Consciousness of Sheep
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Britain is a country which can only keep its lights on by paying businesses and households not to consume electricity when the wind isn’t blowing. And if ever there was an argument for keeping the economy as analogue as possible, this is it. Because anything and everything digital depends upon a firm, 24/7 supply of electricity that simply isn’t going to be there anymore.
We already experience the consequences of our breaking electricity system on a local scale week-in/week-out, when ever more common power outages cause all things digital to cease working. Most commonly, ATMs cannot issue cash just at the point when electronic till systems have stopped working. And so, local retail comes to a halt. And at the other end of the retail process, bank computer system crashes are an all too familiar feature of life in modern Britain.
This situation is expected to worsen considerably over the next five years, as there is now little chance of restoring supplies of cheap Russian gas to Europe, and with expensive Qatari and US liquid natural gas pricing gas power stations out of the electricity generation market. Worse still, most of Britain’s ageing fleet of nuclear power stations are due to close by the end of the decade. And barring a reversal of policy, the three remaining coal plants will be gone soon too. For the moment, Britain is able to draw on imported electricity from interconnectors with Europe. But with French, and particularly Belgian nuclear power stations closing and given Europe’s higher dependency on Russian gas, Britain cannot take imported electricity as a given.
It is against this backdrop that the numpties at the Treasury and the Bank of England have decided that Britain could do with dispensing with cash entirely and moving to a central bank digital currency (CBDC)… something which is pretty much guaranteed to fail in an energy-constrained economy. Although it goes without saying that the orthodox economists at the central bank simply assume that clever people somewhere else will solve such practicalities.
The trouble is that looked at purely as a payment system, there is little wrong with the current arrangements. We can pay with the click of a button, the swipe of a card or even a tap from a phone or a watch. And if all else fails, we can also use those old-fashioned notes and coins issued by the Bank of England (notes) and the Royal Mint (coins) to pay for what we need. Even the propagandists at the BBC struggle to find something positive to say about the British government’s rush to implement a CBDC. Economics editor Faisal Islam, for example, says the quiet part out loud:
“Right now, there is probably little need for a digital pound. People use their debit cards or phones, or even watches to fulfil the same function. It is a solution to a problem that does not yet exist.”
This is where the “bait” part of the bait and switch comes in. CBDC’s, are “green” you see, so we need them if we are going to reach the Nirvana of “Net Zero.” As Jim Rickards explains in a discussion with Adam Taggart:
“The pitch is hey, you know I’m in an airport, I want to buy a candy bar and I go up and I buy the candy bar and I pay for it with the credit card. And what about the retailer? How does he or she get paid? Well, they take my receivable… and they sell it to somebody called the merchant acquirer. Merchant acquirers go out, and they just scoop up, you know, hundreds of millions of dollars’ worth of credit card receivables, and they pay the merchant. So, I get the candy bar and they got paid by the merchant acquirer.
“What about the merchant acquirer? So, they deliver them to MasterCard or Visa and MasterCard or Visa pays them. And then, MasterCard and Visa ship them out to all the banks who issued the cards and the banks pay them. And what does my bank do? Sends me a bill, and I pay the bank. OK, so. It’s all good, but we’ve got five parties to buy a candy bar. We’ve got me, the retailer, the merchant acquirer, MasterCard and the issuing bank… It’s clunky, expensive you know…
“And the Fed says hey, with the central bank digital currency, Jim will have an account at the Fed. You know, probably my bank, but same thing. A little QR code and the payment goes directly from A to B. So it’s better, faster, cheaper.”
It is this simplification that Itai Agur, et al., point to in an International Monetary Fund paper on the energy consumption of CBDCs:
“Academic and industry estimates indicate that non-PoW permissioned networks are significantly more energy efficient than current credit card processing centers, in part because the latter involve energy-inefficient legacy systems. Moreover, these crypto assets can further improve on the traditional payment system in terms of energy consumption because they employ purely digital solutions rather than physical means of payments (such as cash or cards and terminals).”
Energy consumption – along with e-waste – is, of course, the big show-stopper with crypto currencies like Bitcoin. As the IMF paper notes:
“For example, as of April 25, 2022, the annual electricity consumption of the Bitcoin network is estimated at 144 terawatt hours (TWh) per year according to the Cambridge Bitcoin Electricity Consumption Index.”
If the CBDC really were just a digital replacement for cash, it would use far less energy even than the current card payment systems. But there’s the rub, the technocrats behind the CBDCs have no intention of simply issuing them like cash and then allowing us to transact with them in the same way we do now. Rather, there are going to be hidden layers of digital control built into the system, as Rickards explains:
“We’re in a world where there is no more cash. Maybe we have credit cards, but all the payment channels are through the central bank digital currency. What’s the difference? The difference is the Fed, the federal treasury… probably the FBI. They can see what you’re doing now.
“The other thing is that the digital currency, the CBDC, is programmable. So what comes next? OK, we’re on the CBDC dollar world, right? They say: ‘Oh well, you know what? You’ve been buying a little too much gasoline. It looks like you’ve been driving up and down the East Coast. We’re not going to let your CBDC card work at a gas pump for you know, the next 10 days because you’re using up too much gas’. ‘Oh, your heating bills a little high. You need to turn the thermostat down’… You pay your heating bill, you know as they can control how you spend your money, what you spend it on.
“It’s a totalitarian system, but it’s what governments like… ‘OK, you just got you know $10,000 in your bank account. Whatever. We’re gonna deduct 1% a month. Until it’s all gone, so you better spend it well and maybe we’ll deduct 5% a month.’ It’s like a prepaid debit card or these gift cards… They have expiration dates. If you don’t use it up, it goes away. Well, this will happen to your bank account, so between total surveillance forced stimulus because if you don’t spend it, we’ll take it away…”
The trouble is that the more of that digital surveillance and programmability is built into the system, the more the energy and resource consumption profile begins to look like Bitcoin rather than Mastercard. And despite the hype, currently Bitcoin accounts for so small a proportion of total transactions that it barely registers in the data. For example, the latest British Retail Consortium payment survey lumps it in with a raft of other “alternative payment methods:”
“For the purposes of this survey, ‘Alternative Payments’ encompass anything that isn’t a traditional card or cash payment. That may include account-to-account services, Buy-Now Pay-Later (BNPL), gift cards, and payment channels such as PayPal, as well as the developing utilisation of crypto currencies and blockchain. This category saw a somewhat surprising fall from 4% share of total sales in 2020, down to 2.1% in 2021.”
This compares to nearly 90 percent of transactions using credit and debit cards and 8 percent using cash. But – assuming the proportion of transactions is similar across the world – under a fully-functional CBDC system, these 98 percent or so of all transactions would be digital and would require similar energy and hardware costs to those currently incurred by Bitcoin. That is, instead of the 144TWh per year used by Bitcoin, CBDCs would consume some 7,056TWh – more than three times the UK’s total 2019 energy consumption of 2,185TWh… In an increasingly energy-constrained global economy, it should – but likely won’t – be clear that programmable CBDCs are a non-starter… a solution looking for a problem to solve indeed!
As you made it to the end…
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