The global coronavirus pandemic has accelerated several troubling
trends already in force. Among them are exponential debt growth,
rising dependency on government, and scaled-up central bank
interventions into markets and the economy.
Central bankers now appear poised to embark on their biggest power
play ever.
Federal Reserve Chairman Jerome Powell, in
coordination with the European Central Bank and
International Monetary Fund (IMF), is preparing to
roll out central bank digital currencies.
The globalist IMF recently called for a new “Bretton
Woods Moment” to address the loss of trillions of
dollars in global economic output due to the
coronavirus.
In the aftermath of World War II, the original Bretton Woods
agreement established a world monetary order with the U.S. dollar as
the reserve currency.
Importantly, the dollar was to be pegged to the price of gold. Foreign
governments and central banks could also redeem their dollar reserves
in gold, and they started doing so in earnest in the 1960s and early
1970s.
In 1971, President Richard Nixon closed the gold
window, effectively ushering in a new world
monetary order based solely on the full faith and
credit of the United States. An inflation crisis
followed a few years later.
In response, the Federal Reserve took the
painful step of jacking up interest rates to defend its wilting Federal Reserve Note and tame rising prices.
Fast forward to 2020, and the Fed has assumed for itself novel policy
mandates that are a precursor to a new monetary system.
But the monetary masters aren’t contemplating a return to sound
money. Rather, they’re planning for even more debt, more inflation,
and picking of winners and losers in the economy.
The Fed has unceremoniously thrown its statutory dual mandate of full
employment and stable prices out the window. It now gives itself an
unlimited mandate to inject stimulus and bailout cash wherever it sees
fit (including, recently, “junk” bond exchange-traded funds).
Instead of pursuing stable prices, the Fed is now explicitly embarking
on an inflation-raising campaign with the goal of generating annual
price level increases above 2% for an undefined period.
The next frontier of the Fed’s unlimited mandate could be “Fedcoin” –
a central bank digital currency.
Earlier this month Chairman Powell participated in an IMF panel on
international payments and digital currencies. He touted electronic
payments systems and raised the possibility of integrating them into a
central bank digital currency regime.
Powell has so far declined to outright endorse a move toward a fully
cashless system which countries including China and Sweden are
spearheading. But he is on board with the larger globalist agenda of
expanding the role of monetary policy in shaping economic and social
outcomes.
IMF Managing Director Kristalina Georgieva sees expanded monetary
tools being aimed at every issue under the sun: “We will have a
chance to address some persistent problems – low productivity, slow
growth, high inequalities, a looming climate crisis… We can do better
than build back the pre-pandemic world – we can build forward to a
world that is more resilient, sustainable, and inclusive.”
The IMF is being pressured by debt campaigners to sell some of its
gold reserves to cover payments owed by some of the world’s poorest
countries. The IMF would issue pseudo-currency units known as
Special Drawing Rights (SDRs) to cancel the debts of poor countries.
In a world where central bank balance sheets have grown by more
than $7 trillion, it’s not surprising that everyone wants a piece of the
pie and that many now view gold as dispensable.
Is gold merely a barbarous relic in this brave new digital world? If it
were, then it would have collapsed in price this year, amid all the new
central bank rollouts, instead of surging to an all-time high.
Precious metals may be the ultimate hedge
against the new world monetary order.
In the event that the U.S. central bank
launches a digital dollar and assigns every
American a virtual wallet, there would be no
escaping adverse monetary policy decrees
except by exiting fiat currencies entirely.
Under a central bank digital currency, authorities could impose
negative interest rates on all holdings of currency units. They could do
so without needing to get anyone to buy negative-yielding bonds or
deposit money into negative-yielding bank accounts.
Under a central bank digital currency, direct credits and debits could
replace stimulus checks and taxes. It would be the vehicle through
which modern monetary theory could be fully implemented – with the
central bank becoming tax collector and funder of all government
operations.
If depreciating the value of the currency through the inflation tax
wasn’t enough, the Fed could also stick dollar-holders with a direct tax
in the form of negative interest rates. Once paper notes are phased
out, holding cash itself would no longer be a way for individuals to
escape negative rates.
The only escape hatches would be volatile alternative digital currencies
(such as Bitcoin) or hard money (gold and silver).
Under a monetary order where electronic digits representing currency
can be created out of thin air in unlimited quantities, the best hedge is
the opposite – tangible, scarce, untraceable wealth held off the
financial grid.
Stefan Gleason is President of Money Metals Exchange, the
national precious metals company named 2015 Dealer of the
Year in the United States by an independent global ratings group.
