Who to vote for?
Hands up anyone who wants a Central Bank Digital Currency (CBDC). This is likely to become a hotter topic as we get closer to November and the US Presidential vote. While President Joe Biden has not announced any plan to convert the US Dollar into a CBDC, there was some alarm (as well as a lot of conspiracy theory misinformation) that his Executive Order of 9 March 2022, the 'Executive Order on Ensuring Responsible Development of Digital Assets' was paving the way for precisely that. In fact this Executive Order did no more than require government agencies to analyze the pros and cons of creating a CBDC Dollar and to produce reports on the topic. One report, produced by the Office of Science and Technology Policy in September 2022 ducked the matter - it advised on the necessary steps to prepare for a Dollar CBDC, but made no recommendation as to whether one should actually be implemented. That same month the US Treasury recommended moving forward on the development of a CBDC, on the basis that a digital Dollar could speed up payments and improve interaction with the government and banks. In February 2021 US Treasury Secretary Janet Yellen gave a speech in which she simultaneously savaged Bitcoin while endorsing a digital Dollar, saying the latter could result in "faster, safer and cheaper payments."
While President Biden - who barring untoward events is a certainty to stand for the Presidency on the Democratic Party ticket - and his economic team are giving mild CBDC-supportive signals, what's the policy on digitalizing the Dollar of the man most likely to oppose him? Donald Trump is scything through his opponents to take the Republican Party's nomination. In an interview with Fox Business Trump this week called CBCDs a "very dangerous thing". He also called AI "dangerous and scary
According to the a 2023 survey by the libertarian Cato Institute in the US only 16% of Americans back the adoption of a CBDC; 34% oppose it but 49% have no opinion. The Institute posits the high percentage of 'don't knows' is a result of ignorance - just 28% of those surveyed were familiar with CBDCs while a whopping 72% are not. One of the possibilities of a CBDC is that it would allow the government to monitor individuals' spending, let the government control what they spend their money on, or even levy an additionally tax on those who don't spend money during recessions.
The bottom line is that a government-controlled CBDC implies all manner of controls over the way individuals use their money. At the moment governments control the issuing of fiat money but fiat money has an anonymity prized by not just by crooks but by people who want to keep their spending private. That privacy goes out the window with a CBDC, no matter how much governments promise to protect it. The Cato survey found that 76% of Americans opposed a CBDC because it would "potentially allow the government to monitor what people buy and potentially control how they spend their money."
A digital dollar is going to be a topic in this year's presidential campaign. Trump appears to have ruled it out entirely, which doesn't mean he stands against blockchain products - he's sold non-fungible tokens (NFTs) of himself. Like him or loathe him he has at least clearly stated his position. There is a deep vein of distrust of Washington running through Republicans and left-wing Democrats, so maybe Trump could harness support from unlikely places.
Around 130 countries are exploring a CBDC; at least 64 re in the launch, pilot or development stage, with China leading the way. Part of the support for an American CBDC comes from technocrats who want to ensure the US keeps up with China. Yet there's no good reason to join the CBDC bandwagon. Barry Eichengreen, professor of economics and political science at the University of California, says "Central bank digital currencies are the bad idea that won't go away".Come November it may be necessary to vote for a man who is clearly not nice to prevent a bad idea from getting any further along.