Digital Money and Liberty
The Biden Administration is considering the implementation of digital money. This transition has some time urgency because the Chinese consider digital money to be a financial opportunity by which they can displace the U.S. dollar as the world’s reserve currency. There are tremendous advantages to being the world’s reserve currency, so this is a matter of national interest.
Any transition to digital money poses a challenge to liberty. For example, the Chinese consider digital money to be another step further down their totalitarian social scoring system. Controlling money digitally provides the power to cut off an individual completely from a financial system. This directly threatens an individual by withholding the means to eat, be clothed, and have shelter. Liberty is directly in the crosshairs because property can be impounded or seized. Without private property, which provides the means to be independent of government, there is no liberty.
One thing learned from the COVID-19 medical tyranny was there were a couple of libertarians in Congress, but there were no Constitutional conservatives anywhere in Washington, D.C. Further, the 2020 election highlighted that one of the two major political parties has abandoned classical liberalism in lieu of progressivism. Progressivism having no limits, progressives have devolved into fascists. This fascism embraces socialism with government control of nominally private businesses by means of regulations and taxes. Also, by its nature, progressive fascism is intolerant of political opponents and free speech.
Free speech is assaulted by intolerance of different opinions, considering any proposal for debate on the merits to be anathema, attacking, imprisoning, and de-legitimizing political opponents, and stoking cancel culture to isolate or even precipitate unemployment of individuals. Unfortunately, the second major political party has a large percentage of progressives among elected politicians. While this is an unfortunate assessment of the status, and it doesn’t bode well for passage, it underscores the need for a Constitutional amendment to protect individual rights and our liberty when digital money inevitably comes.
Before the U.S. implements any system of digital money, a constitutional amendment addressing several important points is needed to protect individual rights and liberty. A statute is unacceptable because it is too easily undone by progressives with authoritarian inclinations. More permanent protection of individual rights and liberty is needed.
The constitutional amendment needs to guarantee an individual’s right to privacy of his digital money. Before the government can take certain intrusive actions, the government needs to obtain a court-ordered warrant based upon probable cause some crime has been committed. That is to say, obtaining such a warrant should have to clear a high bar. Otherwise, aside from nominal recordkeeping, and that strictly sequestered, the government needs to be precluded from monitoring, observing, recording, storing, obtaining metadata for analysis, and analyzing, or receiving analysis of, any data of individual and corporate accounts.
The constitutional amendment needs to outlaw asset forfeiture, seizure, impounding, or freezing of individual or corporate funds unless government law enforcement has obtained a court order, after due process, and then only after an individual or corporation has been convicted of a pertinent crime. The assets seized should not have a value exceeding what is determined to be the amount of the ill-gotten gains. Asset forfeiture, as widely practiced today by all levels of law enforcement, at local, county, state, and federal levels, is unconstitutional because there is no presumption of innocence until proven guilty. Often, it is simply some level of government taking private property, without compensation, for the purpose of budget revenue enhancement.
Recovery of assets seized by law enforcement can be costly, time-consuming, and problematic for individuals. It is almost unheard of that government officials are punished for improperly seizing assets. Asset forfeiture, as currently implemented, is a direct threat to private property and to liberty.
The constitutional amendment should indicate the amount of digital currency released is fixed forever. The quantity of digital money can’t be increased for any reason at any future time. Digital money, as proposed by government central banks, is fiat currency. As such, its value is not anchored. People thinking digital money is a store of value will be misled. The remedy is to prevent debasement of the value of the currency.
The current inflationary debacle, caused by the profligacy of the Congress and two presidents, the current and the last, working with the Federal Reserve, should be cautionary for how any digital money scheme is implemented. Currently, the Federal Reserve implements monetary policy to accommodate government deficits. In this way, the Federal Reserve facilitates spending beyond means and funding of Endless Wars.
If the quantity of digital money is fixed, then the Federal Reserve will no longer create asset bubbles which eventually lead to financial busts. Because of such actions, the Fed is directly responsible for the business cycle. By fixing the quantity of digital money, the Fed will no longer create asset bubbles that will burst later.
Prosperity isn’t served with malinvestment enabled by low interest rates and easy money provided by the Federal Reserve. But, if the quantity of digital money is fixed, then malinvestment caused by the injection of new money and easy credit will be reduced dramatically because the soundest business proposals will be the ones funded with capital from savings. Monetary inflation, which is a hidden regressive tax on the poor and middle class, will no longer be a plague on citizens.
Related to this, the constitutional amendment should specify no other digital money may be issued by the government. If the amendment constrains digital money to a fixed quantity, then one way to circumvent this proscription would be to simply issue another kind of digital money, and then specify both be considered legal tender. Further, the amendment should prohibit the taxation of cryptocurrencies, gold, and silver, and any transactions used with these. Finally, other such forms of currency, such as cryptocurrency, gold, and silver, should be recognized as legal tender.
Finally, the constitutional amendment should provide that Congress perform frequent and regular audits for full compliance with the requirements of this amendment. Violators of any provision should be subject to severe criminal penalties. No audit content should be classified secret, and all audit results should be made public immediately.
As previously mentioned, there is danger in the tyrannical use of digital money to complement any already existing social scoring system. The most straightforward remedy is for the constitutional amendment to expressly forbid the U.S. government from implementing, or coordinating with any third party to implement, or pressuring local, county, and state governments to implement, any social scoring system that would be used by the government for any purpose. In this way, digital money is decoupled from any social scoring system.
Individuals have the right to keep secrets. Governments don’t. Any digital money scheme needs to respect this principle so that liberty is protected. It is important to get in front of this issue because digital money is coming.
Graphic credit: FamZooStaff CC BY-SA 2.0 license
Whitson G. Waldo, III is a capitalist, a venture capitalist, and master and skipper of a 43 foot monohull sloop-rigged sailing vessel.