Looking Like A Central Bank Digital Currency

Episode Transcript
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(00:02):
Welcome to the Real Estate Espresso podcast, your morning
shot of what's new in the world of real estate investing.
I'm your host, Victor Minash. On today's show, we're talking
about a new provision of the latest tax bill that passed the
US Congress and is now before the Senate.
During the election campaign, President Trump said clearly
that he did not favor a central bank digital currency.
In fact, he's made several statements in support of other

(00:25):
decentralized crypto currencies and his families active in
various crypto initiatives. But it seems the president may
have accidentally created the underlying systems that in fact
amount to a CBDC. Whether this is an accident or
deliberate is hard to tell, but the effect on the long term
freedom and privacy of the citizens of the US is the same.

(00:46):
The Federal Reserve Act explicitly prohibits ordinary
citizens from having an account at the Fed.
In order for a central bank digital currency to be enacted
in the US, it would require thataspect of the legislation to be
modified. Or maybe just house those
accounts somewhere close by. On today's show, I'm going to
unveil the plumbing that is being created in the system that

(01:07):
effectively amounts to a centralbank digital currency with
direct government oversight. In an effort to encourage more
babies, the Trump administrationis offering a baby bonus for
babies born between January 1st,2024 and December 31st, 2028.
In the new tax bill, there's something called Trump accounts.
These were previously referred to as mega accounts.

(01:28):
Here's what that proposal entails.
It's a proposed savings account for children, but it's not a
direct cash bonus to parents at birth in the traditional sense.
Federal government would contribute A1 time transfer of
$1000 into these Trump accounts for U.S. citizens born between
January 2024 and December 2028. Parents or guardians could also

(01:49):
contribute up to $5000 per year,adjusted for inflation, to these
accounts, with the contributionsand earnings potentially
receiving preferential tax treatment.
The funds in these accounts would be generally accessible by
the child after age 18. They could be used for very
specific purposes like higher education, training, or first
time home purchases. At age 30, the account holder

(02:11):
would have access to the full balance for any purpose.
To be eligible for the initial $1000 contribution, the child
and their parents must be U.S. citizens and provide a Social
Security number. There's no income limits for
this initial $1000 contribution.Now, if you don't open one of
these accounts on your own, the government will open one for
you. You might be wondering that if

(02:31):
you bank with, say, Wells Fargo,will this new account be opened
at your home branch at Wells Fargo?
Well, no, not exactly. This account will in fact be at
the US Treasury. The legislation specifies that
these accounts would be administered by banks or
investment firms. That means they would likely be
held at brokerage firms or otherfinancial institutions that
offer investment services. Reason for thinking that the

(02:54):
plumbing of such a system is starting to look like a central
bank digital currency is that assoon as the $1000 are put in
your name of your newborn baby, this becomes a liability of the
US Treasury. While not directly a liability
of the Federal Reserve, it's notfar removed from being a
liability of the central bank bybeing a liability of the
Treasury. It's almost the same thing.

(03:14):
The funds in these Trump accounts would be invested in
the stock market. Specifically, they would be
invested in a broad stock marketindex.
This is a key difference from a Standard Bank account, where
your money typically earns a fixed, low interest rate and
it's FDIC insured. Investment accounts, on the
other hand, carry market risk, meaning the value of the account
can go up or down based on the performance of the underlying

(03:35):
investments. the US Department of Treasury would be responsible
for automatically opening and seeding these accounts with the
initial $1000 for eligible children.
That suggests A streamline process where the government
initiates the account creation with a chosen financial
institution. It's similar to custodial
accounts in that accounts at a brokerage house today don't hold
the shares directly in your name.

(03:57):
They're held in the name of the brokerage in custody for you,
the individual, the account holder.
Now, I fully understand the White House thinking behind the
initiative. The idea is that an investment
in the stock market over 18 or 30 years could create
significant savings for a child,might fund a college tuition or
purchase of a new home, launch them into young adulthood.

(04:18):
When the government contributes money to these accounts, it's
essentially spending federal funds.
These funds have to come from somewhere, either from tax
revenue or from borrowing. Once that $1000 put into an
account for a child, it represents a future obligation
or a claim that the child has onfederal funds, even though the
money invested is outside the direct control of the Treasury

(04:39):
cost of these initial contributions, $1000 per child
would be a direct expenditure ofthe federal government, which
would either add to the nationaldebt unless it's offset by other
revenue or spending cuts. The Congressional Budget Office
would be responsible for scoringthe fiscal impact of the
program. So while the funds are in the
name of your newborn baby, the funds actually belong to the
Treasury or invested in the stock market in the name of your

(05:01):
newborn baby. The actual cost of the taxpayer
is expected to be around $3.6 billion a year.
Is about 3.6 million babies bornin the US each year, at least
the last few years. So $1000 a baby are bounced to
about 3.6 billion plus of coursethe cost to administer the
program. Within the grand scheme of
things, 3.6 billion is a drop inthe bucket compared to the

(05:24):
trillions of dollars that are spent each year above and beyond
what the country can afford. And while the bill states the
funds would be held by financialinstitution, the account is open
automatically by the treasury. And it's a liability of the
treasury. So if the child doesn't provide
the banking information, where exactly will this account be
opened? Will it be open with the
treasury directly? All of this starts to sound like

(05:45):
the tip of the iceberg in a government controlled bank
account or investment account. This is not getting a lot of
press, but it's something you want to pay close attention to,
especially looking at how the plumbing in the system works and
whether it truly is starting to look more and more like a
central bank digital currency. As you think about that, have an
awesome rest of your day. Go make some great things

(06:05):
happen. We'll talk again tomorrow.

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