The Melbourne Rules: CBCD Likely to be Just Another Tool of Control

When the history books are written about how Daniel Andrews locked down Melbourne in a massive overreaction to the public health risk of COVID-19, let’s hope they treat him like the economy wrecker he’s become. Under Andrews’ ‘Melbourne rules’, Victorians still endure the harshest lockdown conditions in the world. And it looks like it could continue for another two weeks because its citizens have failed to bring the 14-day average of new COVID cases under five.

Andrews also extended Victoria’s State of Disaster and State of Emergency for another two weeks. It’s almost as if he’s grown used to governing in a high-handed and arbitrary manner, without any real supervision from parliament. Extending emergency conditions — keeping people under effective house arrest and in a heightened state of fear — is all part of the plan. Will he ever stop?

Maybe he could review the backflip by the World Health Organisation (WHO) on the effectiveness of lockdowns to stop the spread of the virus. ‘Stop using lockdowns as your primary method of control’, said the WHO’s Dr David Nabarro. ‘Lockdowns just have one consequence that you must never ever belittle, and that is making poor people an awful lot poorer.’ The WHO has said lockdowns don’t work. Will Chairman Dan listen?

I’ll come back to that in a moment. I’ve been holiday in the deserts of eastern Utah. It’s always interesting to see if anything in the mainstream media’s narrative has changed. These days, that means paying attention to central banks and their war to redefine fiat money as it devalues relative to gold and silver.

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Economics and politics are two sides of the same coin

It turns out there’s a LOT going on in this space. Economics and politics are two sides of the same coin. Economic liberty and political liberty are inseparable. While governments have used COVID as a Trojan horse to launch a full-scale attack on free enterprise and political liberty, they also know that control of money is the most effective means of controlling people (keeping them compliant, in line, and dependent on the state).

Keep that in mind when you read this report on central bank digital currencies from seven major central banks and the Bank for International Settlements (the central bank for central banks). Central banks — with help from their warmongering friends in politics all over the world — managed to demonetise gold and silver in the 20th century. Since then, they’ve used the printing press as a tool for public policy, one that allows them to shape private and personal behaviour with monetary policy.

Except that stopped working in the 2008 crisis (a crisis that was itself created by bad monetary policy). Out of that crisis, bitcoin was born. Advocates of sound money who praised the virtues of gold were introduced to the idea of a stable, limited money supply for the digital world. The technocrats, bureaucrats and academics have been playing catch up ever since.

Their new fancy white paper says that a central bank digital currency (CBDC) can work if it conforms to three main ideas. First, it has to work alongside cash, not replace it. This seems like lip service to me in order not to scare savers and pensioners from removing all their money from the bank and inadvertently starting a bank run. But hold that thought.

Second, a CBDC must support ‘wider policy objectives’. Just what are those? Well, usually it means low inflation and full employment (as if monetary policy can do that). But in this day and age, it might also be spurring consumption by imposing negative interest rates on cash. That would support the ‘wider policy objective’ of spending over saving.

CBCD likely to be just another tool of control

The last requirement is that a CBCD promote innovation and efficiency. Yes, because centrally-planned currencies and economies are SO good at promoting innovation and efficiency. What they really mean is that a CBDC should adopt all the best features developed by private sector experiments in cryptocurrencies BUT, a CBDC should give the authorities complete transparency over your financial affairs without any privacy.

In other words, a CBDC, as envisioned by the private cartels that currently control world money, becomes a tool for even more control, surveillance, and microeconomic management of your life. All through controlling the supply of money, the rate of interest on savings, and even new frontiers like negative interest rates and bank accounts with the central bank.

It really is a brave new world, with such hideous control freaks in it. What is an investor to do? Consider the stupendous pile of $31 trillion worth of bonds with negative real yields. Central banks can’t afford to raise interest rates. In a world with such mountains of debt, any big increase in interest rates would bring the whole house of cards crashing down.

But investors used to count on interest income as a big part of their total return from financial assets. These days, with income and dividends scarce, the ‘growth/momentum’ end of the trade is the only game in town. That’s why it’s been a record year for IPOs with lots of new listings in the pipeline.

Buyer beware. Wall Street is in the business of giving people what they want. New IPOs and tech listings give the public new growth stocks to speculate on. That’s a lot more fun than earning negative interest on your savings. But it crowds the public’s savings into more and more speculative stocks just when they can least afford to be putting their retirement savings at risk.

Keep in mind one thing…gold thrives when real rates are negative. By ‘real rates’, I mean interest rates adjusted for inflation. Real rates ARE negative in much of the government bond markets around the world. That’s a massive incentive for governments to borrow billions and trillions more at low rates.

But it also makes gold — as a store of value and future medium of exchange — that much more appealing. With bonds at negative real yields, the fact that gold doesn’t have a yield is no longer a strike against it (when you’re discussing ‘safe haven’ options). And gold can’t be printed either. Not yet.

So you see, there’s a lot of movement in the space to control money. The free market chose gold as money thousands of years ago. Governments, kings and central bankers have been at war with it ever since. Beware the central bank digital currency promising efficiency, innovation and convenience. It’s likely to be just another tool of control.


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Dan Denning,
Editor, The Rum Rebellion

PS: Utah was packed with Americans who hit the road to escape local lockdowns. And you know what? They’ve managed to make it work. People camp. They wait in orderly queues for food. Restaurants serve meals in a socially-distanced way. Businesses and customers adapt and life goes on.

Let’s hope it goes on in Melbourne soon. The authoritarian brain that lurks between the ears of Daniel Andrews simply cannot imagine allowing people to assess their own risk and act accordingly. So he’s pursued what will eventually be viewed as the most destructive public policy in Australian history. Because he believes in control more than freedom.

Lockdowns don’t work. But they appeal to men like Andrews because it strips power from the people and gives it to the police and the government. Australians who say they’re ‘doing the right thing’ by complying are contributing to the destruction of a free society. The ‘Melbourne rules’ should be burned at the stake.

Dan Denning is the co-author of The Bonner-Denning Letter.

Dan was a founder of Port Phillip Publishing back in 2005, which quickly became the leading publisher of its kind for independent financial research and insights. In 2014 he left to head up Southbank Investment Research in the UK. Dan is also the author of the 2005 book, The Bull Hunter. Today, he’s based in his home state of Colorado. Each Monday in The Rum Rebellion you’ll get Dan’s unique contrarian thinking to provide insights you won’t find anywhere else.

Dan Denning’s belief in free markets, sound money, personal liberty, and small government have underpinned everything he’s done during his 23 years in the financial publishing industry.

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