CBDCs Are Spreading and So Are the Union Fires of Inflation
As we enter the times when CBDCs are breaking out globally, so are the flames of enraged and empowered workers that will drive inflation.
Central Bank Digital Currencies (CBDCs) are big in today’s news now that the Fed has gone live with its digital processing system as I covered extensively in this week’s “Deeper Dive,” most of which was made available to all Daily Doom readers for free because of the topic’s great importance. While the Fed’s introduction is small, and its system barely past prototype stage, it marks the beginning of a US transition to a global digital currency as numerous articles listed in today’s Daily Doom headlines and in that article make clear.
Digital money’s Manchurian candidate
New in today’s headlines on the subject is a story that makes China’s CBDC, the first one introduced in a test consumer rollout over a year ago, the prime example of how the “convenient” apps I talked about in that “Deeper Dive” will quickly bring broad consumer acceptance and demand for CBDCs. China issued the following announcement for the broadening use of its CBDC within its initial pilot-program zone:
A collaboration between the China Merchants Bank and the Civil Aviation Administration of China led to the introduction of a digital yuan platform, which aims to facilitate transactions for travelers in the aviation network, according to a local media report.
The newly introduced platform reportedly enables companies and entrepreneurs to utilize the digital yuan for convenient payment of business air tickets. Additionally, passengers will have the opportunity to use the CBDC to access new services via the platform.
Entrepreneurs are where the apps come in.
To envision what this means, let me describe my own reluctant change this year to using apps to buy airline tickets. For years, I have done all booking online via Expedia. This year, however, I used two different apps. One was Alegiant’s app for its flights. The other was Alaska’s app. Both, downloaded to my iPhone, made the process easier than Expedia and offered more flight options, and instantly dropped my digital QR-code tickets into my iPhone’s wallet.
Now, I hate digital tickets, and I hate using the iPhone wallet. However, almost no one, including airlines will send you paper tickets for anything anymore. I like the secure feeling of holding the physical ticket in my pocket, but digital is all you have available now. (A physical ticket won’t disappear at the concert gate or plane loading gate if I have no cell or internet connection or if my battery dies.) Smoothly and conveniently, those two apps immediately stored the tickets in two places — my iWallet and the app, itself, so if I lost one somehow, the other had it; and both tickets were instant to access for me and my wife on each phone and did not require an internet connection to access the ticket as, say, a ticket stored as an email might.
Anyway, my options are increasingly limited. It’s digital or nothing in many cases, and the apps were easier even than Expedia. I tried Expedia first, but couldn’t find any flights where the cost was not totally out of reason or the departure/arrival times as horrible as possible. Maybe the airlines are “incentivizing” (to use a word I hate but that seems appropriate when talking about things I hate like digital financial applications) use of their apps by reserving their cheapest flights for sale on their own app only. I don’t know, but that is where I found both the best travel times and the best prices by far. Hundreds of dollar saved and several hours travel time.
I guess that is how they hook you. Today we read about China doing exactly that with its CBDC apps.
According to the report, the People’s Bank of China — the country’s central bank — has been actively encouraging the use of the digital yuan in China’s transportation network….
Railway networks, light rail connections, and metro systems in the CBDC’s pilot zone have also been upgraded to facilitate seamless digital yuan payments independent of power or network connections. Furthermore, bus routes within the zone now also facilitate digital yuan payments. Also, earlier this year, several highway toll booths within the pilot zone started accepting the digital yuan as a payment method.
The city of Shenzhen disclosed that nearly 36 million digital yuan wallets have been opened by its residents, with over seven million new wallets created since the start of 2023. This ongoing expansion of the CBDC pilot program across diverse sectors reflects China’s determination to transform its economy by promoting the widespread adoption of the digital yuan.
And, so, step-by-step the digital yuan spreads as China’s CBDC, and so eventually will the Fed’s digital dollar, which has begun with a limited pilot rollout of the kind of transaction platform necessary to make a Fed CBDC function. And many of these, if not all, as that “Deeper Dive” pointed out, will work with an IMF-created platform that will assure they operate in a globally seamless way.
The fires of inflation are spread by labor seeking protection from inflation
In other news headlines of critical importance, we get to see today exactly how a tight labor market adds heat to inflation. The US is suddenly seeing more labor-union strikes than it has since the 1970’s. The driver now, as back then, is high inflation. Coupled with a tight labor market that has finally given labor a sense of having some leverage and power, unions are striking or threatening to strike like they haven’t done in half a century.
That is where inflation becomes its own vicious tornado of a circle: Inflation presses workers to strike to make up for how badly suffocated they feel from inflation. They get higher wages, so companies raise prices more to cover the cost, which causes inflation to rise more; and, so the cycle, then, repeats.
This is exactly what the Fed MOST wanted to avoid. The labor market did not slacken in time for it to avoid that, and the effect is likely to be compounded because it is already being reported that the UPS strike alone, if it happens, could create shortages on a scale similar to what were saw peak-pandemic.
UPS says it has contingency plans if staff do go on strike after the July 31 contract deadline, but disruptions would still be substantial, Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, previously told The Hill.
“You’d have supply chain disruption like we witnessed during the pandemic potentially, where you won’t be getting your deliveries.”
Supply chain disruptions cause shortages; and, of course, shortages, as I’ve pointed out many times, are essential to creating high inflation, which happens from too much money chasing too few goods.
The Teamsters represent 340,000 UPS workers. If a strike does happen, it would be the first since a 15-day walkout by 185,000 workers crippled the company a quarter century ago.
Since then, UPS has become an even bigger part of the U.S. economy. UPS says it delivered 24.3 million packages daily in 2022, totaling 6.2 billion packages by year’s end. That’s about a quarter of all U.S. parcel volume, according to the global shipping and logistics firm Pitney Bowes.
If it happens, it is one more epic strike against the economy.
And “America is barreling toward a summer of strikes” according to another article in today’s headlines below.
More than 650,000 American workers are threatening to go on strike this summer — or have already done so — in an avalanche of union activity not seen in the US in decades.
The combined actors and writers strikes in Hollywood are already a once-in-a-generation event. Unions for United Parcel Service Inc. and Detroit’s Big Three automakers are poised to join them in coming weeks if contract negotiations fall through….
“This will be the biggest moment of striking, really, since the 1970s,” said labor historian Nelson Lichtenstein, who directs the University of California, Santa Barbara’s Center for the Study of Work, Labor and Democracy….
The pandemic years have, in some ways, reenergized American labor. Emboldened by tight labor markets and agitated after shouldering new risks, workers notched a series of surprising victories at some of the most prominent US companies. Now, wary of soaring corporate profits as major technological changes threaten to upend their industries, unions are ready to test their clout.
“There’s an ambition here that I think is new,” said Lichtenstein. “They’re on the offense.”
Moreover, if the unions succeed in these times where they finally have the leverage, thanks to the plague, more people will join existing unions, and more new unions will form, adding to union power to raise wages. The peasants are finally revolting. For too long all the cream from profits has floated to the top for shareholders, particularly the 1%. Now the workers are ready to fight for a larger share of all that has not been trickling down for decades. It could get ugly. It has a history of getting ugly.
The showdowns could have sweeping consequences, not just for the hundreds of thousands of workers striking, but for the much-diminished American union landscape. The share of the US private sector that’s unionized has fallen from one-quarter half a century ago to just 6% today. Few groups have as much leverage to upend company plans, capture public attention and force concessions as the organized workers who deliver Americans’ packages, make their cars and entertain them.
“In terms of workers in America who still have the ability to change their conditions, these are three of the top 10….”
“Hopefully Amazon employees look at this and go: ‘You know what? We deserve this too’,” said Minnesota UPS warehouse worker Rikki Schreiner, who has been at the company for two decades.
It is contagious, and it is part of the Fed’s worst nightmare for inflation as the flames have now risen up the walls and are lapping across the ceiling.
And this is why I argued in last week’s “Deeper Dive” it is far too early and too complicated for anyone to be assuming the Fed’s battle against inflation is nearly finished. Remember, there are no straight lines in economics.
(Headlines supporting today’s editorial are in boldface below:)
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