The Coming Monetary Apartheid

Mark Jeftovic, Grey Swan Investment Fraternity

Looking at the big picture, central bank digital currencies or CBDCs, offer a lifeline to fiat currency.

Remember, central bankers are trapped. They can’t go up, they can’t go down. These currencies are completely debased. Changing interest rates does very little to fix fundamental problems with a currency, it can only juice up or slow down an economy.

Enter the CBDC. This programmable money can act as a way to try to extend that runway another few decades.

And what I have always said about them is they will either launch as or morph into social credit systems.

Remember when the “stimmy checks” came out during Covid and the pandemic? It was not used in ways central banks intended.

People used it to buy stocks on Robinhood, rather than pay their rent or continue to spend on other items. That was a clear, unintended effect.

Well, what if you could have permanent stimlus, permanent Universal Basic Income (UBI), you’re going to want to control how and where that money is spent.

CBDC’s: Tracking Your Social Credit, Carbon Footprint, and Programming Accordingly

Meanwhile, there’s the whole World Economic Forum (WEF) mindset that you’ll own nothing, and be happy.

A CBCD will be part of that trend, and, in fact, the key tool. You’ll have money that may come with a use-it-or-lose-it expiration date. And you’ll have an increasing number of monthly subscriptions to spend things on, not just streaming services, but things like food and clothes.

That means a CBDC can also be used not just for a social credit score like in China, but personal carbon footprint trackers.

Yes, all of this is doable with CBDCs. There’s an incredible clip from the World Economic Forum about a Canadian who’s the president in the Valley Baba, this one unit of Baba talk, and we’re going to be able to know what you’re eating, where you’re traveling, all of this stuff.

You can track your own carbon footprint, but really the sort of punchline there is they can control your carbon footprint.

In a way, CBDCs are kind of like an embracing of sound hard money in a way. It’s not. CBDCs come from the same realization as gold, and bitcoin is that fiat money is backed by nothing, and it’s worthless, and it’s kind of a ruse, and we’re running out of runway for it.

So CBDC or so gold says, well, we’ve got this gold, and we’re going to back money. And it’s worked for thousands of years that way.

Bitcoin is saying we’ve got this energy-backed fixed supply currency that’s capped at 21 million, and that’s never going to get bigger. And so that’s going to be a currency.

Well, what the CBDCs are doing is saying, we all live on one planet and carbon is killing us, and we’re going to back your money with a carbon footprint. That’s going to be what backs your “money.”

And I put air quotes around money at that point because it brings us to the big difference between CBDC and crypto.

Bitcoin: The Anti-CBDC and Protection in the Digital Age

Some people look at bitcoin and say, oh, this is just a prototype for CBDCs. It’s actually they’ve got it backwards.

Bitcoin is the anti-BDC. And the reason why is because bitcoin gives you private custody, private keys, personal sovereignty over your keys, whereas CBDC will have no self custody.

Bitcoin’s program runs as-is, and without 51% of network control, it can’t be changed. That’s in contrast to a CBDC, which could be changed on the programmer’s whim.

Alternatively, a CBDC will be a ledger in a central bank. It will not be hard-capped, and it will be more like a social credit score than it will be money, but it will happen.

The only thing that can stop CBDC from happening in my mind is if the global financial system falls apart before they can roll them out.

Currently, the United States is one of the laggards in CBDC development. So I don’t see a CBDC coming out at a federal level in the U.S. for a long time, and Canada’s a little further ahead, but nobody is anywhere close to launching this thing in Western countries.

So, because the global financial system is coming unglued faster than the powers that be hoped, they’re going to have to go with something that already exists to sort of come out with a hybrid quasi-CBDC. That gives investors an opportunity, and a chance to avoid the dangers of a CBDC.

Right now, there are some crypto projects who want to be base layers for CBDCs. One of them is Ethereum, another one is Ripple. They want to be the coding underpinning a CBDC. That’s why the developers of those projects go to World Economic Forum conferences and give presentations on how great it would be to use Ethereum as a base layer for a CBDC. So that may be how we see it deploy on top of some crypto.

It’s not going to happen on bitcoin because nobody can control bitcoin. So that’s why I firmly view bitcoin as the anti-CBDC, and we’re heading into a world where there’s going to be UBI because there’s going to be no jobs thanks to automation and AI.

Future forms of UBI will be delivered via CBDC, and the CBDC will be like carbon footprint trackers and social credit systems. In time, this programmable money will come with strings attached.

Tools For Escaping the CBDC Trap

And so the number one rule is going to be don’t be dependent on the state for any aspect of your economic underpinning.

It goes back to 1998 advice from Agora, right? Own your own businesses, multiple streams of income, hard assets, real estate out of the country, all of second passports, all of that thing, and hold Bitcoin and precious metals outside of the legacy financial system.

Because if you have no self-sustaining economic basis, you’re going to be getting your “stimmy” every month on this CBDC thing. And it’s also going to tell you how many hamburgers you can eat and how many plane trips you can take, and that’s going to be your life.

It’s monetary apartheid, and it’s coming in digital form.

It’s going to be awful. I don’t think it can last,, either. I don’t think it can be sustainable, but there’s going to be this rough period to get through.

The Coming Monetary Apartheid

Mark Jeftovic, Grey Swan Investment Fraternity

Looking at the big picture, central bank digital currencies or CBDCs, offer a lifeline to fiat currency.

Enter the CBDC. This programmable money can act as a way to try to extend that runway another few decades.

And what I have always said about them is they will either launch as or morph into social credit systems.

Remember when the “stimmy checks” came out during Covid and the pandemic? It was not used in ways central banks intended.

People used it to buy stocks on Robinhood, rather than pay their rent or continue to spend on other items. That was a clear, unintended effect.

Well, what if you could have permanent stimlus, permanent Universal Basic Income (UBI), you’re going to want to control how and where that money is spent.

CBDC’s: Tracking Your Social Credit, Carbon Footprint, and Programming Accordingly

Meanwhile, there’s the whole World Economic Forum (WEF) mindset that you’ll own nothing, and be happy.

That means a CBDC can also be used not just for a social credit score like in China, but personal carbon footprint trackers.

You can track your own carbon footprint, but really the sort of punchline there is they can control your carbon footprint.

So CBDC or so gold says, well, we’ve got this gold, and we’re going to back money. And it’s worked for thousands of years that way.

Bitcoin is saying we’ve got this energy-backed fixed supply currency that’s capped at 21 million, and that’s never going to get bigger. And so that’s going to be a currency.

And I put air quotes around money at that point because it brings us to the big difference between CBDC and crypto.

Bitcoin: The Anti-CBDC and Protection in the Digital Age

Some people look at bitcoin and say, oh, this is just a prototype for CBDCs. It’s actually they’ve got it backwards.

Bitcoin is the anti-BDC. And the reason why is because bitcoin gives you private custody, private keys, personal sovereignty over your keys, whereas CBDC will have no self custody.

Bitcoin’s program runs as-is, and without 51% of network control, it can’t be changed. That’s in contrast to a CBDC, which could be changed on the programmer’s whim.

Alternatively, a CBDC will be a ledger in a central bank. It will not be hard-capped, and it will be more like a social credit score than it will be money, but it will happen.

The only thing that can stop CBDC from happening in my mind is if the global financial system falls apart before they can roll them out.

Future forms of UBI will be delivered via CBDC, and the CBDC will be like carbon footprint trackers and social credit systems. In time, this programmable money will come with strings attached.

Tools For Escaping the CBDC Trap

And so the number one rule is going to be don’t be dependent on the state for any aspect of your economic underpinning.

It’s monetary apartheid, and it’s coming in digital form.

It’s going to be awful. I don’t think it can last,, either. I don’t think it can be sustainable, but there’s going to be this rough period to get through.

Now cometh AI, adding to the too-much-info problem. Already, it generates news and reports that fill our in-boxes and waste our time. And an Israeli company just announced that it can twist and turn (distort) the news in real time.

Which leaves, at least for now, AI and the Mag 7 in an old-fashioned financial bubble. Stock prices are far higher than actual sales and profits can account for. So one way or another price and value will have to come back together. While it is not impossible that some breakthrough will lead to a big burst of productivity gains and growth, it is more likely that stock prices will fall.

Cash, mostly invested in short-term Treasury bills, will earn over 4% per year, still higher than inflation.

And with market valuations well over the “Buffett indicator” for greed, measuring a stock market valued at 207.4% of GDP, a record high, the market is ripe for a strong pullback.

As we noted yesterday, big names are pulling the fire alarm:

Ray Dalio warns of an “economic heart attack.”

Michael Burry placed a $98 million short bet on Nvidia.

Jeremy Grantham expects a 50% collapse.

They’re not warning about recessions. They’re warning about systemic failure.

Jim Rickards called it “the avalanche theory.” When the snowpack is unstable, the snowflake doesn’t matter. The market doesn’t need a reason to fall—just a trigger.

Are we there yet?

Distress in one area of financial markets spread to other seemingly unrelated areas of financial markets. In fact, the mathematics of financial contagion are exactly like the mathematics of disease or virus contagion. That’s why they call it contagion. One resembles the other in terms of how it’s spread.

What are examples of the complexity?

One of my favorites is what I call the avalanche and the snowflake. It’s a metaphor for the way the science actually works but I should be clear, they’re not just metaphors. The science, the mathematics and the dynamics are actually the same as those that exist in financial markets.

Imagine you’re on a mountainside. You can see a snowpack building up on the ridgeline while it continues snowing. You can tell just by looking at the scene that there’s danger of an avalanche.

You see a snowflake fall from the sky onto the snowpack.

It disturbs a few other snowflakes that lay there. Then the snow starts to spread… then it starts to slide… then it gains momentum until, finally, it comes loose and the whole mountain comes down and buries the village.

Some people refer to these snowflakes as “black swans,” because they are unexpected and come by surprise. But they’re actually not a surprise if you understand the system’s dynamics and can estimate the system scale.