Letter: A Forced Digital Currency Swap

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Hugh and Jim,
Yes, we can be effectively forced into a digital currency swap. Here is a real world example:

In the early 1970s (as a young U.S. Army Captain) I was with the G2 Div, 2d Infantry Division in the Republic of Korea (ROK). In those days the military (and presumably civilian) personnel used Military Payment Certificates (MPCs) in lieu of US Dollars. This supposedly helped combat the local ROK black market which was notorious.

A decision was made to make a change in the MPC (color, design, etc). The whole conversion process was initially classified until rollout. When it was done, it was accomplished quickly. At the appointed time troops were “recalled,” and posts were locked-down. Troops were advised they had a limited period of time to exchange their “old” MPC for “new” MPC.

Simply put, after a certain date “old” MPC would have no value. (“Poof…”) It worked. Naturally there were also policies that required soldier to explain themselves if they wanted to exchange suspiciously large amounts of MPC.

The same process could even be done in a currency-to-digital exchange here in the US. But it would be done much faster. It could probably also be done on an international scale but it would be a much larger and more lengthy protocol.

Imagine your stack of $50s and $100s with [the equivalent of] a “Best if Used By” date. What would probably happen would be a depreciating conversion rate. Example: Currency exchanged within 30 days would receive 100% face value. Within 31-90 days would receive 90% face value. Within 91-120 days would receive 75% face value. 121-180 days would receive 50% face value, and so forth.

There would be lines at banks, but people would be turning in money, not trying to get it out! Thereafter, the banks could implement whatever Negative Interest Rate Policy (NIRP) that the Treasury Department and the Federal Reserve authorized.

This gives rise to all kinds of comments about fiat currency versus a currency based on something tangible, but I’ll save those comments for another day. – C.C.

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