Central Bank Digital Currencies (CBDCs) and the New Economic System....

Part 1/3 - The Banking Event...
Take a look at this quote.
Who said it though?

Part 2/3 - Game Theory...
Have you heard of DARPA's LifeLog Project?
LifeLog aimed to compile a massive electronic database of every activity and relationship a person engages in.
The high level goal of this data logging was to identify "preferences, plans, goals, and other markers of intentionality"
Another of DARPA’s goals for LifeLog had a predictive function.
It sought to “find meaningful patterns in the timeline, to infer the user’s routines, habits, and relationships with other people, organizations, places, and objects, and to exploit these patterns"
The DARPA program was canceled in late January, 2004
Facebook was founded...on February 4, 2004

Part 3/3 - China, Treasuries and CBDCs...
Does China want to dethrone the United States as the global superpower, and have the Global Reserve Currency?
Well, the first part seems obvious.
Of course they want to become number one.
However, the second part is perhaps more subtle.
Do they really want Global Reserve Currency status?
The UK paid off its WWII debt to the US in 2006.
So it took them the best part of 60 years to deal with the cost of the war.
On the other hand, because they now had Global Reserve Currency status as per the 1944 Bretton Woods Agreement, it only took the US 5 years to significantly inflate away a sizeable chunk of the debt burden.
Wow, isn't being the Global Reserve Currency cool?
The majority of global trade is priced in US Dollars, and therefore countries that are net exporters receive dollars for their goods.
Unless they want to push up the value of their currency by selling US Dollars and buying their domestic currency, surplus countries must buy US Dollar-Denominated financial assets.
Because it is the Global Reserve Currency, the US must run an open Capital Account.
Many countries do not want foreigners to be able to buy any type of financial asset, particularly domestic property.
This is one of the reasons why China would likely refuse to take the Reserve Currency Throne if it were on offer.
China is perfectly happy with closed or semi-closed Capital markets.
Surplus countries have traditionally recycled their exporting revenue into US Treasuries, due to their liquidity and perceived risk-free nature.
In 2014, Jared Bernstein, Chief Economist of then Vice president Joe Biden, wrote an op-ed in the New York Times titled "Dethrone King Dollar".
In it, he makes his stance clear regarding the US Dollar's reserve currency status...
As interest rates rise, bond prices fall (and vice versa).
Therefore, the market price of existing bonds falls to offset the more attractive rates of new bond issues.
Basically, when interest rates increase, new bonds are issued with a higher rate and provide more income.
However, the older bond rates are locked in and as a result the only way to increase competitiveness and attract investors is to reduce the bond's price.
This means the original bondholder has an asset that has decreased in price.
Longer-term bonds have a greater price sensitivity to interest rate changes, and this is reflected in the interest rate risk.
Those who are long bonds are short interest rates.
Large foreign holders of US treasuries look at the money printing and associated inflation and run for the exits, as evidenced by the fact that Foreigners only bought 8% of the Treasuries issued in 2020 (compared with 42% of all Treasuries issued from 2002-2019).
The Fed stepped in and purchased 55% of all treasuries issued (compared with 13% from 2002-2019).
This is why the Fed’s balance sheet grew 76% in 2020.
Instead of putting their export income into US Treasuries, Foreigners put it into US Equities instead.
In 2020, Foreigners bought $2.4 trillion of US Equities.
Why? Since equities benefit from low interest rates and an expanding Fed balance sheet.
The Interest Rate going up would be bad for both US Treasury and US Equity holders.
Is the only realistic option for the Fed to continue printing for the time being, delaying the crash for a while longer?
Is it possible that a scenario of persistent high inflation could be encouraged to bring about a New Economic System, powered by Central Bank Digital Currencies?

SOURCES:

The Honorable Jerome H. Powell
   • The Honorable Jerome H. Powell  

Chair Powell’s Message on Developments in the U.S. Payments System, May 20, 2021
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Chamath Palihapitiya, Founder and CEO Social Capital, on Money as an Instrument of Change
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Whistleblower: Goal Is 'Total Population Control'
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Finance Manager Interview - Richard Werner
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