Update - March 23, 2021

The Federal Reserve Robs Us All

There’s an old saying that you may have heard.

Give a man a gun… and he may rob a bank.

Give a man a bank… and he’ll rob everyone.

It seems fitting these days. But I’ll add to the idea.

I say if you give a man a central bank, he’ll rob generations to come.

Honoring the Dead

The underground world of money wonks and economic deep thinkers is abuzz this week as Jay Powell shares his thoughts on digital currencies and the eventual replacement of the system we know today.

In a bit of an odd twist of words, the Fed chief said cryptocurrency (we assume he specifically meant Bitcoin) is more of a substitute for gold than the dollar.

Both, he concluded, are backed by nothing.

But the dollar? What does it have in its pocket? A pallet of freshly printed equivalents?

It’s ironic that at the very same time as the man in charge of the nation’s money is putting down other forms of money, he’s working on a replacement that mimics the dollar’s digital competition.

For a couple of years now, the Federal Reserve has been studying how to create a digital currency of its own.

It knows it needs it. The current system, largely designed in the 1970s, is slow, expensive and doesn’t fit the needs of today’s digital economy.

The new concoction is sure to be just like Bitcoin. It will allow for instant transactions. There will be no more waiting days for a payment to clear. But it won’t be ready for you and me, says Powell, for at least another half a decade.

Powell says that because it’s creating what will be the nation’s reserve currency, America has “no need to rush.”

This is too important to mess up, he says.

It’ll be ready when it’s ready.

Meanwhile… the world isn’t waiting.

Too Late?

China, as you probably know, is deep into testing its own new digital currency. It’s given millions of dollars’ worth of the stuff away as its citizens test it out in real-world scenarios.

And don’t forget… Bitcoin is already here. It’s already gained unstoppable momentum.

The private sector is not waiting for Uncle Sam or his brethren in Europe (who say their digital currency is at least two to three years out). More than half of the Bitcoin buying pressure in recent months comes from institutional investors… not retail speculators.

The reason is obvious. The government is too slow.

There’s a very strong chance that by the time Washington is officially ready to roll out its digital money, the free market will have already chosen its new master.

The Fed’s biggest obstacle, of course, lies with the banks.

Right now, banks are at the center of all electronic transactions. They process and clear trillions of dollars each year. They not only get a cut of each sale… but also get to sit on that money for days at a time, lining up big profits and creating a tremendously powerful piece of the economy.

With fully digital currencies, though, that’s not the case.

With them, transactions clear nearly instantly… without the need of somebody in between.

When I send you money, it goes straight to you. No bank vaults in sight.

It’s why the big banks – the banks that back the Federal Reserve – are lobbying the Fed quite hard to ensure that they remain a cog in the machine. Powell admits these players are a big concern.

It’s why the money maestro is taking things slow and pondering both sides of, well, the coin.

It’s also why the banks are hedging their businesses. They’re all jumping into Bitcoin, knowing the oh-so-slow Fed may not have much of a choice in the matter.

By the time it gets around to making its move, the free market will likely have already cozied up with an alternative.

Banking on the Evolution of Money

Our portfolio, of course, is positioned to take advantage of the situation nicely.

Monero (XMR) is our official crypto stake. It’s more than doubled our money since we got in late last year. But it’s not the only digital money play with 10X potential in our portfolio.

I remain a very big fan of Fiserv (FISV).

As I detailed last September, the company is a leader in the effort to digitize the banking world.

Since I first recommended the stock, its role has evolved even further. In December, Fiserv announced it will acquire Ondot Systems – a fintech platform for banks that gives customers real-time control of their money.

The company is a leader in developing tools that allow customers to access and manage their credit cards. It provides its services to more than 4,500 banks. It is also a leader in mobile wallets and virtual credit cards.

Fiserv’s acquisition of the company shows its clear vision for the future of digital banking.

Also of note is Fiserv’s recent move to invest in Square‘s (SQ) acquisition of Tidal… a popular music streaming business.

It’s a strong signal that the company is tied into some of the biggest movers and shakers in the crypto game (Square owns nearly $400 million worth of Bitcoin). It also shows that Fiserv understands the next wave of this crypto boom almost certainly lies in digital rights – a fascinating piece of the Tidal deal that I will detail in an upcoming issue.

The bottom line is that we’re up by about 20% on our Fiserv stake… but the move to digital money is just getting started.

I am convinced that the company is a play with some of the highest potential in the sector.

It’s a sleeper stock that will roar to life as the industry evolves.

The Fed is bound to mess up its foray into digital money. Its slowness and forced marriage to the nation’s banking lobby will make it late to the game.

The American economy and the people who depend on it will suffer. Prosperity will wane, and generations ahead will pay for it.

We, of course, can’t stand idly by.

There’s ample opportunity in the free market.

Please take advantage of it.

P.S. Bitcoin continues to get all the headlines… but I don’t think it stands a chance of being the top crypto in 2021. I’ve got my thumb on several, including one that’s beaten Bitcoin by 4X so far this year. Click here to learn more about it.