Welcome to our Friday mailbag edition!

Every week, we receive great questions from your fellow readers. And every Friday, I answer as many as I can.

This week, we talk about the all-digital dollar that’s coming, which we’ve called “programmable” money… the real cause of inflation for the things we depend on the most – like food and gas… and the latest in the spot Bitcoin ETF story.

If everything will be programmable in the future, even if you have millions, how does that not stop them from stopping you operating outside their control?

For instance, could they stop your access to your brokerage account? Or stop access to your internet or electricity to your house so you couldn’t do anything? This is a very worrying scenario.

– Sandra K.

Hi, Sandra, thanks for your thoughts and questions.

I’m as concerned as you are about maintaining our freedoms as the government rolls out a programmable, all-digital currency.

The good news is that I don’t think the government will be able to cut off your internet or electricity, even as it rolls out a central bank digital currency (CBDC).

That would be extreme. It would require a social credit system even worse than the one they have in China. Luckily, we’re nowhere near that territory.

That doesn’t mean there’s nothing to worry about, though.

The loss of freedom in a democracy doesn’t tend to happen overnight. It’s a slow, creeping process.

And that’s what makes it so dangerous. It can catch you off guard.

CBDCs are at the forefront of this encroachment today. Which is why I’ve been sounding the alarm about them since we started Inside Wall Street two years ago.

With a digital dollar, it will be easier for the government to track your financial information and choices. Anyone who cares about their financial privacy needs to pay attention to that.

It will also give the government more power to compile data on how and where we spend our money. That would take away what little freedom we have left to decide what personal information we share and what we keep private.

And, as you suggest, a CBDC could even be programmed so that you can only spend it if you meet certain requirements.

That means that, if you do something the government doesn’t like, it could limit your financial choices. Or even worse, at the push of a button, it could turn off your ability to transact.

This isn’t just speculation. It happened in Canada last year when the government there froze hundreds of bank accounts connected to protesters.

A CBDC would make it even easier for the government to crack down on people who speak out against it.

Now, in the U.S., the Federal Reserve can’t flip a switch and mandate exclusive CBDC use. It’s just like any other encroachment on our liberties. It happens in steps.

Even Fed chief Jerome Powell said the Fed would “need Congressional approval” for a CBDC when he testified before the House Financial Services Committee in March.

That doesn’t mean the Fed can’t create a digital currency without Congress. It can. But not without creating friction down the road.

The Fed doesn’t want to get on Congress’ bad side. So, before any CBDC bill can become law, it has to go through several steps of approval. The U.S. House of Representatives, the U.S. Senate, and then the president all need to approve it.

That means implementing a CBDC in America won’t happen overnight. But it is happening.

The Fed got a step closer to that this summer when it launched its FedNow payments system.

FedNow isn’t a CBDC, but it’s a necessary precursor for one. The FedNow technology gives the elites new powers to track every dollar you spend.

More than 100 major banks and businesses have already tested the technology. And about 57 banks and credit unions completed certification to use FedNow as early adopters.

There are plenty of reasons for other institutions to follow. Like faster, more efficient fund transfers… and better liquidity management… which can lead to more satisfied customers.

If institutions see those benefits lining up with their business goals, and if FedNow can give them a competitive edge, they will join it.

But as the Fed keeps pushing for a digital dollar, it raises a bigger question. It’s one that you and many others might be mulling over. That is, do we embrace the “new normal” that’s coming? Or do we fight it?

For anyone who chooses to fight it, this is just a quick rundown of civic actions anyone can take to influence the advent of CBDCs in the U.S.:

  • Engage with Legislators. Reach out to local and federal representatives and express your opinions and concerns about CBDCs. For example, Congressman Tom Emmer – whose office I’ve been in contact with – is leading an effort to squash financial surveillance. Anyone can write in to his offices through his website portal to support his CBDC Anti-Surveillance State Act.

  • Advocate for Privacy. Support organizations and initiatives that advocate for strong privacy protections in the digital payments space.

  • Join or Support Advocacy Groups. Get involved with advocacy groups that share your views on CBDCs and collaborate to promote your collective interests.

  • Participate in Public Forums. Attend town halls, public meetings, or webinars related to CBDCs and share your perspectives.

  • Educate Others. Inform your friends, family, and community about CBDCs and encourage them to participate in the conversation.

None of this will likely stop the U.S. from adopting an all-digital dollar. But if we speak up, it can help minimize the impact it has on our day-to-day lives.

I’ve been meeting with Congress members and their staffers for 20 years, and I’ve seen firsthand how our voices can influence policy decisions.

And that’s just one of the steps we can take today.

As the government rolls out a CBDC, it is also possible to capitalize on it. That’s why I tell all my readers that they should take steps now to diversify their portfolio.

Anyone who’s worried about a CBDC needs to own the right assets to safeguard their wealth.

I’m a big advocate of gold and Bitcoin for that purpose. Both provide a way for us to become our own bankers with assets that are primed to grow in value over time as this encroachment unfolds.

Gold in particular is the ultimate form of wealth insurance. It has preserved its value through every kind of crisis imaginable.

And there are many ways to own gold. For anyone who prefers physical gold, see our April 6 essay for best practices.

Anyone more interested in convenience might consider a gold exchange-traded fund (ETF). We recommend choosing one backed by physical gold. Read more about that in our April 7 mailbag issue.

And finally, anyone who wants gold with the highest potential upside should check out this free presentation. In it, I give details on the No. 1 gold stock I recommend today.

I always enjoy your articles. A recent article commented that the price of oil determines the cost of fuels. That is largely true. However, there are other painful and ludicrous reasons such as we have here in Washington state.

Our governor and legislators have forced a roughly $1 per gallon tax on us. Of this amount, ~$0.49 is state “gas tax.” The rest is due to a carbon capture payment plan the state collects from refiners who then add this cost to each gallon wholesale. This makes it look like oil companies’ prices have gone up. When this legislation was proposed, it was “projected” to add ~$0.06 to a gallon!

Another inflationary part of this is that the legislation contains provisions to exempt farmers and others producing and transporting food products from paying the carbon capture tax.

But that exemption has apparently been overlooked by the regulators. Now all states that benefit from Washington food industries have inflated food prices from our carbon capture tax as well. There just doesn’t seem to be any end to this.

– Leon L.

Thanks for writing in, Leon!

I appreciate your insights about the situation in Washington state. It’s frustrating to see how government policies can lead to unintended consequences.

The situation you’ve described highlights a typical hiccup with government-led green initiatives.

Even though those measures appear noble in their aim to address environmental concerns and reduce carbon emissions, their implementation often results in additional burdens for consumers.

The massive $1-per-gallon increase in gas taxes and the carbon capture payment plan you mentioned are clear examples of how such policies can backfire.

At the heart of this situation in Washington state is a cap-and-trade program.

The state rolled it out for carbon emissions starting Jan 1, 2023, under the umbrella of the Climate Commitment. (That, in turn, was passed by the legislature in 2021.) 

As the name suggests, this initiative caps greenhouse gas emissions and implements a trading market. This has reportedly triggered a surge of over 32% in gas prices since the start of the year.

As a result, the gas prices in Washington state have been higher compared to almost all other states in the U.S.

A recent report pointed out that gas in Washington is going for $5.02 per gallon.

That is $1.17 more than the national average of $3.85. And it’s $1.71 more per gallon compared to the cheapest gas around, which is $3.31 per gallon in Mississippi.

So, when you say that it’s not just the price of oil that determines fuel costs, that does ring true for Washington state.

Looking at the bigger picture, this goes back to what I’ve written in past essays about inflation. The Fed wants to control inflation – but it can’t.

We can see that in energy. Many factors can impact energy prices – such as the Organization of the Petroleum Exporting Countries’ (OPEC) decisions, geopolitical dynamics, and as you pointed out, state initiatives.

The issue is that we need energy to propel America’s industries forward. You mentioned the food sector, one of the sectors that hinges on energy.

You need energy to make food and to transport it to the store. Trucks and trains run on diesel; planes run on jet fuel. There are millions of them crisscrossing the country each day to get produce to the market, for example.

So, when energy prices go up, it’s only a matter of time before food gets pricier too, as producers pass along their swelling energy bills.

We observed this in the latest Consumer Price Index (CPI) reading. Food prices in September rose by 3.7% compared to last year.

And with the way food prices are tied to energy costs, we’re looking at higher inflation in food prices in the future. They could come in even higher than we saw in September.

Is the recent increase in Bitcoin strictly speculation, and is the possibility of spot ETFs the primary factor?

– Richard S.

Thanks for the question, Richard. Yes, the potential introduction of a spot Bitcoin ETF has been the main driver behind Bitcoin’s recent price action.

Bitcoin has been riding an upward wave for the past two weeks, fueled by rumors of an imminent approval. In all the buzz, the name BlackRock has been tossed around more than others.

It’s too early to say whether speculators are right or not.

But all this anticipation does underscore one thing: the growing acceptance of cryptocurrency among investors.

It also debunks the notion held by some pundits that this news had already been priced in.

And it’s not just BlackRock. Big financial heavyweights like Fidelity, Invesco, Ark, and Grayscale are all scrambling to get in on the action. They are vying for their own spot Bitcoin ETFs.

They all want a piece of the potential trillions of dollars they could manage and collect management fees from.

In fact, the Securities and Exchange Commission (SEC) has 8 to 10 filings of possible exchange-traded products for Bitcoin in front of it for consideration. That alone is a bullish sign.

All these applications have a range of different filing dates. That makes it challenging to pinpoint the timing. But here’s the word on the street…

Analysts from JPMorgan said an approval could arrive within the next few months. And Bloomberg ETF analysts say there’s a 90% chance of approval by mid-January.

Speculators are betting on this materializing sooner than many foresee. And even outside the buzz surrounding BlackRock’s application, there are reasons to believe they might be onto something.

Remember Grayscale? As you may recall, its Grayscale Bitcoin Trust (GBTC) is one of the most popular Bitcoin investment vehicles out there. But it’s not a spot Bitcoin ETF. Yet.

The SEC had rejected Grayscale’s application to convert GBTC into an ETF. But more recently, a U.S. appeals court recently overturned that rejection.

The ruling was a major victory for Grayscale. It’s argued that spot Bitcoin ETFs would provide investors a more efficient and secure way to invest in Bitcoin.

The SEC had until October 13 to appeal the ruling. It did not. So, the SEC must assess Grayscale’s proposal again.

Approval is not guaranteed. But the court did caution the SEC against vague rejections based on concerns of market manipulation.

So, if regulators choose to turn down the proposal again, they must provide substantial and clear reasons.

With the SEC’s decision not to appeal, it also seems like the agency might be warming up to the idea of approving spot Bitcoin ETFs down the line.

But why is a spot Bitcoin ETF such a big deal anyway?

Well, as I’ve mentioned before, it would be a financial product for the masses. A more convenient way for everyday people to own Bitcoin.

But it would also make Bitcoin more appealing for institutions. We’re talking pension funds, endowments, family offices, and advisors managing clients’ investments.

You know, all those cash-loaded institutions that can’t just buy Bitcoin right now due to their charter and/or the lack of regulatory clarity.

This could be a game-changer. And that’s why speculators have been eager to grab some Bitcoin before it happens.

All that said, the price of Bitcoin is still down about 50% from its November 2021 all-time high of about $68,000.

And that’s a good thing. It means we can still buy it at lower prices before big financial institutions swoop in.

That said, my general advice for all my readers is to never put all of your savings into Bitcoin (or any other asset). There’s no need to put a big chunk of your portfolio in crypto to see big gains. Even a small investment can go a long way.

In general, the best way to do this is to set up an automatic process for recurring buys. Anyone can do this through a secure platform like PayPal, or with some of the other reputable exchanges.

That’s an easy way to buy a small amount of Bitcoin each week or month.

We recommend choosing an amount that works for each person’s financial budget. It could be as little as $15 each time. That’s a way to build up Bitcoin exposure.

We also recommend allocating only up to 2-3% of an overall investment portfolio to Bitcoin.

Finally, anyone who dips a toe in Bitcoin should be prepared for big price swings. No young asset class goes up in a straight line.

So while I see Bitcoin as a store of wealth similar to gold in the long run, I also expect dips in the short term. That’s par for the course.

And that’s all for this week’s mailbag. Thanks to everyone who wrote in! I do my best to respond to as many of your questions and comments as I can each Friday.

If I didn’t get to your question this week, please write me at [email protected]. Just remember, I can’t give personal investment advice.

Happy investing… and have a fantastic weekend!



Nomi Prins
Editor, Inside Wall Street with Nomi Prins