By Nomi Prins, Editor, Inside Wall Street with Nomi Prins

The Federal Reserve appears to be inching toward an artificial intelligence (AI) future.

This matters because AI in the hands of a central bank can allow it to gather even more of your data.

That data can show specifics on how, when, and where you spend your money.

What’s most alarming is what the Fed could do by combining AI with a central bank digital currency (CBDC).

A CBDC could be set up to prohibit you from spending your money as you want.

That means restrictions, fines, or withdrawals of funds if you don’t act how governments say.

To be clear, this isn’t speculation or science fiction from a George Orwell book.

In 2022, in Canada, the government froze hundreds of bank accounts from protesters.

And while these scenarios are still unfolding, AI could make them easier for governments to launch, track, and grow.

And that’s where the Fed’s “AI Incubator” comes in.

The Fed’s AI Incubator

Last year, the Fed’s chief innovation officer (CIO) revealed something that caught my attention.

This happened at an event that Microsoft – one of the world’s leading AI powerhouses – hosts every year.

The Fed’s CIO revealed that the central bank is exploring generative AI capabilities through an “incubator” program.

Now, so far, little has surfaced about what the Fed could use AI for.

But the Fed CIO did say they were evaluating “payment rails” focused on supervision and regulation.

Those terms are open to interpretation. But there’s every reason to believe they may leave the door open for a CBDC to collect and analyze data.

The Fed could present AI programs that it manages as another data-gathering tool. But they could also be used to limit your financial choices.

If the Fed’s use of AI does center on payment data and processes, it could explore and save that information – all to be deployed and programmed into a digital currency.

The Fed’s AI Incubator likely has four main objectives. Two of them could crush your privacy and financial autonomy.

Below, I’ll tell you what my research shows could be unfolding.

  1. Enhanced Decision-Making: The Fed aims to integrate AI technologies into its decision-making processes to improve forecasting, risk assessment, and resource allocation. By leveraging AI, the Fed can make more informed decisions.

  2. Risk Management: AI can help the Fed detect and mitigate financial risks associated with various economic factors, such as market volatility and systemic risks. But it can also be used to analyze millions of pieces of data to detect or forecast.

  3. Data Analytics: The AI Incubator could advance data analytics capabilities within the Fed. By harnessing the vast amounts of data generated by its various operations, the Fed could leverage AI techniques to extract meaningful insights, inform policy decisions, and support data-driven decision-making. It can use this to regulate or supervise financial transactions.

  4. Oversight of Payment Systems: The Fed could use AI to track anomalous transactions, but that could also mean tracking whether your transactions fall into some pre-specified social “norm.” This also would mean using unsupervised machine learning methods to single out transactions “worth closer inspection.”

Agenda Items Three and Four Are the Real Privacy Problems

These four objectives are consistent with messaging from the Bank for International Settlements (BIS). Think of the BIS as the central bank of central banks.

The BIS acknowledged that “citizens have a right to privacy and might feel uncomfortable with central banks scrutinizing their data.”

But through its FedNow payment platform, the Fed can access every financial transaction you make. As the Fed’s CIO put it:

Really understanding which payment rail does a customer want to use, at what time for what purpose and kind of align our business decisions accordingly.

That means the Fed could deploy AI to analyze data about you and then control how you use your money in the future.

That’s why agenda items three and four above are the real privacy problems.

Now, this won’t happen tomorrow. But a Fed CBDC could use AI to analyze, store, and process your data – potentially without your consent or knowledge.

Also, the Fed could begin to collaborate and partner with AI developers, academia, and technology firms that are driving innovation in AI.

That means an AI Incubator program could share information about you with these external parties.

With AI, the Fed could forecast where you spend your money next. Not only would it be monitoring your financial moves – but your future ones.

That’s Big Brother on steroids.

There are still many unknowns about what the Fed’s AI and CBDC will look like. But one thing is certain: Taking your financial freedom into your own hands is crucial.

And the best way to do that is with a diversified portfolio that includes gold and silver.

Gold has preserved its value through nearly every financial monetary experiment. And silver often steals the spotlight when gold booms.

Both offer a great way to protect your financial future as the CBDC trend accelerates.



Nomi Prins
Editor, Inside Wall Street with Nomi Prins