Total Control

CBDCs will happen, but not in the way people expect.

Here’s Jerome Powell in his own words, while discussing monetary policy at a Senate Banking Committee last Thursday:

We're nowhere near recommending – or let alone adopting – a central bank digital currency in any form… people don't need to worry about it.

He isn’t lying, by the way.

CBDC is political cyanide. Nobody wants to touch it, except for a handful of exceptionally delusional and power-hungry politicians.

But they’re a distinct minority, with no real path forward.

It’s not just that the public is spooked and now has an almost reflexive aversion to the boogeyman term “CBDC.” More importantly, powerful banking interests are very much opposed to the concept in general.

Banks understand that allowing the Fed to go direct to market would effectively disinter-mediate their business model, cutting them out as middlemen.

Stablecoins have already done an end-run around the legacy banking system - they are in effect full-reserve banks that take deposits and issue digital receipt tokens. If the central bank were to do the same, this would be the death knell for TradFi banks.

Not to mention the fact that the US government by itself lacks the technical and logistical ability to implement a centralized monetary network.

Remember, they couldn’t even build a sign-up page for the Affordable Care Act. The humiliation forced them to pull in “tech industry experts,” after failure to launch. Bloomberg reports that the website wound up costing over $2 billion. Yes, that’s what the website cost… Nothing to do with the actual healthcare reform…

Now imagine what would happen if the government tried to build a CBDC on its own. And yes, they would have to do it on their own. Because the tech industry will help with a website, but banks certainly won’t help with self-erasure.

In other words, there is no political will, no financial incentive, and no operational competence to forcibly collapse the current system onto the Fed’s balance sheet.

That’s why this transition must happen organically:

Over the last 20 years, the US has lost about half of its banks. Most of these are smaller players that got absorbed by larger institutions. This trend is only speeding up. Last year, we had the largest bank failures since the 2008 financial crisis, and regional banks have continued to fold into the "too big to fail" G-SIB Banks ever since. Already, the top 5 banks constitute over 57% of total bank assets. You can expect this trend to accelerate with Monday’s discontinuation of the BTFP program.

If you play this forward, it isn’t hard to see where the puck is going.

That’s because there exists a forcing function which is herding the population into the slaughterhouse of a small number of highly centralized and enormous financial institutions. This forcing function is baked into the cake, it is a natural consequence of compounding interest on debt. By definition, the system must continue to centralize. This does not depend on opinion polls, nor the banking industry’s willing participation, nor government’s cunning. It’s only math.

Once trapped, people’s life savings can then be weaponized and subjected to every political perversion imaginable. This is a fully permissioned system - a de facto CBDC. Imagine the equivalent of the DMV in charge of your money. Sounds fun.

Be like Wayne Gretzky, and skate to where the puck is going.

There is a window of opportunity where it is still possible to leave the legacy system, before the doors are sealed shut and the exits barricaded.

Many won’t see it coming.

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