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HomeNewsThe Bank of England’s CBDC ‘consultation’ and how to respond, Part 2

The Bank of England’s CBDC ‘consultation’ and how to respond, Part 2


This is the second of two articles on the Bank of England’s plan for a Central Bank Digital Currency (CBDC) and why it should be resisted. Yesterday’s article, which you can read here, asked why the Bank is so keen on the idea. Today’s highlights why the Bank is not fit to control such a scheme.

WHILE the Bank of England (BoE) boldly goes in search of a solution to a payment system problem that doesn’t exist, Global Financial Crisis (GFC) 2 is well under way, with four US banks having collapsed since March and the threat of contagion casting a dark cloud over the entire Western banking system. Not only is the BoE doing very little about that imminent and catastrophic threat, but it is implausibly denying that there is anything to worry about.

To understand today’s financial instability, we must cast our minds back to GFC 1 because, contrary to popular belief, that problem has not been solved. It was triggered when financial institutions knowingly made loans that couldn’t be repaid. Before these ‘subprime’ mortgages could blow up in their faces, they were surreptitiously repackaged and sold to other institutions. Now disguised in a forest of inscrutable collateralised debt obligations, they sat like buried landmines, waiting to be trodden on by innocent passers-by.

When they exploded in 2008, the ingeniously insane solution to the ensuing liquidity crisis in the banking system was to plaster the hole in the Ponzi scheme with more debt through money printing. This was given the ridiculous sounding name of ‘quantitative easing’, a practice the BoE and every other major central bank wholeheartedly embraced.

Quantitative easing is defined by Statista as ‘the creation of digital money in order to purchase government bonds’. So the BoE, the US Fed and central banks across the West created digital money to buy bonds from banks. The banks received the digital cash they needed to plug the gaping holes in their balance sheets, and central banks now hold bonds that aren’t worth the paper they’re printed on. Calling it ‘quantitative easing’ stops financially illiterate people (most of us) from asking questions. Had they called it what it is – money printing – there would have been very little doubt as to its fundamental stupidity. Having cemented the idea that money grows on central bank mouse pads, mouse-click money printing was repeated in 2020, ostensibly as an economic stimulus response to shutting down the global economy in response to a cold virus.

UK public sector net debt has risen from £0.7trillion in 2008 to £2.4trillion in 2023. The cumulative value of the BoE’s quantitative easing, or creation of digital money, rose from £200billion in 2009 to £895billion in November 2020. The UK’s M2 money supply has grown from £2.1trillion in January 2010 to £2.9trillion in November 2021. Meanwhile, there is a serious disconnect between the growth in debt and the money supply on the one hand, and the growth in actual economic activity as measured by GDP which grew from £1.9trillion in 2008 to just under £2trillion in 2020, rising to £2.2trillion in 2022. In short, the money supply and debt burden are ballooning while economic activity is stagnant. And this is why we are in stagflation.

In the US, this monetary expansion policy blew the US Federal Reserve’s balance sheet up from $0.9trillion in 2007 to $8.3trillion by the end of February 2023. In three years the US M2 money supply has risen from $15.4trillion in February 2020 to $21trillion in February 2023.

The way to think of this explosion in the money supply and central bank debt is that it represents the cost of the mistakes made in 2008 and repeated in 2020. The illusion created by the steroidal money printing of 2008 and onwards is that the banksters can quantitatively ease their way out of the jam they got into in 2008. But they can’t. First they tried to quantitatively ease their way out of a mountain of rotten loans and then they tried to quantitatively ease their way out of quantitative easing. Yes, it’s that mad. The central banks are now holding the bill for those errors (or more accurately, crimes in the case of the subprime mortgage scandal) and they want to make us pay for it.

You can’t print that amount of money out of thin air and expect it to hold its value. The headline numbers above provide a glimpse into the inflationary pressures in the economy at the moment. Central banks in the West have responded to the inflationary pressure by raising interest rates. But that has only provoked a banking liquidity crisis increasing pressure on bank margins and capital. As I’ve said, there have been four bank collapses in the US since March and it’s hard to see how things aren’t going to get significantly worse in the near term.

With inflation running at over 10 per cent and Britain forecast to be the only G7 economy to shrink in 2023, it appears that the BoE’s monetary expansion policy has contributed to the current economic stagflation. So much for its vaunted claim to defending monetary stability.

Now ask yourself whether creating a ‘digital pound’ has anything whatsoever to do with solving the ills described above.

While CBDCs are the destination central banks are desperate to reach, the narrative surrounding them will double up as a distraction tactic. At the moment, they’re using the carrot of convenience to sell you the canard of efficiency and ‘democratisation’ of payment systems. But if the banking crisis gets worse, the fear stick will almost certainly be wielded to convince you that your money will be safer in a CBDC, lovingly watched over by Big Brother at the BoE.

The US bank collapses, which at the moment are really banking consolidations, are having the effect of spurring a fear-driven flight of deposits from smaller regional banks to large too-big-to-fail banks. Driving deposits from small regional banks to large banking behemoths accelerates the desired consolidations while also herding as many consumers as possible into a small number of large banks which can then more easily administer retail CBDC wallets on behalf of the US Fed. Control by centralisation adopts the view that we are sheep far more easily controlled in large pens.    

Why are we being sold a dangerous dud? Crushing crypto (aka the competition)

I maintain that the chief purpose of CBDCs is to transform money from a medium of exchange into a medium of control. So why this new, or certainly heightened, need for control? Well, the need is far from new. The banking cartel, including central banks, exercise control over the economy by controlling the money supply. As already alluded to, there are massive problems with the monetary system that can no longer be fixed using the traditional levers of printing and interest rates – excessive amounts of the former have negated the effect of the latter. All fiat money systems have a limited lifespan because they exist primarily to benefit the controllers and, for that reason, they get abused to the point that they crash. The statistics above strongly hint at the fact that the printing presses have overheated, and the interest rate cooling system can’t extinguish a fire as big as the one that’s raging.

A new payment system cannot fix this and nor is it intended to. But what this new payment system does offer the banking cartel is the prospect of absolute control over us and therefore the future economy that emerges from the attempted controlled demolition of the current Ponzi scheme. The present banking collapse which has begun in the US is really a banking consolidation and wealth transfer in which there is a massive scramble for real assets using, somewhat hilariously, the fake money that has been printed over the last 15 years.

There is another reason for herding us into the digital gulag of a central bank digital payment system. The emergence of crypto currencies – essentially private money not issued or controlled by the central banks – is a direct response to the implosion of the prevailing fiat money system and therefore a threat to the central banks’ monopoly control over the supply of money. The BoE would have us believe that shutting down private crypto is part of their remit of maintaining financial stability. It is in fact a thinly disguised ploy to eliminate the competition in the money-supply market.

Again, don’t take my word for it. Listen to what the BoE Governor himself has to say about the threat of crypto when asked how a CBDC supports financial and monetary stability:

‘We are seeing very rapid growth . . . in what you could broadly call the crypto asset world . . . The crypto world is unbacked by assets. If you like, it is computer code. The crypto world is much bigger. The latest estimate for this now is about $2.7trillion . . . That is a very big growth, and it has happened very rapidly. We do not regard it today as a direct financial stability issue, but we regard it as having the potential to be a threat to financial stability, which is why we think we need to take action on that front . . . [T]he question then becomes how we tackle that world. From the history of what often gets called fractional-reserve banking, we know it is an inherently unstable system unless it is put within a framework of regulation, which we have done over the years . . . Broadly, we face two choices. Is it going to evolve to some world of backed stablecoins that have money-like features, which could be regulated? I must say . . . I am sceptical about that. Is the better contribution, particularly to financial stability . . . to say that the better alternative to that may be a central bank currency of digital form?’

Note the coyness in the last sentence in which he both asks and answers the question. Here’s the plain-English translation: crypto is too big to ignore and has become a threat to the central bank and banking cartel monopoly on money; central banks are re-branding that threat as a threat to financial stability, notwithstanding that central banks and the banking cartel are, and always have been, the primary source of financial instability; that re-branding makes it palatable from a PR perspective to crush the threat, not just with regulation, but by central banks using their power to get rid of private crypto and re-establish their monopoly position on the money supply with their own dystopian version of crypto currency.

The Governor’s CBDC plan is an insult to your intelligence. Let him know.

The BoE’s CBDC or ‘digital pound’ is not a currency; it’s a payment system that will grant the government hyper-centralised control over you and your spending habits. It doesn’t solve any of the pressing financial instability problems that we currently face such as the potential collapse of the banking system as a contagion effect of the US bank collapses that began in March. Whatever minor problems we may have with the existing payment systems, they can be addressed completely outside of the CBDC paradigm being pushed by the BoE. As it fiddles with interest rates while Rome burns, the BoE is aggressively pushing for a dystopian payment system to retain its monopoly on the control of money – a monopoly that it has abused, and which is a direct cause of the second looming banking crisis since GFC I in 2008.

The Governor of the BoE is making us an offer he thinks we can’t refuse. Please feel free to use the template provided in the link below to let the financial thugs at the BoE know that they should not insult our intelligence. The deadline for responding is next Wednesday, June 7.

Template Response to the Bank of England’s Digital Pound Consultation.

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Rusere Shoniwa
Rusere Shoniwa
An accountant by training, Rusere Shoniwa blogs at about topical issues through a non-ideological lens. He grew up in Zimbabwe and has lived in London for 17 years.

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