EP192: Your Money Expired
👉 The US Government is on the verge of creating its own digital currency and like the milk 🥛 in your refrigerator, it may come with an expiration date.
This new currency comes with some serious ramifications to your personal finances that we think you should know about.
In order to get there, we have to first think about where the money comes from.
Have you ever stopped and really thought about this? 🤔🤔
Think about the carton of whole, almond, or soy milk you buy at your local store. There’s nothing more disappointing than reaching into your fridge for a nice cold glass of milk to go with your chocolate chip cookie and discovering that it’s expired.
Well, what if your money also expires? 😣😣
Yeah, it’s true, and this is exactly what happens when the nest egg that you’ve worked so hard to save just vanishes into thin air.
And this isn’t because someone stole your credit card information from PayPal or Amazon, nope, it’s because your money has actually expired. As weird as that sounds, this isn’t some meme-worthy Instagram hoax about aliens.
Worse, this sci-fi nightmare is a reality, straight out of the U.S. 🇺🇸 government’s playbook.
Before you start thinking we are conspiracy theorists, let’s explore a little history together.
You see, in recent years, there’s been increasing unrest over the notion of digital currency.
And not just any digital currency – the CBDC, AKA the Central Bank Digital Currency.
Sounds like the government agency out of Monsters Inc., right?
It sure has caused a stir among those of us trying to financially plan for the future. But don’t worry; we’re here to shed some light on why this matters, unbiased views on implications for the economy, and how it affects you.
Even better, if you stick with us all the way to the end, you’ll even learn how this all ties into the classic Tom and Jerry cartoon 🐱🐀.
But more on that later…
So, what in the world is a CBDC?
Are any of you guys Star Wars fans? If you are, you might remember that in Episode IV, Han Solo haggles with Obi-Wan Kenobi over the cost of a discreet charter flight from Tatooine to Alderaan: between 10,000 and 17,000 Galactic Credits Standard (or simply, credits).
If you remember, Han Solo didn’t pull out a wallet to pay for this flight, instead, he digitally transferred “credits”.
Credits are used for all types of transactions, including buying goods and services, and are accepted universally across different planets and regions in the galaxy. 💫
It’s kind of like a sneak peek into the whole digital currency thing we’re talking about in real life and the concept of a world without physical cash.
Back on March 9, 2022, President Biden did something pretty interesting.
He signed an Executive Order, and this one was all about encouraging responsible innovation with digital assets.
It’s a big deal because it’s the first time the government has taken a comprehensive approach to dealing with digital assets, including things like cryptocurrencies and Central Bank Digital Currencies (CBDCs).
Why did they do this?
Well, digital assets have been booming lately. Just to give you an idea, the total market value of these assets soared to $3 trillion by November.
That’s a massive jump from just $14 billion five years earlier! 😫😫
Just so we’re on the same page here, the Executive Order doesn’t actually create a U.S. digital currency. It simply lays out the things the government needs to think about when they’re deciding whether to make one, like priorities and a digital roadmap.
So, you might be wondering why some people think the CBDC is definitely happening soon.
You see, in April 2023, the Fed rolled out a new payment gateway called FedNow. ⬅️
Now, while this payment system and the CBDC are kind of connected, it’s super important to know they’re not exactly the same thing.
Let’s break it down a bit. The FedNow Payment System isn’t a currency itself; instead, it’s more like a service that helps make real-time payments happen.
Now, when we talk about the Central Bank Digital Currency, that’s a whole different ball game.
It’s basically a digital version of the U.S. dollar, created and backed by the central bank. With the CBDC, it’s all about central control – either the government or the central bank has full control over making it and spreading it around.
This digital currency is designed to be accessible and usable by a wide range of users, including individuals, businesses, and government agencies. To use it, you’ll typically need a digital wallet or a similar setup.
Now, here’s where it differs from other digital currencies like Bitcoin or Ethereum: the U.S. CBDC wouldn’t operate on a decentralized system.
Instead, it would be governed and issued by the central bank, meaning they would be in charge of it.
The U.S. CBDC comes with both promising advantages and possible drawbacks.
On the positive side, having direct control over the money supply through the Federal Reserve would enable efficient management, somewhat like the concept of quantitative easing.
This direct control makes it easier to inject or withdraw money into the economy as needed, which can help maintain stability during different economic situations. Just picture this: instead of waiting for weeks to receive the next round of a stimulus check, it instantly appears in your digital wallet.
Additionally, the government would have accurate income data for both individuals and businesses.
This could simplify the tax collection process and potentially increase tax revenues. 💰
The competitive aspect of CBDC might also encourage banks to compete with the Federal Reserve, potentially resulting in lower costs for banking services and transactions.
Furthermore, CBDC has the potential to promote financial inclusion by providing underserved communities with access to financial services, thus supporting economic growth and financial inclusion.
But keep in mind the development of the U.S. CBDC isn’t without its critics. Some express concerns about increased government surveillance of individual financial transactions, which raises significant privacy issues.
There’s also unease about the government potentially having the ability to influence or even control citizens’ spending habits, including the possibility of freezing assets or implementing measures to manipulate saving and spending behavior.
These concerns give rise to doubts about the government’s capacity to effectively oversee CBDC.
Not only that, but there are also fears of potential government abuses of power, to the extent that they might cause the digital currency of citizens to become invalid.
Needless to say, there’s a lot to think about here.
And if you think no government has ever lost your hard-earned money, think again‼️
According to CoinTelegraph, 🇨🇳 China’s Central Bank is currently testing a Digital Yuan that has an expiration date.
This means you’d need to use the digital currency before a set date, which could act as a stimulus during economic downturns by encouraging spending.
While this could potentially boost the economy, it also comes with risks for personal savings, which is a major concern, especially for people nearing retirement.
So look, we promised you our take on the situation.
Here’s the deal – whether you’re a fan of the idea or not, it appears that most of the world is moving toward centralized digital currencies.
In a previous episode, we talked about the clear advantage for countries like the US in having full control over their currencies.
This control is crucial for maintaining economic stability and credibility because it allows them to adjust the amount of currency in circulation as needed.
For a powerful nation like the US, this control becomes a significant tool for influencing foreign policy.
But expecting the government to always act in the public’s best interest might be overly optimistic.
It’s a bit like hoping Tom won’t chase after Jerry when he spots him – that would go against his nature.
Thanks for tuning in today! Until next time, dream big, and keep making those dreams a reality!
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