Vivek Ramaswamy, a Republican candidate for President, has a strong position on central bank digital currencies (CBDC): “Hell no.”
His proposals for reforming the Fed have major problems, but his views on financial freedom and privacy are unimpeachable. A CBDC would give the government unprecedented access to and control over private transactions. Allowing the Fed to create one would take us dangerously far down the road to serfdom.
A CBDC is sometimes described as a digital dollar. This is true but incomplete. We already have trillions of digital dollars in the economy thanks to private banks. For example, checking and savings accounts take the form of electronic balances.
A CBDC is different. It’s a liability of the central bank (in the U.S. case, the Fed) rather than private banks. Transacting with a CBDC also means using the central bank’s attendant payments system: the process for clearing debits and credits.
Financial privacy would be the first major casualty of a CBDC. Uncle Sam would have an incredible amount of information about citizens’ transactions. Do you want to live in a world where the government knows who buys and sells which goods and services, and on what terms? The potential for abuse is obvious to anybody with a modicum of understanding about political power.
But that’s not all. Whether on their own initiative or under the influence of politicians, Fed officials could use a CBDC to micromanage the economy. If central bankers decide the public isn’t spending enough money, they could debit CBDC accounts to stimulate consumption. This is, in essence, a negative interest rate policy. And since the assets in question are a liability of the central bank, not tied to or redeemable for anything, they can do whatever they want with them. Your only recourse would be to exit your position—if the technocrats pulling the strings let you.
Then, of course, we must consider the risks of selective (and likely politically motivated) payments processing. We’ve already seen that central bankers are far too eager to meddle in policy areas like racial justice and climate change, which are beyond their legitimate mandate. It’s no stretch to imagine central bankers denying payments for firearms or fossil fuels. A CBDC would allow Fed officials to pick winners and losers based on ideological factors to an even greater extent.
Alarmingly, the government has already taken important steps towards implementing a CBDC. In cooperation with participating financial institutions, the Fed inaugurated Project Hamilton, which is basically a CBDC pilot program. Congressional Republicans have introduced legislation to prevent the Fed from going any further. Fed Chairman Jerome Powell says no final decision would be made without legislators’ approval. But given decades of Fed mission creep, this promise is not credible. GOP lawmakers absolutely should head CBDC efforts off at the pass, and the party’s presidential candidates should support that rejection.
Ramaswamy’s unequivocal stance sets a good example. He’s stimulating a public conversation about an issue that otherwise would be limited to white-paper wonks and thinktank “experts.” Americans cherish their liberty and privacy and rightly will refuse to surrender them unless the stakes for the nation are existential. Let’s be clear: There is no problem, serious or otherwise, that CBDC is well-positioned to solve. It’s just a power grab, and it deserves a “hell no” from each of us.
