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by Pam Martins and Russ Martens
May 31, 2022
from
WallStreetOnParade Website
As I
have said, when the Federal Reserve (FED) created its
own digital currency and accepts its first consumer
deposit account, the U.S. Treasury will be obsoleted and
Congress will lose all control over creating money and
coinage.
This
means that one private banking monopoly controls
the entire monetary system.
Source
Credit union and banking trade
groups have released a joint letter to the chair and ranking member
of the House Financial Services Committee, warning of
"devastating consequences" if
the Federal Reserve (FED) moves
forward with a Central Bank Digital Currency (CBDC).
The letter was sent on
May 25, one day before the Committee
convened a hearing on,
"Digital Assets and
the Future of Finance: Examining the Benefits and Risks of a
U.S. Central Bank Digital Currency."
That hearing took
testimony from only one witness, Lael Brainard, the Vice
Chair of the Federal Reserve.
The fact that credit unions, which frequently serve unionized labor,
joined with banking trade groups to sign off on the letter, lends
credibility to the "devastating consequences" the letter enumerates
of a Central Bank Digital Currency.
A CBDC would allow the Federal Reserve to compete for deposits with
credit unions and banks.
The letter correctly
assesses the downside of such a move as follows:
"Private money is
created through financial intermediation by banks and credit
unions - the process in which financial institutions take
deposits and lend out and invest those deposits.
Private money is used
by financial institutions to provide funding for businesses and
consumers and thus supports economic growth.
Introducing a CBDC
would be a deliberate decision to shift some volume of private
money to public money, with potentially devastating consequences
for the cost and availability of credit for consumers and
businesses.
In sum, the savings
of businesses and consumers would no longer fund the assets of
banks - primarily, loans - but instead would fund the assets of
the Federal Reserve - primarily securities issued by the
Treasury Department, Fannie Mae, and Freddie Mac."
In a similar vein, the
letter warns:
"In effect, a CBDC
will serve as an advantaged competitor to retail bank deposits
that will move money away from banks and into accounts at the
Federal Reserve where the funds cannot be lent back into the
economy.
These deposit
accounts represent 71% of bank funding today.
Losing this critical
funding source would undermine the economics of the banking
business model, severely restricting credit availability,
increasing the cost of credit, and causing a slowdown of the
economy.
ABA estimates that
even a CBDC where accounts were capped at $5,000 per 'end user'
could result in $720 billion in deposits leaving the banking
system."
The joint letter also
calls out the absurdity that the dollar is not already digitized.
(Anyone who uses a "pay
by phone" method to pay a monthly bill in seconds from their
checking account or a debit card to pay for purchases fully
appreciates how rapid and streamlined the digital dollar already
is.)
The credit unions and
banking groups write as follows:
"Contrary to the
assertions of some CBDC proponents, a U.S. CBDC is not necessary
to 'digitize the dollar,' as the dollar functions primarily in
digital form today.
Commercial bank money
is a digital dollar, and is currently accepted without question
by businesses and consumers as a means of payment."
In July 2019, NYU
Professor and economist Nouriel Roubini also touched on the
existing speed of the Visa credit card system versus digital
currency in a Bloomberg News interview.
Roubini stated:
"...nobody, not even
this blockchain conference, accepts Bitcoin for paying for
conference fees cause you can do only five transactions per
second with Bitcoin.
With the Visa system
you can do 25,000 transactions per second... Crypto's nonsense.
It's a failure.
Nobody's using it for
any transactions."
One of the key concerns
in Congress and at the FED appears to be that another country, such
as China, might get ahead of the U.S. in the development of their
own Central Bank Digital Currency and endanger the U.S.
dollar as the world's reserve currency.
At the House Financial
Services Committee hearing on May 26, FED Vice Chair
Lael Brainard testified as
follows:
"The future evolution
of international payments and capital flows will also influence
considerations surrounding a potential U.S. CBDC.
The dollar is the
most widely used currency in international payments and
investments, which benefits the United States by reducing
transaction and borrowing costs for U.S. households, businesses,
and government.
In future states
where other major foreign currencies are issued in CBDC form, it
is prudent to consider how the potential absence or presence of
a U.S. central bank digital dollar could affect the use of the
dollar in global payments.
For example, the
People's Bank of China has been piloting the digital yuan, and
several other foreign central banks are issuing or considering
issuing their own digital currencies.
A U.S. CBDC may be
one potential way to ensure that people around the world who use
the dollar can continue to rely on the strength and safety of
the U.S. currency to transact and conduct business in the
digital financial system.
More broadly, it is
important for the United States to play a lead role in the
development of standards governing international digital finance
transactions involving CBDCs consistent with the norms of
privacy, accessibility, interoperability, and security."
The credit unions and
banking groups' joint letter addressed that issue as follows:
"...a CBDC does not
appear to be necessary to support the role of the U.S. dollar
internationally.
While many countries
have experimented with a CBDC, many have focused on a wholesale
model, something not contemplated by the Federal Reserve's
discussion paper.
In addition, many
have pulled these experiments back as the costs of
implementation have become apparent.
The Federal Reserve
notes that the dollar's status as the global reserve currency is
driven by,
-
the strength
and openness of our economy
-
the depth of
our financial markets
-
the trust in
our institutions and rule of law...."
Wall Street On Parade
has been skeptical of the 'invisible' hand(s) behind this push for a
Central Bank Digital Currency at the FED - (the FED being the
perpetual provider of bailouts to Wall Street's casino banks) - ever
since a similar 'invisible' hand pushed
Saule Omarova forward as
President
Biden's nominee to head the
Office of the Comptroller of the Currency, the regulator of
national banks (those that operate across state lines).
In October of last year, the Vanderbilt Law Review published
a
69-page paper by Omarova in which
she proposed not just a Central Bank Digital Currency but a
hair-raising, radical restructuring of the FED that would include
the following:
-
Move all
commercial bank deposits from commercial banks to so-called
FedAccounts at the Federal Reserve
-
Allow the FED, in
"extreme and rare circumstances, when the FED is unable to
control inflation by raising interest rates," to confiscate
deposits from these FedAccounts in order to tighten monetary
policy
-
Allow the most
Wall Street-conflicted regional FED bank in the country, the
New York FED, when there are "rises in market value at rates
suggestive of a bubble trend," such as with technology
stocks today, to "short these securities, thereby putting
downward pressure on their prices"
-
Eliminate the
Federal Deposit Insurance Corporation (FDIC) that
insures bank deposits in the U.S. and that prevents panic
runs on banks
-
Consolidate all
bank regulatory functions at the OCC - which Omarova was
nominated to head
By early November,
Omarova was facing even more controversy when it was revealed that
she had called the very industry that she had been nominated to
supervise
the "quintessential a**hole industry"
in a 2019 Canadian feature documentary.
Omarova eventually
withdrew her nomination after it became clear she did not have the
votes to be confirmed.
You can read the joint letter from the credit union and banking
groups
here.
Brainard's testimony is
available
here...
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