Move To Control ‘Digital Dollars’


Simpler Trading Team

3 min read

From John Carter,

Founder of Simpler Trading

There is an economic movement that isn’t getting much attention from headline news sources.

This movement could heavily impact the markets and personal finances, and deserves the spotlight.

The Federal Reserve — the United States’ central bank — is working on a central bank digital currency (CBDC) to expand its influence.

Why? Because the Fed’s influence is weakened.

Tools currently at the Fed’s disposal for creating economic growth are limited when it comes to influencing a key aspect the government can’t control: how often a consumer is willing to spend.

The Fed wants us to spend, avoid saving, and go into more debt. This all creates economic activity, and economic activity generates inflation.

With interest rates already at near zero, the Fed has limited options remaining.

One way is to move toward negative interest rates — a heavily debated topic in 2020. Japan and a few other countries have tried this, but with very limited success.

The main issue is that if you have $1,000, it still seems like $1,000, even while it is being devalued as prices for things like health care, college, building materials, etc., rise in price.

But what if the Fed could push a button, and suddenly your $1,000 was only worth $990?

Just like a stock that falls in price? Wouldn’t you be motivated to spend it before it falls even further?

That is the influence the Fed wants and this is the direction where we are headed.

The first signs of this will be attempts to get rid of physical cash, especially the larger bills.

Have you noticed the coin shortage and a push toward paying with your debit or credit card?

In the U.S. economic stimulus bills, the “Banking For All Act” mentions the idea of paying stimulus money directly from the Fed as a “Digital Dollar” and opening bank accounts for all citizens directly with the Fed.

Congratulations, you would then have your first digital dollar account.

Seems OK because it’s your money, right?

Not so fast.

Part of the power with this “Digital Dollar” scenario is the Fed’s ability to dictate what can and cannot be purchased using this digital currency. And when you must spend the “free” money.

In addition to having these dollars fall in value to encourage spending, the Fed could also place an expiration date on such stimulus funds to encourage their use and place a cap on saving the digital currency.

This isn’t a doom and gloom article. This is just a reality check on where we are headed. There are some advantages of this as it would lead to more spending. There are disadvantages as shown here, of course.

This is why we are seeing such a rise in crypto as people and institutions look for ways to avoid being completely tied into a government-influenced financial system.

In a future world of digital currency, who doesn’t want to remain in control of when and how their money gets spent?

We Saw: Markets not delivering anything to write home about — 

  • More market angst over Senate election results
  • Oil rising with new international agreements
  • Major indexes move higher after Monday bleeding

We’re Watching: Waiting for a possible flush and buying —

  • Calm traders in opposition to anxious new traders
  • Avoiding leaning into any big bets
  • Setups in: ADBE, SPY, TSLA, AMZN, SE