FedNow: The Thin Edge of the Wedge

The Federal Reserve's latest offering, FedNow, is set to revolutionize the U.S. payment landscape by allowing bank customers to send and receive money in real time, 24/7. 

The Need for Speed

The existing payment system in the United States relies heavily on the Automated Clearing House (ACH) for fund transfers between financial institutions. While the ACH has evolved to offer same-day payment transfers, it still operates primarily during normal business hours, resulting in delays and limitations on weekends. In the era of instant access, no one should be waiting for a check to clear. 

Last year, ACH handled 30 billion payments, valued at close to $73 trillion. FedNow aims to gradually replace those old systems. This behind-the-scenes network, though not directly accessible to consumers, promises to allow bill payments, paychecks, and other common transactions to be available instantly and without interruption.

Advantages of FedNow

The benefits of FedNow are clear. Once fully operational, individuals will be able to receive their paychecks instantly and use the funds immediately, reducing the need to wait for processing times. Small businesses in particular stand to gain from faster access to cash flows, allowing for more efficient financial management. Lower friction means increased velocity. Money moving around faster is good for the economy.

Moreover, gig workers and individuals not on a regular payroll will enjoy faster access to their wages, ensuring greater financial stability. For the federal government, this system holds the potential to accelerate the disbursement of emergency support payments during times of crisis, aiding those in need more promptly.

CBDCs

This all sounds well and good but the introduction of FedNow is a significant step toward building a robust infrastructure for a central bank digital currency, or CBDC. As you know, a CBDC is a digital form of a country's fiat currency, issued and regulated by the central bank. 

A CBDC would give the government ultimate control over your money and, when grafted to a social grading system like they have in China and have used as a political weapon in Canada, makes Orwell look like a Sunday school gossip-monger.

The Path to Tyranny in Three Steps

1. Technological Advancements: The successful implementation of FedNow necessitates the development and deployment of advanced technologies to ensure smooth and secure real-time transactions. These technological advancements will serve as a solid foundation for a CBDC.
2. Data Security and Privacy: Real-time payment systems require robust security measures to protect user data and financial information. The lessons learned from securing FedNow will be invaluable in designing secure CBDC systems, ensuring data privacy and mitigating potential cybersecurity risks.
3. Monetary Policy Flexibility: A CBDC offers central banks increased flexibility in implementing monetary policies. By observing the impact of FedNow on the broader financial landscape, the Federal Reserve can invent all sorts of new methods to corrupt the invisible hand of the market under the guise of economic stability.

What It Means

The introduction of FedNow will move control of the U.S. payment landscape from private entities to the government. By enabling real-time transactions, the Federal Reserve will claim that it is fostering greater financial inclusivity and boosting economic growth, but we know there is already a private system that was introduced in 2017 that does much the same thing.

The implementation of FedNow is a crucial stepping stone toward the issuance of a CBDC. The future of cash is bits and bytes. The problem is that the government, in the form of the Fed or the IRS, will control and manipulate every penny, and, if the past is prologue, that will be very bad indeed.

To your wealth,

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.