Will The Fed Usher In A CBDC?

This is something that people are most interested in.

What will the Fed do? Will it recommend that we move towards a "digital Dollar" or will they scrap the idea?

In this article, we will delve into what possibly could be the thinking and how this could be structured.

Source

The Fed's Limitations

I know this is completely foreign to some but we need to deal in reality here. The Fed CANNOT create legal tender. This means the Fed has nothing (as in zero) to do with the creation of US Dollars. It is limited in what they can do. This dates back to the original Federal Reserve Act of 1913 and was further enhanced by the Banking Act of 1933.

What this means is that any Central Bank Digital Currency the Fed issues can ONLY apply to the Fed's "customers". That means the ones who can use it are member banks.

Hence, all the worry about the "FedCoin" is misguided under existing law. The Federal Reserve cannot interact with US citizens. If anyone does not believe that, try to find someone with a bank account at the Fed.

The US population has to go through the commercial banking system. That means any FedCoin can only apply to those entities. Under these circumstances, a digital currency might make a great deal of sense. We know settlements, especially internationally, could use some help. Does this mean a token of this nature is the only answer? Not at all.

In fact, it might be wiser to take the existing payment system and upgrade the technology. This is being done domestically although internationally is still lagging a bit.

From this perspective, it is not likely Powell goes for one but he could see the value in it.

PoliticianCoin

Of course, the Federal Reserve is not the only one involved in this. We also have members of Congress. Right now, we await confirmation of Powell by the Senate. Once he gets that, he can take a more aggressive approach with the political nitwits on Capitol Hill.

Make no mistake about it, Powell is a banker. He is not going to do anything to destroy the commercial banking system. The political hacks in Congress, that is another story.

We can presume those senseless fools are drooling to get their hands on a CBDC. There was already a proposal in the past to include digital wallets in one of the bills. It was scrapped, probably due to the fact it is illegal. Nevertheless, things can be changed.

Congress is within their rights to alter the law to allow the Fed's liability to become legal tender. This would pave the way for the Fed to create a CBDC that is used by the population while being controlled by Congress. If they wanted to implement a spending project, they simply have the Fed create a bond that goes nowhere, put the digital dollars in the Treasury account and, presto, instant money. Ironic, this is how many mistakenly believe the USD is created now.

The challenge here is we would be giving monetary policy to the same nitwits who screwed up fiscal policy over the last few decades. Obviously politicians are clueless about this other than buying votes and asserting their misguided ideologies.

Want $2 trillion for military or green spending, simply print it up and send it out.

Here is where we would see the fears of the hyper-inflationists coming into being. Of course, before we got that, global markets would become unstable, probably in a matter of days. The markets would see the Fed was truly powerless to stop what was going on (which they are already just most don't realize it).

This is something that Powell is likely to fight. It is unlikely that he would ever agree to a move like this on his watch. He would then be the one who saw things sink on his watch.

Naturally, with the political environment that many believe is just simply brewed out of tyranny, it is not over-the-top to believe that Congress will push for this. It will be interesting to see who wins this tug-o-war if it is to take place.

My guess is Powell is going to resist a change in the law but he cannot do much about it. On the other hand, once confirmed Powell can push back and there is little Congress (or the President) can do. If Powell gets the nod, he is there until his term runs out.

Hang on tight. The next few months will be interesting.

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