CBDCs and Your Small Business
Over the last 18 months or so every time I’ve pondered Central Bank Digital Currencies (CBDCs) and how they might impact the future it has always been from the angle of the consumer.
What and how will the government limit me from buying or how will the Fed adjust my interest rates or banking abilities based on my voting history or my liked tweets?
When I go to Walmart will the government be able to dictate what I walk out with?
Digital Money
Most of the daily transactions in this county now are done digitally via credit cards or debit cards (digital money) so personal spending is already capable of being monitored to some extent, but the tracking is largely after the sale has occurred. I’m confident the feds are monitoring spending habits. But if they are tracking consumption post-sale, then they don’t have much ability to enforce consumption limits on the consumer.
Rejection of purchase at the point of sale is the next major lever of power CBDCs may give Big Brother in the near future.
Point of Sale Monitoring & Rejection
CBDCs will allow the FED to see what you’re buying in real-time at the point of sale which will give the government the ability to prevent transactions before they occur. Rejection before purchase gives the government ultimate control over the consumer.
As a consumer, if the government knows what you’re trying to buy before you actually buy it, they could start to limit consumption of certain items for whatever reason they can get public support behind (Covid, climate change, public safety, etc).
Beef would be a good example of this possible limitation of consumption because of cow farts and climate change, obviously. We know that if we have too many cow farts then ice caps will melt and polar bears will die, or something like that.
Government control starts when they can prevent sales of certain items, not track them after they occur.
Supply/Production Throttling
CBDCs can and will create problems on the consumption side without a doubt, but maybe the more sinister way to use them is on the supply side.
Think about this. Would it be easier for the government to control millions and millions of transactions at the point of sale everywhere all of the time instantaneously or would it be easier for them to control the supply side of the equation by limiting the quantities a business can sell during a given time frame?
How Would the Feds Use CBDCs to Limit a Company’s Sales?
If every company is only able to transact using a CBDC, the government could in theory limit the amount of money a business could earn if the company sells a “dangerous” product.
The government may cap the amount of CBDCs you can receive or spend each year if your product or service is deemed dangerous to the public good. I know this seems like a stretch even as I write it, but it really isn’t much different than price controls. Instead of controlling the price of an item, CBDCs would allow them to limit the amount of total revenue a business takes in during a given time frame.
After the covid lockdowns and businesses being deemed “non-essential”, is it really much of a stretch to think this could be a reality?
Beef Cattle Ranch Example
For example, say you are a beef cattle ranch (Ranch X). Picture Yellowstone for all you Kevin Costner fans. Your entire goal is to get cows to maturity and sell them to a slaughterhouse. The more cows you can get to maturity the more money you make.
Big Brother could try to limit the amount of beef consumption per person via CBDC tracking at the point of sale, but that is a huge amount of monitoring of transactions at every butcher shop, restaurant, and grocery store in the USA all at once constantly. This also creates another problem for our elite overlords because this monitoring has to be instantaneous, and each person would have to have a unique profile in some database monitoring their previous consumption for that month/year.
If you’re allotted five pounds of beef per month, the feds have to be able to track that in real-time and prevent sales to you at the local Walmart if you try to buy 4 extra lbs of ground beef. That sounds like a digital nightmare.
Wouldn’t it be simpler for Big Brother to instead limit the amount of CBDCs Ranch X could earn in a given month and limit their production/output that way?
Let’s make this simple math. Say Ranch X can sell a mature beef cow for $1,000 a head. In any given year they can raise 1,000 cows which then get slaughtered and distributed to grocery stores. So top line revenue for Ranch X in that given year is $1,000,000. (1,000 cows x $1,000)
Why wouldn’t Big Brother go after Ranch X at the supply side instead of trying to track each consumer’s beef consumption and then subsequently blocking consumption at the point of sale?
The supply side may prove to be much more efficiently tamped down than the demand/sales side due to much fewer transactions and points of sales.
Big Brother could dictate that Ranch X is only able to earn $800,000 of CBDCs in a given year (because of a climate change emergency) no matter how many cows they physically raise. Ranch X would obviously raise fewer cows if there was no more incentive to produce after they hit their $800,000 sales mark.
Also, limiting the supply side would mean that the price per cow and price per pound of beef would also increase further limiting production and public consumption indirectly if there was a revenue cap.
If the price per cow goes up to $1,200 due to supply constraints, Ranch X would have to sell fewer cows to hit their $800,000 artificial cap. This would mean even less ground beef out in the market driving the price up at Walmart.
If the government is willing to restrict the consumption ability of the American public I’m confident they wouldn’t have any hesitation to restrict the supply side as well. Limiting upstream transactions in a supply chain sounds like a simpler route to go down to control consumption than doing it at the point of sale.
Logistical Control
Another way of controlling the supply side of the equation would be to limit fuel consumption and logistical travel distance of your finished product/goods. If CBDCs are in place, our government would have the ability to limit how far your goods could travel before being sold. They could use climate change and fossil fuels as justification for limiting the distance your products could go.
For example, I live in Indiana. What is stopping the feds from not allowing me to accept payments from companies in New York or Florida? What if they flipped the switch and to “save the environment” I could only ship products to customers in Ohio or Illinois? Only CBDCs coming from customers/bank accounts in those states would be valid and allowed to transfer on the digital ledger.
Food For Thought as an Entrepreneur
Can Big Brother use CBDCs to impact my ability as a small business owner to earn money and sell products directly or indirectly?
Instead of limiting the consumption habits of consumers at the point of sale, can they restrict a business owner’s ability to earn income by restricting output or revenue via a CBDC system?
In my analysis, here, I am making some assumptions with the big one being that CBDCs would have to be the only “legal” medium of transaction, or else the public would use dollars, gold, bitcoin, barter, etc. to continue to consume in the amount and way they want outside of the system.
This supply throttling seems far-fetched, but entrepreneurs need to at least ponder this heading into the future given the current state of the world.
Maybe I’m paranoid. Maybe I’m clairvoyant.
Scott Kohler