Thoughts on the digital RMB
In December of 2020, the Chinese state-controlled media posted a video on Facebook which seems to have gotten little notice (223 likes, 9 comments, and 66 shares). The fact that this video seems to have garnered little attention should not be taken as evidence of its unimportance however.
If you watch this video, and I recommend that everyone does, what you will see is the following.
Source: https://www.facebook.com/ChinaGlobalTVNetwork/videos/386407859105906/
The goofy looking guy in the stars and stripes is apparently a representation of the American people pulling the SWIFT network out from under the global financial system. I’ll just give a brief summary of that four-minute video now.
The Digital RMB won’t require the internet or a bank account to use.
It provides real-time data to be used in monetary policy decisions.
It reduces trade settlement times and eliminates the need for Belt & Road partners to settle transactions in 3rd party currencies like the US Dollar.
This is necessary because “cross-border payment systems have been weaponized by the USA.”
Digital Yuan provides a digital alternative that blocks foreign interference in the economy.
Stands by itself and does not need the US Dollar.
It expands engagement with global trading partners and helps reform economic governance.
In some ways, these statements make complete sense. The SWIFT network has in fact become a weapon of the United States. Additionally, digitally native transactions do have much greater settlement speed. But if being able to transact without the internet and without a bank account seems like a move towards economic freedom, let’s pull the reins back for a moment.
China has one of the worst human rights records on planet earth. From forced sterilizations, social credit scores, mass censorship, surveillance, and worse. If China succeeds in driving adoption of the digital RMB then they will begin to have an ever greater influence on the direction of the global economy.
The USA has done itself no favors by greatly expanding its own balance sheet, but it's interesting to me that the largest pension fund in the world (the Japanese government) has chosen to reposition their holdings of US Bonds in favor of EU sovereigns. Recall that the ECB has been an even more prolific printer than the Fed.
Source: https://twitter.com/dlacalle_IA/status/1433026497846157315
The United States is playing with fire when we take for granted the exorbitant privilege we have with the world reserve currency. And the shift to digital currency just might be the straw that breaks the camel's back.
Consider this, big changes tend to come all at once while the pressure that creates that change tends to build up over time. It’s kind of like an earthquake, there’s no other way for the change to occur. Without some kind of pressure, and then a catalyst, everything will remain essentially the same as it has been up until that point. This is one of the central arguments of “The Fourth Turning.” Generational shifts can only occur under certain circumstances, but when they do happen it’s like time itself is speeding up.
I hope that we can appreciate the gravity of these changes, even if we cannot foresee all the details surrounding them. The big picture for me is that the world is becoming increasingly complex. Money is how we express value, and how we transact in the real economy. The rules surrounding money govern how we act, what we expect, and to a certain extent how the future itself plays out.
We have to choose what kind of rules we want to live under. And if you think about the potential of open-source money, and rules decided by the crowd versus rules thrust upon us by the Chinese Communist Party, there’s absolutely no contest.
Open source money wins in terms of fairness, security, and value generation. We’ve seen time and time again that money systems fail along with their governments. Look at what’s going on in Afghanistan. No sooner had we pulled out the military than the entire monetary system started to collapse and the banks haven’t been open since.
I hope that we can seize this opportunity and remember that there’s almost always some country in crisis. Those countries now have a choice: Bitcoin and the Lightning Network, or perhaps they will get steamrolled by the CCPs New World Order.
The decisions we make can have an impact here. As the Fed slowly starts to pivot on its own Central Bank Digital Currency, we need to make sure that we do everything we can to explain why Bitcoin is different from what they’re creating and to make our voices heard at this important juncture.
On the back of these changes, the value proposition of Bitcoin (and some other cryptos) rings more true than ever. We now have the ability to create digital scarcity, we don’t need to accept a constant erosion of our purchasing power while the money printer goes “Brrrrr.” We can have security on Bitcoin’s base layer, and the freedom that comes along with it. And if we need to transact quickly and cheaply there’s always the Lightning Network, Liquid, or even stablecoins running on multiple blockchains.
This is why I say that Bitcoin is the most important technology since the internet and I hope we don’t squander this great opportunity we have right here, right now.
Thank you,