No Cash, No Anonymity

  • The pandemic, cash and “decisions without data”
  • Jim Rickards: Constitutional implications of a cashless society
  • The bust phase has been postponed? (point-counterpoint)
  • LME’s nickel farce goes to court
  • Pride goeth before the fall (Janet Yellen tempts de-dollarization)
  • Readers on “a thought that has been bugging me” (commodities manipulation)… “What a load of crap”… The 5 defends anti-partisanship… And more!

“Early in the pandemic, we had this massive outcry for businesses to stop using cash; all these businesses just followed this advice and said, ‘OK, we are credit card only,’” recalls Richard Robison, professor of microbiology and molecular biology at Brigham Young University.

“I thought, Wait a minute, where are the data to support that?”

So Robison and colleagues went to work. They squirted the virus on bank notes, coins and credit cards in the lab, then ran some tests. The virus was already 99.9993% gone after 30 minutes on the paper bills — and had no presence at all after 24 hours. Meanwhile, the virus was still detectable on plastic after 48 hours.

The researchers also gathered bills, coins and cards from around the BYU campus and nearby restaurants. After swabbing and testing, they found no virus on the bills and coins and only a low level on the cards. They published their conclusions in PLOS ONE in January.

“This pandemic has been infamous for people making decisions with no data,” Robison says. “We have these people just saying things and massive numbers of organizations just follow it blindly without any data. It turns out in this case, they went precisely the wrong direction.”

So at least on this round, the power elite that’s itching to impose a cashless society have been foiled. But for how long?

It was just over a year ago that our Jim Rickards sat down for a Zoom chat with The 5’s founding editor Addison Wiggin. One of the big topics — a CBDC, or central bank digital currency. It’s worth revisiting today.

The world of a CBDC is potentially a world with no cash, no financial privacy — and the constant threat of devaluation via negative interest rates.

Still, CBDCs aren’t a new currency per se. “They will still be dollars, euros, yen or yuan as they are today,” Jim explained. Only the format and payment channels will change.

“Payments can be done with an iPhone or other device with no need for credit cards or costly wire transfers,” Jim says. “Balances can be held in digital wallets or digital vaults without the use of traditional banks.”

Note well: “If there is no cash, there is no anonymity,” says Jim. “Governments will know your whereabouts and habits at all times simply by tracking your use of funds through the CBDC payment system.”

China is in the vanguard of developing a CBDC. “China already uses facial recognition software, mobile phone GPS tracking and monitoring the purchases of plane or train tickets to track its citizens.”

From there it’s a short leap to more sinister purposes — “to detect anti-state activities and to arrest dissidents or anyone who does not strictly follow the orders of Chairman Xi.”

“The Federal Reserve has been working with scientists at MIT to develop a CBDC dollar,” Jim said. We hasten to remind you this was in May of last year.

“The endgame for CBDCs,” he said, “would closely resemble George Orwell’s dystopian Nineteen Eighty-Four.

“It would be a world of negative interest rates, forced tax collection, government confiscation, account freezes and constant surveillance,” Jim concluded. “And if cash is gone, there is only one way to escape digital confiscation of wealth — physical gold.”

When Jim made these remarks just over a year ago, it all seemed very hypothetical and very far off in the future.

But the “de-banking” treatment doled out to the Canadian truckers in February — their bank accounts frozen with no due process — offers a terrifying hint of what a CBDC future really looks like.

The new week begins with stocks on the rally tracks — all the major U.S. indexes up at least 1%.

The Dow has vaulted back above 33,000. The S&P 500 is up 56 points to 4,165. The Nasdaq is bouncing 1.75% off the 12,000 level.

The risk-on vibe is leading to a sell-off in bonds, pushing yields higher. The yield on a 10-year Treasury note is back above 3% for the first time in four weeks. But gold is not benefiting — it’s back below $1,850 even as silver has crept above $22.

Crude is backing off slightly from its big rally on Friday — down 42 cents to $118.45. The national average gasoline price per AAA is $4.865. On an inflation-adjusted basis, that’s still not a record; we’d have to get up to $5.18 to equal the pain of summer 2008. (The nominal price then was $4.11.)

Crypto is rallying smartly, Bitcoin back above $31,000 and Ethereum approaching $1,900.

We have no economic indicators today — at least none of the statistical variety…

Tweet - Porsche delivery

Photoshop… or a Porsche SUV really delivering chain-store pizzas?

On the other hand, maybe the bust phase of the boom-bust cycle still hasn’t materialized…

Tweet - Poolside

To be clear, though, these young women aren’t exactly blazing trails — other than the work-from-home part.

As the journalist Sam Smith observed in 2013, “We have created an economy based not on actually doing anything, but on facilitating, supervising, planning, managing, analyzing, tax advising, marketing, consulting or defending in court what might be done if we had time to do it.”

For the record: The nickel fiasco at the London Metals Exchange is going to court.

Elliott Management, the hedge fund founded by Paul Singer, is suing the LME for over $456 million.

As we chronicled at the time, the LME suspended nickel trading for over a week in March after the price zoomed higher and a Chinese commodity tycoon got into trouble meeting his margin calls. In addition, as a favor to that tycoon — known in Chinese financial circles as “Big Shot” — the LME canceled eight hours’ worth of nickel trades after they’d been executed.

From our perch, the canceled trades were one more sign of a breakdown in the global financial system’s rule of law — right up there with the Canadian truckers and the freezing of assets held by Russia’s central bank.

Turns out some of those canceled nickel trades had been placed by Elliott Management — thus the litigation, which the LME promises to contest “vigorously.”

De-dollarization signpost: The percentage of global currency reserves denominated in dollars has fallen to a new low — 58.9%.

Granted, the records kept by the International Monetary Fund go back to only 1995. “That said,” according to MarketWatch, “it’s likely that this new low is actually the lowest concentration of dollar holdings in international reserves since the collapse of Bretton Woods in the early 1970s.”

As you might know, Bretton Woods was the agreement hashed out toward the end of World War II that cemented the dollar’s place as the globe’s reserve currency after a three-decade decline of the British pound. We’ll come back to that momentarily…

Of the 58.9% figure, “That’s low,” says our friend Chuck Butler — currency maven and keeper of the Daily Pfennig e-letter. “I remember years ago, when I was doing presentations, I would talk about how the dollar had fallen to 63% of international reserves denominated in dollars… This tells me that all the talk about how countries are dumping dollars is coming to fruition.”

Right, but don’t tell that to Treasury Secretary Janet Yellen.

In April, Yellen gave a big speech to the Atlantic Council — waxing on about how in the wake of Russia invading Ukraine, it’s time to craft a new Bretton Woods.

“I think we at Bretton Woods created an excellent set of institutions that have served the world very well in opening up trade and investment,” she said during the Q-and-A. “And these developments have really led to more efficient economies, economic growth and lifted billions of people from poverty. So we need to keep those accomplishments in mind.

“But these institutions, while I feel they should play an important role going forward, they need to be modernized to address problems, some of the ones that I mentioned in the speech, that are really challenges that we face today and these institutions were not really designed to address.”

She just assumes the dollar will remain king of the hill as it has since that original conference in 1944:

“I think it will be a long time, if ever, before the dollar is replaced as a key reserve currency in the global economy, and that’s fundamentally because of the strengthened role of the U.S. economy, the strength of our financial system, the fact that we have institutions in law that — and deep in liquid financial markets that makes investors all around the world feel safe in relying on the dollar as a store of value and means of exchange, so there will be a desire to avoid sanctions, to replace the dollar, but I don’t think we will likely see that happen.”

What’s that saying about pride goeth before a fall?

To be continued…

To the mailbag: “Since the Securities and Exchange Commission came up in Friday’s issue, a thought that has been bugging me about the SEC’s response to crypto is this…

“They refuse to consider anything having to do with spot prices ‘to protect the consumer,’ but will allow paper derivative markets to be created, again ‘in the consumer’s best interests.’ What does this leave us with? The exact framework we have for the most manipulated, least transparent markets in the world, the commodity markets.

“This seems like overt criminal activity being carried out in the open, trying to create yet another gaming system for the self-anointed ‘elite’ out of this new asset class.”

The 5: To be fair, most of the manipulation you describe is facilitated and/or overlooked by a different agency, the Commodity Futures Trading Commission.

But yes, the same principle applies. It’s why Americans can buy ETFs backed by Bitcoin futures but not by actual Bitcoin. And we’ll be shocked if Fidelity can actually follow through on its plans to offer Bitcoin in a 401(k) plan.

“What a load of crap,” a reader writes after we got an earful from another reader on Friday — proving folks on both sides of the divide are way too invested in election outcomes.

“Maybe you’ll defer any relationship to Rickards, or maybe you’ll defer to your ‘caveats’ while repeatedly posting the garbage coming out of the Republican/Fox mouthpieces about all the last elections, but it’s a load of crap. You guys are all in and have been since November 2020. Maybe you can help me out on Clinton’s efforts to overturn the 2016 election and run up the 25th Amendment, ’cause you know, I really have no recollection of that whatsoever. Another load of crap.

“Maybe the reason you guys think you can keep denying what you’ve been saying for the last 18 months is because either a) your readership wants to hear it, or b) you think your readership is too stupid to know the truth about the election, or the truth that you’re biased. You’re all victims.”

The 5: *Sigh*

I can only speak for myself and not for other editors at our firm and certainly not for editors at competing firms. And it’s easy to conflate them all if you consume a couple dozen emails from our industry each day — some of which do flagrantly pander to MAGA sensibilities.

But The 5 is not only a nonpartisan publication, it is anti-partisan — as our Election Day 2020 edition ought to have made clear. Too, The 5 was throwing shade at the likes of Trump-adjacent grifters like Sidney Powell only days after the election.

Ordinarily I’d say Google is your friend… but if you must know, here’s source material on the Clinton campaign endorsing a weird Electoral College gambit… and the 25th Amendment discussions early in Trump’s term.

And another thing: It seems much of the Democratic Party, intelligence community and media have been keen to poke fingers in the eye of Vladimir Putin because they’re still butthurt about 2016 and refuse to look in the mirror. Here’s an amazing passage from The New York Times in a story published 12 days before the Ukraine invasion in February…

Text from NYT

As the journalist Aaron Maté (no right-winger, he) tweeted at the time, “Thank you, Jeh, for affirming everything that us heretics have been warning about since 2016: Your Russiagate disinformation campaign would radically escalate tensions with a nuclear power.”

Of course, if you’re Jeh Johnson, it’s all good — pulling down $325,000 a year as a board member at Lockheed.

Best regards,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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