- Could “bad actors” exploit CBDCs?
- A hair-raising Cuban Missile Crisis comparison
- The U.K.’s road to financial perdition
- Hazard STILL ahead: National rail strike
- “Fat Leonard” gets an extended layover… Boeing’s cost of doing business… A GloboTax-Federal Reserve link… and More!
File this one under “problems we hadn’t started worrying about yet.” What if hackers got their hands on a central bank digital currency?
For lo these many months, Paradigm Press Group’s macroeconomics maven Jim Rickards has been warning about a CBDC — or as he styles it, “Biden Bucks.”
It would be the ultimate tool of government surveillance and control: “In a world of CBDCs,” Jim said in The 5 three months ago, “the government will know every purchase you make, every transaction you conduct and even your physical whereabouts at the point of purchase.
“It’s a short step from there to negative interest rates, account freezes, tax withholding from your account and even putting you under FBI investigation if you vote for the wrong candidate or give donations to the wrong political party.”
Yes, the powers that be have pondered the possibility that hackers could get their hands on everyday folks’ CBDC accounts — in the same way hackers keep making headlines about stealing people’s cryptocurrency.
Jim points us to a Federal Reserve paper from this past January. It states…
Threats to existing payment services — including operational disruptions and cybersecurity risks — would apply to a CBDC as well. Any dedicated infrastructure for a CBDC would need to be extremely resilient to such threats, and the operators of the CBDC infrastructure would need to remain vigilant as bad actors employ ever more sophisticated methods and tactics. Designing appropriate defenses for CBDC could be particularly difficult because a CBDC network could potentially have more entry points than existing payment services.
Please reread that last sentence and focus on the term “entry points.”
Right now, even the financial system’s biggest behemoths — be they Visa or JPMorgan Chase or Charles Schwab — have only so many customers.
But the whole point of a CBDC is that everyone must use it. Thus, there would be many, many more potential “entry points” where a hacker could worm his way into the system. Preventing such an outcome is, by the Fed’s own admission, “particularly difficult.”
“If bad actors can already hack crypto platforms with ease, what’s to stop them from hacking a CBDC network with more entry points?” Jim asks rhetorically.
“What could this mean for you and your life savings? How can you protect your finances from being hacked by bad actors?
“The White House recently released a framework for developing digital assets, so this replacement of the U.S. dollar with a traceable digital currency will happen sooner rather than later.
“There is only one way I trust to protect your money and your freedom from Biden’s new surveillance machine. I call it ‘Asset Emancipation’ — and it’s easy to do and understand.”
If you’re already a subscriber to Rickards’ Strategic Intelligence, you’re already up to speed and hopefully you’ve taken protective measures. If not… well, there’s still time to act. At least for now.
To the markets, which are carrying on in the shadow of an escalating risk of nuclear war that makes the Cuban Missile Crisis look like a picnic. (You can put the headlines of the last 24 hours in context with our most recent nuclear musings from three months ago.)
It’s a lousy day, no matter where you look…
- Stocks: All the major U.S. indexes are in the red at last check. The Nasdaq is holding up best, nearly flat in fact at 10,866. The S&P 500 is down a half percent to 3,673 — barely above the June lows. The Dow is on track for another year-to-date low, down two-thirds of a percent to 29,394
- Bonds: Prices are down, yields are up. Again. A 10-year Treasury note is up to 3.8% — another highest-since-2010 level
- Precious metals: Gold is down another 10 bucks to $1,634, another low last seen during the corona-panic of spring 2020. Silver continues to hold up better at $18.70.
Note these are the “paper prices” of precious metals. If you want real metal in your hands, you’ll pay substantially more — even with our friends at Hard Assets Alliance, who do their level best to keep premiums to a bare minimum. As we write, a one-ounce U.S. Gold Eagle will set you back $1,811.18. If you’re content with a one-ounce gold bar, that’s a more reasonable $1,690.37.
Crude is off another 1.6%, a barrel of West Texas Intermediate now fetching $77.42. That’s a level last seen in early January.
The big market buzz today is about what happens when you slash taxes without slashing government spending at the same time.
Of course, that’s not how Establishment media are framing it. A typical headline is “British Pound Hits a Record Low Against the Dollar After Government Doubles Down on Tax Cuts” (CNBC).
Late last week, the new government under Prime Minister Liz Truss rolled out the biggest tax cuts in 50 years.
Hey, nothing wrong with tax cuts — but unless they’re offset by spending cuts, they’re a surefire step on the road to financial perdition. And as you might have heard, Truss’ government is cranking up the spending with $108 billion in handouts to consumers and businesses to cover rising energy bills caused by the blowback from Western economic sanctions against Russia.
Thus, the pound is worth a piddling $1.08 this morning.
Heck, at the peak of the Brexit freakout in 2016, the pound bottomed at $1.32. The current move is “almost unfathomable,” writes the renowned trader Simon Rees, in a post spotted by colleague Sean Ring at The Rude Awakening. “What we are witnessing is a COMPLETE LOSS OF FAITH in the U.K. government.”
And totally deserved. One of these days, the U.S. government will get a similar comeuppance. (As always, we caution: Events that are inevitable are not necessarily imminent.)
For the record: The threat of a national rail strike hasn’t gone away completely.
It was 10 days ago that negotiators for the major freight railroads and their unions reached a last-minute deal on a new contract — with no small amount of prodding from a Biden administration eyeing the midterm elections on Nov. 8.
So far, the rank-and-file from two unions have accepted the deal, while one has voted against. Members of another nine unions have yet to vote — and it’s up in the air how many of those votes will take place before or after Nov. 8. A survey of one union shows only 20% in favor.
The pay package seems satisfactory to both sides. It’s sick days and similar issues that are the sticking point. We’ll keep you posted…
➢ Something else to watch with the midterm election grandstanding in mind: Once again, the end of the U.S. government’s fiscal year is approaching (Friday, to be precise) and Congress hasn’t yet drawn up a budget for the new year. Expect mainstream headlines about an impending “partial government shutdown” by tomorrow or Wednesday.
Whoop, the military contractor and fraudster known as “Fat Leonard” might not be shipped back to the United States after all.
Leonard Francis faced sentencing this month for swindling the Navy out of at least $35 million in overcharges — until he snipped off his GPS ankle monitor, fled his home in San Diego and crossed into Tijuana, Mexico. He went undetected despite his 350-pound girth.
Yes, he was caught, as we mentioned last week — but he was caught in Venezuela.
On paper, the United States and Venezuela have an extradition agreement. But it’s been the policy of both the Trump and Biden administrations to pretend that President Nicolas Maduro’s government isn’t really in charge. Thus, in customary wire-service understatement, The Associated Press says, “The U.S. government faces an uphill challenge returning the fugitive back to American soil.”
After we noted Boeing’s latest “cost of doing business” fine for the deadly 737 MAX fiasco, a reader writes…
“It is also interesting that the people who caused all the problems were left almost untouched — as when you make Boeing pay for its stupid mistake, it is really that investors who get to pay for their mistake. Instead of fining Boeing, why not fine the executives, not the innocent public!!!”
The 5: Ex-CEO Dennis Muilenburg will have to fork over $1 million as part of the SEC settlement.
But yes, given his evident degree of culpability, justice would mean he’s stripped of all his assets and living under an overpass, no?
That’s yet another consequence of corporate America’s fondness for “hired gun” executives that have little or no ownership stake. They have every incentive to cut corners for the sake of a short-term bump in the share price (to which their compensation is frequently tied).
Finally today, a reader detects a link between GloboTax and the Federal Reserve’s interest rate increases…
“If you listen closely to Biden’s U.N. speech, the intended mission of the GloboTax is to put every economy on the same level.
“By 2050 the U.S. standard of living will be just one of many at the bottom. By every objective measurement we have been heading for that now for decades as incomes decline in real terms and relentless inflation reduces the cost of corporate and government debt.
“There is no mystery to the rate hikes or the thinking at the Fed and the objective is certainly not to return to the ‘targeted’ 2% inflation.
“Investors have been fleeing the dollar because of the events in the last six months and U.S. policy concerning sanctions. Sanctions are being overused and it’s clear that their exact application favors certain corporations and billionaires as well as preventing bartering between countries that seek to avoid dollar purchases for commodities.
“This is not an accident, nor is the targeting of particular individuals for sanctions — something previously unheard of and a carrot for European billionaires in order to get their participation. Sanctions are a perfect tool for American and European oligarchs to cripple their competitors. It’s also the reason Biden recently threatened China about participating.
“Rapidly jacking up the rates of Treasury bonds is aimed directly at international currency transactions as well as encouraging Americans to transfer their wealth from falling stocks to bonds. Yet another way of siphoning off the wealth of the middle class to pay down the debt.
“And while we’re at it, let’s not forget the real cause here — the Middle East Wars. We went through the same cycle in order to pay off the Vietnam War.
“I always appreciate Paradigm’s efforts to get at the real news. Keep at it.”
The 5: Interesting parallel you draw: As we’ve chronicled now and then, the dollar had a near-death experience in late 1979 and early 1980 — thanks to U.S. economic warfare piled atop the lingering effects of Vietnam/Great Society spending.
We fully anticipate history will rhyme sooner or later, and with worse effect: America’s debt-to-GDP ratio was 30% then, 130% now.
(But we’ll say it a second time today: Events that are inevitable aren’t necessarily imminent.)
Best regards,
Dave Gonigam
The 5 Min. Forecast
