Will Central Bank Digital Currencies Undermine Gold’s Value?

Via SchiffGold.com,

With the eventual launch of central bank digital currencies (CBDCs) now seemingly inevitable, there are many directions central banks could take with their digital currency projects that would have dramatic implications for the price of gold.

Touted for their “convenience” and “efficiency”, the end game of digital currencies is not only to gain greater power over the currency, but also a way to monitor and micromanage the personal finances of each individual. Owing taxes or a parking ticket? It can be deducted automatically. Does the Fed think it should cool inflation? Withdraw money straight from people’s accounts, or set a daily spending limit. The possibilities for control and profit are endless, and too tempting for control freak bureaucracies and amoral tech companies to ignore.

As countries like China implement their own CBDCs, buy more precious metals, and generally reliance on the US dollar for trade, Western central banks also feel they must compete to maintain their power. This is at the heart of the other motivation for CBDCs – a currency race between East and West in which the winner not only consolidates unprecedented control over its own citizenry, but a place atop the global power structure for the next century or more.

Since CBDCs and the idea of ​​a “cashless society” are mostly about increasing centralization and control at the societal and individual level, it’s easy to see how this could be accompanied by new legislation restricting investment in precious metals and other non- state-sanctioned financial activities prohibited. . All they need is a serious enough financial crisis to provide the justification. After all, during the Great Depression, the federal government quickly used an Executive Order to demand that citizens surrender their gold en masse to the Federal Reserve.

And with new developments in crypto-tokenization technology and a brewing global financial crisis, the Technical-Banking-Political complex are preparing for what they collectively know will be a crucial window of opportunity to force their CBDCs down people’s throats and make opting out of their new system next to impossible.

Once their CBDC is rolled out, central bankers will have more ability than ever to manipulate the money supply and your personal finances to their whims. This summary of s 2023 BIS Report on the promise of CBDCs to increase the scope of central banking activities, describes in (cheerful banker-speak) the increase in power and control that central planners will give themselves under a unified digital currency system:

“As well as improving existing processes through the seamless integration of transactions, a unified ledger can harness programmability to enable arrangements that are not currently practicable, thereby expanding the universe of possible economic outcomes.”

Zimbabwe is new CBDC experiment uses an interesting “gold-backed” approach, which appears on paper as a combination of the traditional gold standard with digital currency technology. It’s a promising approach, but to avoid being damaged by authorities, it needs a protocol that makes it nearly impossible to fake a higher gold supply with tokens for gold that doesn’t really exist. Otherwise, his claims of returning to a “gold standard” are meaningless.

I would not expect a Western CBDC to contain gold backing or the protection of any kind of restrictive protocol, but I predict that in a centralized national or international digital currency system of any kind, central banks will still hold large amounts of gold in reserve. Just as Bitcoin is not truly “digital gold” but only numbers on a screen, bankers know they will still have to hold real money as an insurance policy.

The difference is that banks may be the only ones allowed to hold gold, while wider society will no longer have access to cash. With all other potential options to withdraw from this system fully digitized and prevented from competing with CBDCs, gold and silver will become the only way to exist and transact outside of the Central Bank’s digital control network with any semblance of true freedom or agency. Black markets will have to turn to various forms of analog money, and gold and silver will rise as the top options.

Just look at the gold chart for 1933: When Executive Order 6102 demanded that citizens give up their gold, the price skyrocketed and never returned to pre-1933 levels. A similar effect would occur as a result of the announcement of CBDCs, phasing out of paper cash and restrictions on private gold ownership:

Gold vs USD before and after execution order 6102

Some lawmakers recognize the CBDC threat and are fighting it, declaring CBDCs a threat and empowering precious metal holders. However, I am not sure that this will be enough to fight the CBDC tide being designed by central planners. The system may begin as optional, but with the phasing out of cash and other incremental measures, it will eventually become permanent either by direct legislation or by making it completely impractical to resist.

If the architects of CBDCs can market their new system as the solution to an epic financial meltdown (of their own making), it will likely be seen as a sign of stability that calms global markets, potentially sending gold and silver down. But as precious metals emerge as the best form of physical money in a tightly controlled, micromanaged financial dystopia, they will become the only way to make private or off-network transactions, making them more valuable than ever – not just as investments, but a means of survival outside the fully digitized fiat nightmare.

By Zerohedge.com

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