The Simon Lectures. Series I, Part 8.

Originally published on greatawakening.win, 2023 January 10.

This is Part 8 of Series I of The Simon Lectures.

Part 7 can be found here: https://greatawakening.win/p/16ZE4bONBX/the-simon-lectures--series-i-par/

“A Departure and a Preface” can be found here: https://greatawakening.win/p/15K6cDeVUY/the-simon-lectures--a-departure-/

Part 6 can be found here: https://greatawakening.win/p/15K6SpCAse/the-simon-lectures--series-i--pa/

Part 5 can be found here: https://greatawakening.win/p/15K6JWPoXQ/the-simon-lectures--series-i-par/

Part 4 can be found here: https://greatawakening.win/p/15JnPPYPZx/the-simon-lectures--series-i-par/

Part 3 can be found here: https://greatawakening.win/p/15JAllbd2t/the-simon-lectures--series-i-par/

Part 2 can be found here: https://greatawakening.win/p/15JAEy4lN4/the-simon-lectures--series-i-par/

Part 1 can be found here: https://greatawakening.win/p/15IrUHyPbl/the-simon-lectures--series-i-par/

To recap: (1) in Part 1, we determined that the United States federal government is insolvent, and that all of our assets bear illusory valuations, in that they’re all overvalued; (2) in Part 2 we observed (i) that the United States Dollar is backed by nothing other than the “full faith and credit” of an insolvent federal government, and (ii) that we have compelled use of the dollar by imposition of the petrodollar arrangement, thereby creating synthetic demand for the dollar in order to keep it artificially strong; (3) in Part 3 we concluded that the artificially strong dollar has decimated the U.S. manufacturing sector, but has fueled the stratospheric growth of Wall Street; (4) in Part 4 we determined (i) that Obama initiated a regimen of economic sabotage of this country; (ii) that expansion of our money supply is part of that regime; (iii) that the expanded money supply is being used by Wall Street to acquire business concerns on a global basis; and (iv) that the remainder of the world cannot “opt out” of all of this because they need our dollars to purchase OPEC oil; (5) in Part 5 we concluded that our national debt is destructively large, that there are no available spending “levers” to pull to solve the problem, and that our leaders are, instead, reconstituting the citizenry of the country in response to the situation, and that this is societally observed as the Southern Border Crisis; (6) in Part 6, we learned that (i) our country is financing debt with debt; (ii) the debt cycle, itself, is being seeded with printed money; (iii) we are in constructive default on our debt; and (iv) Wall Street knows this; and (7) in Part 7, we determined that Wall Street is executing a worldwide project of repossession that amounts to a reverse-sequenced Chapter 7 proceeding, and when this has run its course, the first “leg” of the Great Reset will have been completed.

Ladies and gentlemen, let’s dive in to Part 8, shall we? I promise it won’t disappoint. But first I need to remind you of what I wrote in Part 7:

*I want you to consider the following potential scenario. Consider that, in the not-too-distant future, our government introduces a central bank digital currency (CBDC), with the pretext being that a CBDC offers citizens a direct “draw” on the Federal Reserve, as opposed to your current situation in which your debit card offers you a digital claim on “bank money.” Your debit card puts you at risk: your bank is subject to a bank run, and you can lose everything in excess of your FDIC insured limit. So, theoretically, a CBDC is your savior – you’d be subject to no counterparty risk: there can be no “run” on the Federal Reserve. So that’s step one of this potential scenario, introduction of a CBDC.

Next would come step two. It would go like this: for cryptographic mumbo-jumbo reasons, it will be “impossible” to comingle our existing United States Dollar (USD) with our CBDC. They will not be alternate expressions of the same thing. They will be distinct currencies, but simultaneously honored within the United States. When you go to the store to buy a case of beer, it will be priced both in USD and CBDC – and you’ll be able to pay with either currency. Right now, you should be thinking of a situation similar to the introduction of the Euro – goods were priced, for a time, both in Francs and Euros, Deutschmarks and Euros, Lira and Euros, and so on. Now consider that if and when you see that here, the fix is on: we will orchestrate a controlled demolition of our USD, paying off all of our debt that is denominated in USD (not CBDC), with worthless dollars. And we will move forward with CBDC as our new currency. You can think of this as our “Great Currency and Debt Reset.” *

I suspect that greater time and attention is required on the topic of CBDC. So let’s go through it slowly, shall we? Right now, there are only two kinds of money available to you and me: (1) physical cash; and (2) digital commercial bank money. I’ll begin with physical cash, i.e., a twenty-dollar bill or a fifty-dollar bill, or if you’re not feeling wealthy today, a one-dollar bill, and so on. Greenbacks. Those green things in your wallet. Technically, they are “Federal Reserve Notes.” And what is a “note?” In legal terms (recall: I am a lawyer), a “note” is an instrument indicating a debt obligation on the part of the issuer of the note. In other words, the party that issued the note “owes” something to the holder of the note. In the case of that Andrew Jackson in your wallet, the issuer is our Federal Reserve, and by virtue of your possession of the note, the Federal Reserve “owes” you twenty dollars. In other words, your physical cash is a direct liability on the balance sheet of the Federal Reserve.

Now what happens if you were to visit your local commercial bank (example: US Bancorp or Fifth Third Bank or Bank of America) and deposit your physical cash? Well, your account would be credited with twenty dollars. So far, so good. And the Bank’s reserves would increase by twenty dollars, reflecting your deposit. Let’s take those one-by-one, shall we?

What does the credit in your account mean? It means that the commercial bank owes you twenty dollars. By virtue of having deposited your cash at the bank, you have converted your money from Federal Reserve money (i.e., cash that is a direct liability on the balance sheet of the Federal Reserve) to commercial bank money. And what is commercial bank money? It is a liability on the balance sheet of the particular commercial bank holding your money – not a liability of the Federal Reserve. So that’s what you’ve done when you’ve deposited money at a bank. You’ve become a creditor of a commercial bank. That commercial bank now owes you money. That’s what happens when you deposit money with a commercial bank.

Well, one more thing happens too: the bank’s reserves are expanded in proportion with your deposit. And what does that mean? Recall: the Federal Reserve requires commercial banks to maintain a minimum level of reserves against their liabilities. Your account with the aforementioned bank is a liability on its balance sheet. And right now the reserve requirement is 10%. So if you deposited twenty dollars, the bank has to keep two dollars on hand. It can lend out the other eighteen. This means that if you were to demand access to your twenty dollars, such as by attempting to withdraw it or spend it via a cash card, there exists a possibility that the bank might not have twenty dollars to give you. With commercial bank money, you are exposed to counterparty risk: maybe the commercial bank won’t be able to repay you. And you could conceivably lose all amounts in your account that are in excess of the FDIC insurance limit (which is $250,000). This is what happens in the context of a bank run.

Now consider: all digital money available to you or me is the reflection of a balance held at a commercial bank. When you use your cash card, you are accessing a balance held in your commercial bank account. When you use a gift card, you are accessing a balance held in an aggregated bank account devoted to funding gift cards. And so on. Today, all digital money available to you or me is commercial bank money – not Federal Reserve money. The only Federal Reserve money available to you or me is physical cash. This means that when you or I use digital money, we are exposed to counterparty risk. There is no way for us to escape that prospect today.

Now here is where things get interesting and infused with breathtaking mendacity. We’ve got to go at this slowly. Stay with me.

The ostensible purpose of CBDC is to give you and me the option to use digital money that is free of counterparty risk. In other words, CBDC is being positioned as a digital version of physical cash: it will represent a direct liability on the balance sheet of the Federal Reserve. Your physical cash represents a liability on the balance sheet of the Federal Reserve. But it’s not digital. That’s what CBDC is supposed to be: digital physical cash. Digital. And representing a direct liability of the Federal Reserve. That’s exactly what you want today, but can’t have. Sounds good, huh?

Our Federal Reserve is proposing introduction of CBDC alongside physical cash and commercial bank money. That is the proposal as it stands today. You could use physical cash. You could use commercial bank money (example: your cash card). Or you could use CBDC. Your choice. They’re just different expressions of the same thing. Different expressions of the United States Dollar. And you’ll get to choose which one you want to use. That’s the story.

Someone has to do it, so I’ll do it for all of us: I’m calling bullshit. Because that’s exactly what it is. Keep staying with me. You’ll be glad you did.

First, let’s examine the idea that the proposed CBDC will be – in substance – just another expression or form of the United States Dollar. I am now going to quote from a paper published by the Federal Reserve in January 2022. The passage refers to a hypothetical situation in which CBDC holdings were to bear interest:

*In this case, the level and volatility of the public’s demand for CBDC could be quite substantial. …To maintain an ample supply of reserves, the Federal Reserve might need to substantially expand its holdings of securities. * What is being said here? Let’s look at the first sentence. It speculates that, if CBDC holdings yielded interest, then all of us might pull out of commercial bank money and move into CBDC. In other words, we’d use our commercial bank money to buy CBDC. Why wouldn’t we? If it yielded interest and carried no counterparty risk, wouldn’t it be superior in every way to commercial bank money? That’s what the first sentence says.

Now the second sentence. What happens if all of us choose to buy CBDC? Well, our bank account balances would dwindle. Because we would be turning commercial bank money into CBDC. And as our bank account balances dwindle, so does our bank’s reserves. So the Federal Reserve might have to put more money in our banks by purchasing securities (i.e., Treasurys) off of the bank, thereby restoring it with USD, which counts toward its reserves. That’s what the second sentence says.

Hold on. Take that in. CBDC will not be counted as a part of a bank’s reserves. When you opt to use CBDC, you will reduce your bank’s reserves. Let me ask you a question. If you chose to be paid in cash, and took the cash to your bank to deposit it, that would count toward the bank’s reserves. And if you, instead, chose to be paid electronically via a direct deposit using commercial bank money, that would count toward your bank’s reserves. But if you choose to be paid in CBDC, the CBDC will be electronically deposited in your digital wallet, but will not count towards your bank’s reserves. If CBDC is merely another expression or form of the USD, why does it not count toward your bank’s reserves? What is going on?

Let me turn your attention to another matter: it is not clear that CBDC will trade with the USD at a 1:1 ratio. The Clearing House – a banking association owned by the largest banks in the United States and which operates the ACH payment system, the wire transfer payments system, and so on – has stated in its public comments pertaining to the prospect of CBDC that as certain conditions increase (we’ll get to what those conditions are, later) “the less likely [CBDC] is to be fungible with other forms of the dollar and trade at a 1:1 ratio.”

So let’s get this straight. CBDC is just another form of the USD. But it might not always trade at 1:1 with the USD. I’ll ask again: what is going on?

Permit me to turn your attention to another matter. CBDC will not be holdable in your bank account. Your bank will provide you with an electronic wallet, and your CBDC will be held in that wallet. But you cannot commingle your CBDC with your USD.

So here’s where we’re at. You are supposed to believe that CBDC will be just another form of the USD. A form that: (1) does not count toward the USD considered to be on hand by a bank to cover its liabilities; (2) may not trade at 1:1 with the USD; and (3) cannot be commingled with the USD in your bank account or any other account, for that matter.

Bullshit.

No matter how it is spun, no matter how hard they try to tell you otherwise, CBDC will be a separate, parallel currency. Period. Look, if you brought Euros to your bank, could you directly commingle them with your USD in your bank account? No, you could not. Are Euros guaranteed to trade at 1:1 with the USD? No, they are not. If you deposited Euros in a safe deposit box at your bank, would the bank’s reserve levels be credited for such a deposit? No, they would not. Folks, this is the exact treatment that CBDC will get. There’s no other way of looking at it.

CBDC will be a separate currency.

Now let’s reflect on that passage from the Federal Reserve’s 2022 paper that I quoted earlier. As people leave the USD to hold CBDC, what will the Federal Reserve do? What did they literally tell you they would do? Inject USD into banks to “maintain adequate reserves” by way of purchasing Treasurys off the balance sheets of banks. When a country’s central bank buys its government’s securities from its commercial banks, what is this called and where does the money come from? If you’ve been reading my Series, you know the answers by now. This is called quantitative easing. And the money is simply printed into existence by the central bank (in our case, the Federal Reserve).

[I have reached the character limit. Please See Part 8b.]