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Saturday, February 11, 2023

Scientific highs and lows of cannabinoids

 The 1960s was a big decade for cannabis: Images of flower power, the summer of love and Woodstock wouldn’t be complete without a joint hanging from someone’s mouth. Yet in the early ’60s, scientists knew surprisingly little about the plant. When Raphael Mechoulam, then a young chemist in his 30s at Israel’s Weizmann Institute of Science, went looking for interesting natural products to investigate, he saw an enticing gap in knowledge about the hippie weed: The chemical structure of its active ingredients hadn’t been worked out.

Mechoulam set to work.

The first hurdle was simply getting hold of some cannabis, given that it was illegal. “I was lucky,” Mechoulam recounts in a personal chronicle of his life’s work, published this month in the Annual Review of Pharmacology and Toxicology. “The administrative head of my Institute knew a police officer. ... I just went to Police headquarters, had a cup of coffee with the policeman in charge of the storage of illicit drugs, and got 5 kg of confiscated hashish, presumably smuggled from Lebanon.”

By 1964, Mechoulam and his colleagues had determined, for the first time, the full structure of both delta-9-tetrahydrocannabinol, better known to the world as THC (responsible for marijuana’s psychoactive “high”) and cannabidiol, or CBD.

That chemistry coup opened the door for cannabis research. Over the following decades, researchers including Mechoulam would identify more than 140 active compounds, called cannabinoids, in the cannabis plant, and learn how to make many of them in the lab. Mechoulam helped to figure out that the human body produces its own natural versions of similar chemicals, called endocannabinoids, that can shape our mood and even our personality. And scientists have now made hundreds of novel synthetic cannabinoids, some more potent than anything found in nature.

Today, researchers are mining the huge number of known cannabinoids — old and new, found in plants or people, natural and synthetic — for possible pharmaceutical uses. But, at the same time, synthetic cannabinoids have become a hot trend in recreational drugs, with potentially devastating impacts.

For most of the synthetic cannabinoids made so far, the adverse effects generally outweigh their medical uses says biologist João Pedro Silva of the University of Porto in Portugal, who studies the toxicology of substance abuse, and coauthored a 2023 assessment of the pros and cons of these drugs in the Annual Review of Pharmacology and Toxicology. But, he adds, that doesn’t mean there aren’t better things to come.

Graphic details examples of the wide variety of chemical structures of three classes of cannabinoid compounds: plant-produced phytocannabinoids, the body’s own endocannabinoids and synthetic compounds made in the lab.

The cannabis plant produces more than 140 phytocannabinoids; the most well-known are cannabidiol (CBD) and delta-9-tetrahydrocannabinol (THC) (top). These interact with many of the same receptors as compounds made by the body, called endocannabinoids (middle), despite their chemical differences. Synthetic compounds (bottom, three shown) that are meant to mimic the action of various cannabinoids also have a wide variety of chemical structures.

Cannabis’s long medical history

Cannabis has been used for centuries for all manner of reasons, from squashing anxiety or pain to spurring appetite and salving seizures. In 2018, a cannabis-derived medicine — Epidiolex, consisting of purified CBD — was approved for controlling seizures in some patients. Some people with serious conditions, including schizophrenia, obsessive compulsive disorder, Parkinson’s and cancer, self-medicate with cannabis in the belief that it will help them, and Mechoulam sees the promise. “There are a lot of papers on [these] diseases and the effects of cannabis (or individual cannabinoids) on them. Most are positive,” he tells Knowable Magazine.

That’s not to say cannabis use comes with zero risks. Silva points to research suggesting that daily cannabis users have a higher risk of developing psychotic disorders, depending on the potency of the cannabis; one paper showed a 3.2 to 5 times higher risk. Longtime chronic users can develop cannabinoid hyperemesis syndrome, characterized by frequent vomiting. Some public health experts worry about impaired driving, and some recreational forms of cannabis contain contaminants like heavy metals with nasty effects.

Finding medical applications for cannabinoids means understanding their pharmacology and balancing their pros and cons.

Mechoulam played a role in the early days of research into cannabis’s possible clinical uses. Based on anecdotal reports stretching back into ancient times of cannabis helping with seizures, he and his colleagues looked at the effects of THC and CBD on epilepsy. They started in mice and, since CBD showed no toxicity or side effects, moved on to people. In 1980, then at the Hebrew University of Jerusalem, Mechoulam co-published results from a 4.5-month, tiny trial of patients with epilepsy who weren’t being helped by current drugs. The results seemed promising: Out of eight people taking CBD, four had almost no attacks throughout the study, and three saw partial improvement. Only one patient wasn’t helped at all.

“We assumed that these results would be expanded by pharmaceutical companies, but nothing happened for over 30 years,” writes Mechoulam in his autobiographical article. It wasn’t until 2018 that the US Food and Drug Administration approved Epidiolex for treating epileptic seizures in people with certain rare and severe medical conditions. “Thousands of patients could have been helped over the four decades since our original publication,” writes Mechoulam.

Historical photo of Raphael Mechoulam speaking in a white lab coat in front of a chalkboard with the chemical structure of cannabidiol.

Chemist Raphael Mechoulam did pioneering work in the 1960s figuring out the chemical structures of cannabinoids.

CREDIT: R. MECHOULAM / AR PHARMACOLOGY AND TOXICOLOGY 2023

Drug approval is a necessarily long process, but for cannabis there have been the additional hurdles of legal roadblocks, as well as the difficulty in obtaining patent protections for natural compounds. The latter makes it hard for a pharmaceutical company to financially justify expensive human trials and the lengthy FDA approval process.

In the United Nations’ 1961 Single Convention on Narcotic Drugs, cannabis was slotted into the most restrictive categories: Schedule I (highly addictive and liable to abuse) and its subgroup, Schedule IV (with limited, if any, medicinal uses). The UN removed cannabis from schedule IV only in December 2020 and, although cannabis has been legalized or decriminalized in several countries and most US states, it remains still (controversially), on both the US’ and the UN’s Schedule I — the same category as heroin. The US’ cannabis research bill, passed into law in December 2022, is expected to help ease some of the issues in working with cannabis and cannabinoids in the lab.

To date, the FDA has only licensed a handful of medicinal drugs based on cannabinoids, and so far they’re based only on THC and CBD. Alongside Epidiolex, the FDA has approved synthetic THC and a THC-like compound to fight nausea in patients undergoing chemotherapy and weight loss in patients with cancer or AIDS. But there are hints of many other possible uses. The National Institutes of Health registry of clinical trials lists hundreds of efforts underway around the world to study the effect of cannabinoids on autism, sleep, Huntington’s Disease, pain management and more.

In recent years, says Mechoulam, interest has expanded beyond THC and CBD to other cannabis compounds such as cannabigerol (CBG), which Mechoulam and his colleague Yehiel Gaoni discovered back in 1964. His team has made derivatives of CBG that have anti-inflammatory and pain relief properties in mice (for example, reducing the pain felt in a swollen paw) and can prevent obesity in mice fed high-fat diets. A small clinical trial of the impacts of CBG on attention-deficit hyperactivity disorder is being undertaken this year. Mechoulam says that the methyl ester form of another chemical, cannabidiolic acid, also seems “very promising” — in rats, it can suppress nausea and anxiety and act as an antidepressant in an animal model of the mood disorder.

But if the laundry list of possible benefits of all the many cannabinoids is huge, the hard work has not yet been done to prove their utility. “It’s been very difficult to try and characterize the effects of all the different ones,” says Sam Craft, a psychology PhD student who studies cannabinoids at the University of Bath in the UK. “The science hasn’t really caught up with all of this yet.”

A natural version in our bodies

Part of the reason that cannabinoids have such far-reaching effects is because, as Mechoulam helped to discover, they’re part of natural human physiology.

In 1988, researchers reported the discovery of a cannabinoid receptor in rat brains, CB1 (researchers would later find another, CB2, and map them both throughout the human body). Mechoulam reasoned there wouldn’t be such a receptor unless the body was pumping out its own chemicals similar to plant cannabinoids, so he went hunting for them. He would drive to Tel Aviv to buy pig brains being sold for food, he remembers, and bring them back to the lab. He found two molecules with cannabinoid-like activity: anandamide (named after the Sanskrit word ananda for bliss) and 2-AG.

These endocannabinoids, as they’re termed, can alter our mood and affect our health without us ever going near a joint. Some speculate that endocannabinoids may be responsible, in part, for personality quirkspersonality disorders or differences in temperament.

Animal and cell studies hint that modulating the endocannabinoid system could have a huge range of possible applications, in everything from obesity and diabetes to neurodegeneration, inflammatory diseases, gastrointestinal and skin issues, pain and cancer. Studies have reported that endocannabinoids or synthetic creations similar to the natural compounds can help mice recover from brain trauma, unblock arteries in rats, fight antibiotic-resistant bacteria in petri dishes and alleviate opiate addiction in rats. But the endocannabinoid system is complicated and not yet well understood; no one has yet administered endocannabinoids to people, leaving what Mechoulam sees as a gaping hole of knowledge, and a huge opportunity. “I believe that we are missing a lot,” he says.

“This is indeed an underexplored field of research,” agrees Silva, and it may one day lead to useful pharmaceuticals. For now, though, most clinical trials are focused on understanding the workings of endocannabinoids and their receptors in our bodies (including how everything from probiotics to yoga affects levels of the chemicals).

Graphic of human figure with dots for locations of CB1 and CB2 receptors. CB1 receptors are common in brain, brainstem and along the central nervous system, and present in many other organs. CB2 receptors are most abundant in spleen but also present in bone, skin, immune system, liver, bone marrow and pancreas.

The cannabinoid receptors CB1 and CB2 are found throughout the body — from the brain to the spleen. CB1 receptors are especially common in the nervous system; CB2 receptors are concentrated in the immune system and related areas. But both receptors also are present throughout the body. This broad distribution means that compounds — from THC to endocannabinoids to synthetic cannabinoids — that bind to one or both of these receptors may affect a wide variety of systems, including pain perception, motor activity, appetite and short-term memory.

‘Toxic effects’ of synthetics

In the wake of the discovery of CB1 and CB2, many researchers focused on designing new synthetic molecules that would bind to these receptors even more strongly than plant cannabinoids do. Pharmaceutical companies have pursued such synthetic cannabinoids for decades, but so far, says Craft, without much success — and some missteps. A drug called Rimonabant, which bound tightly to the CB1 receptor but acted in opposition to CB1’s usual effect, was approved in Europe and other nations (but not the US) in the early 2000s to help to diminish appetite and in that way fight obesity. It was withdrawn worldwide in 2008 due to serious psychotic side effects, including provoking depression and suicidal thoughts.

Some of the synthetics invented originally by academics and drug companies have wound up in recreational drugs like Spice and K2. Such drugs have boomed and new chemical formulations keep popping up: Since 2008, 224 different ones have been spotted in Europe. These compounds, chemically tweaked to maximize psychoactive effects, can cause everything from headaches and paranoia to heart palpitations, liver failure and death. “They have very toxic effects,” says Craft.

For now, says Silva, there is scarce evidence that existing synthetic cannabinoids are medicinally useful: As most of the drug candidates worked their way up the pipeline, adverse effects have tended to crop up. Because of that, says Silva, most pharmaceutical efforts to develop synthetic cannabinoids have been discontinued.

But that doesn’t mean all research has stopped; a synthetic cannabinoid called JWH-133, for example, is being investigated in rodents for its potential to reduce the size of breast cancer tumors. It’s possible to make tens of thousands of different chemical modifications to cannabinoids, and so, says Silva, “it is likely that some of these combinations may have therapeutic potential.” The endocannabinoid system is so important in the human body that there’s plenty of room to explore all kinds of medicinal angles. Mechoulam serves on the advisory board of Israel-based company EPM, for example, which is specifically aimed at developing medicines based on synthetic versions of types of cannabinoid compounds called synthetic cannabinoid acids.

With all this work underway on the chemistry of these compounds and their workings within the human body, Mechoulam, now 92, sees a coming explosion in understanding the physiology of the endocannabinoid system. And with that, he says, “I assume that we shall have a lot of new drugs.”


https://knowablemagazine.org/article/health-disease/2023/scientific-highs-and-lows-cannabinoids

How TV raises stakes for sports gambling

 2022 was a transformative year for the sports gambling industry. The number of states where it’s legal grew by five, including gambling heavyweight New York, leading to record amounts wagered across the country. Now VIP+ has updated its “Sports Gambling & Media” special report for the third time, with a focus on what the rise of mobile sports betting in particular means for media partners. 

Adding to our comprehensive coverage of the emerging market, VIP+ held a webinar with industry experts from across the media landscape. Joining senior media analyst Gavin Bridge to discuss the opportunities sports gambling presents media partners were Chris Bevilacqua, CEO at Simplebet; Raph Poplock, SVP of Business Development, Bleacher Report; Liam Roecklein, SVP of Content, PointsBet; and Jason Steeg, president of ECI Research, the company that designed VIP+’s sports gambling survey, which was fielded by its parent company CRG Global. 

One of the key topics discussed was what is fueling sports betting’s rise. Even with the 2022 total not complete, it is up considerably ($38.2 billion, or 75%) versus 2021, and this can’t all be attributed to New York (January), Louisiana (January), Arkansas (March), Kansas (September) and Maryland (November) legalizing operations last year. 

PointsBet’s Roecklein noted that the rise in wagers is a combination of additional states legalizing but also betting behavior increasing in states where the practice has been legal for some time. Bleacher Report’s Poplock added that the sports bet industry has done a good job of innovating new betting markets based on user behavior. Bleacher Report has noticed a trend in younger viewers not watching full games so brought out a line of quick-resolving bets that have seen upticks in engagement and wagering with their sportsbook partners. 

While winning money is the No. 1 reason for betting on sports, over half of bettors said in the CRG Global/VIP+ poll that doing so was entertaining. The panel weighed in on why, with Bevilacqua and Roecklein both noting that gambling is becoming entwined with sports content on TV — such as PointsBet’s onscreen partnership with NBCUniversal — and is driving an uptick in casual bettors placing simple wagers.

These casual gamblers often graduate to putting more complex bets, but there is also a social aspect behind the entertainment factor, as people bet with their friends and communicate with them around their status. 

VIP+ has previously noted the positive relationship between betting and increased viewership of games, but Bevilacqua gave a very interesting example of how this works in real-time. Simplebet’s data showed that the aftermath of the opening game of the NFL’s 2022 season, which was followed by a blowout baseball game between two teams with nothing to play for, saw many NFL bettors getting involved in the MLB tie to the extent that it had the greatest total wagers placed across Simplebet for any baseball game in 2022. 

The CRG Global/VIP+ study found that betting results in new fans being made of teams, with over a quarter of gamblers reporting this. When asked why, ECI Research’s Steeg wasn’t surprised by this but added that the phenomenon will extend to people becoming fans of specific players. This was something PointBet’s Roecklein said occurred during the World Cup, where Messi fans ultimately converted to Argentina fans during the successful tournament run and grew betting activity. 

VIP+’s research with CRG Global found that people who have an active bet during a blowout game are much less likely to have their attention drop in a one-sided blowout game, maintaining their engagement. 

Simplebet’s business is geared to in-game bets, and CEO Bevilacqua noted that in a recent NFL Wild Card game, which happened to be a blowout, they saw more bets placed in the second half, when blowout status had been reached, than in the first when the game was competitive. This demonstrates how blowout games can still be engaging for viewers but also how microbets can drive up that interest. 

https://variety.com/vip-video/how-tv-is-raising-the-stakes-for-sports-gambling/

Doing Less Is Hard, Especially When We’re Overwhelmed

 Bouncing on a medicine ball while loudly shushing, one of us (Leidy) was trying to get his newborn back to sleep. Keeping hold of his crying son, while maintaining the rhythm, Leidy heroically wriggled a hand free to his tablet nearby, where he searched for something, anything, that could help him prevent another sleepless night like this one. Behold! A contraption that could do the shushing and bouncing for him. Part crib and part amusement-park ride, this marvel of modern engineering even offered a figure-eight movement setting—in both directions!

Despite owning two basinets, four swaddling cloths, a custom rocking chair, and a white noise machine worthy of Wirecutter, Leidy didn’t reach for something he already owned that could address his infant’s middle-of-the-night distress. Instead, he decided to add.

If Leidy’s frantic wee hours addition sounds familiar, you are not alone. Solving problems by adding is an instinct in parenting, and in most everything else. Leidy’s research and book, Subtract, describe how when we try to improve things, our first thought is nearly always about what we can add, whether it’s an additional spice for your stew, a new folder for your junk mail, or a $250 sleep contraption. The problem is that jumping right to “more” means we fail to consider “less.” Even when less would be a far better choice.

But shouldn’t parenting and other overwhelming situations naturally prompt us to consider subtracting? It sure would be nice, as well as highly logical, if subtraction got easier the more we felt overwhelmed. If that were the case, parents might be subtraction superstars. Sadly, it’s not. Parents’ tendency to add, and failure to subtract, brings even more stress and overwhelm to parenting, and has implications for child development.

Fortunately, as Yael explains in her recent bookWork, Parent, Thrive, there are ways parents can do less and feel better about it. But before jumping into how parents can get better at subtracting, we need to understand why we default to adding.

In research with colleagues, Leidy has asked people to improve things like recipes, golf course designs, travel itineraries, and bridges made of Legos. Across all these design challenges, participants tended to add, even in the scenarios that were set up with subtraction as the better choice.

The most logical explanation for why so many people failed to choose the correct subtractive answer is because they didn’t even think of it. They instinctively thought of adding, then they added, and then they moved on. This helps us understand why we find ourselves adding meetings to the calendar or extracurriculars to the spring season even though “more” may be the very last thing we, or our kids, need.

What’s key is that the tendency to add seems to grow stronger the more we have on our minds. In one of Leidy and his coauthors’ studies, participants played a laboratory game in which they were instructed to modify grid patterns to be symmetrical from left to right and top to bottom. Again, participants could add or subtract squares from the pattern, but all of the patterns were designed so that the best (fewest clicks) choice required subtracting squares. To add a bit of pressure to the task, some participants were also asked to click a button every time they saw a “5” scrolling by, while also figuring out how to make the grids symmetrical (see image below).


A symmetry puzzle

What’s the simplest way to make this design symmetrical from left to right and top to bottom?


Scrolling digits are less distracting than a screaming newborn, of course, but they effectively do the same thing: increase cognitive burden on whoever is tasked with paying attention to them. Compared to participants who weren’t tasked with looking for “5,” those who had to mentally juggle the pattern and the scrolling numbers were even more likely to add and miss the better choice of subtraction.

The scrolling 5s may be subtle, but the implications are not. If subtracting becomes harder while looking for 5s during an emotionally neutral task, it’s no wonder that we neglect the option when our minds are taxed with sleep deprivation, doctor’s appointments, developmental milestones, and achieving just the right candy-to-guest ratio for the birthday piñata. We succumb to our mental adding defaults. Without bandwidth to think, we add. And having added, we are left with even less bandwidth to think.

So what can parents do when subtractive changes don’t come naturally and things are more likely to pile up the busier we are?

The first step is recognizing our default mental setting to add for what it is—an instinct that doesn’t always lead to better outcomes. Understanding this removes a misconception that less is easy. Subtracting may promise a less effortful end state, but it takes more thinking to notice that subtracting is an option.

The recognition that we neglect subtraction, especially when we are feeling harried, can also motivate us deliberately cue it. Something as simple as a reminder can work. In one study, when Leidy and his colleagues reminded participants that they could “add or subtract,” participants became more likely to do the latter. In the day to day and week to week rush of life, when you start a new activity, use it as a cue to think of something to stop (a “stop doing” list). Developmental milestones can also serve as a reminder for parents to consider what the child should start doing more of—say, their own laundry—as well as what can be taken off the books—perhaps a club or team that they now find mundane.  

As Yael explains in her book, exclusively adding to our parental repertoires causes problems for our children, too. Often, a parent’s impulse to do things for their children continues well past the point at which the child might be able to do it for themselves, hampering their learning and independence. For instance, too much parental comforting can result in the child sleeping worse. Adding bouncing and shushing and a machine that can do figure-eights might do the trick temporarily, but the best chance for getting a baby to sleep is stripping away to a simple and consistent approach to bedtime. Even well-meaning actions like opening up toddlers’ juice bottles for them delay development of fine motor skills, not to mention confidence to access a bottled drink without needing to ask a frazzled parent. Research has found that elementary-school-aged children whose parents do all the problem-solving and decision-making end up with lower self-regulation, competence, adjustment, and school grades. And among young adults, overly involved parenting is associated with higher levels of depression and lower life satisfaction.

There’s one more challenge when it comes to subtraction. As a parent everything might seem important—piano lesson, soccer practice, Russian math, and Pokémon club. So how can you and your children decide what to subtract? Here, a science-backed psychological treatment, acceptance and commitment therapy, offers a guide: clarify your values. Values are the qualities we most want to embody through our actions, and clarity can help us make choices consistent with the kinds of lives we want to be living—particularly when our choices might otherwise be hijacked by our adding impulses.

To get clear on your values, ask yourself what kind of life you want to be building for your family and your child. What do you want to stand for and what matters most (and least) to you? What kind of lifestyle design example do you want to be setting for your children? In phases of heightened overwhelm, it is especially helpful pause to get clarity on what is most important to you and for your family. With clearer values in hand, you can retain what matters most and get rid of what is less important—at least for the time being.

To realize our full parenting potential, and to help our kids realize theirs, we need to judiciously combine adding and subtracting. But to arrive at any kind of balance, parents have to deliberately practice the latter. Even if you agree that subtracting is worthwhile, it will not come naturally or effortlessly—particularly in highly stressful circumstances.

Yael Schonbrun is a clinical psychologist, assistant professor at Brown University, co-host of the Psychologists Off the Clock podcast, and author of Work, Parent, Thrive: 12 Science-Backed Strategies to Ditch Guilt, Manage Overwhelm, and Grow Connection (When Everything Feels Like too Much).

Leidy Klotz is a professor at the University of Virginia, where he is appointed in the schools of engineering and architecture. His scholarship merges design and behavioral science. He is the author of Sustainability through Soccer: An Unexpected Approach to Saving Our World, and, most recently, Subtract: The Untapped Science of Less.

https://behavioralscientist.org/doing-less-is-hard-especially-when-were-overwhelmed/

Another Big Week For Central Bank Digital Currencies (CBDCs)

 by Nick Corbishley via NakedCapitalism.com,

Another G-7 economy took a big step toward adopting a central bank digital currency (CBDC)At the same time, the first largish economy to have launched a CBDC, Nigeria, descends further into financial chaos.


This week, two big things happened in the CBDC arena. One of the world’s oldest central banks, the Bank of England, and the British government jointly confirmed that a digital pound would probably be necessary at some point in the none-too-distant future. While they were saying that, lengthy queues were forming at ATMs across Nigeria, the first largish economy to launch a central bank digital currency (CBDC), as most Nigerians struggle to access physical money following the government’s disastrous demonetisation campaign.

A New and Trusted Way to Pay”?

Let’s begin with the UK, whose latest Chancellor of the Exchequer Jeremy Hunt this week described CBDCs as potentially “a new and trusted (state-backed) way to pay” that is likely to emerge some time this decade. John Cunliffe, Deputy Governor for Financial Stability of the Bank of England (not to be confused with the creator of the children’s books and animated TV series, Postman Pat) said:

Our assessment is that on current trends it is likely that a retail, general purpose digital central bank currency — a digital pound — will be needed in the UK.

With cash usage in rapid decline in the UK, a digital pound would perform the “anchor function” which cash currently carries, allowing the holder access to Bank of England money, Cunliffe said. It would also counter the risks posed by so-called “stable coins”, which are relatively new forms of cryptocurrency that are pegged to the value of a fiat currency (e.g, the dollar or the euro), while also ensuring that certain tech firms are not able to monopolize areas of the online market with their own coins.

These are all classic justifications for launching a CBDC. But not everyone in the UK’s political establishment agrees that they constitute sufficient cause. For example, the former governor of the Bank of England, Mervyn King said in January, 2022: “By far the most important question is what is the problem to which a CBDC is the solution?” King said a number had been proposed but “none of them were terribly convincing”.

Also, the House of Lords’ Economic Affairs Committee recently concluded that it is “yet to hear a convincing case” for why the UK needs a retail CBDC. On the contrary, while a CBDC “may provide some advantages”, it could present “significant challenges” for financial stability and the protection of privacy.

But the Bank of England and the UK Treasury respectfully beg to differ.

“A digital pound would be a very substantial financial infrastructure project that would take several years to complete,” Cunliffe said in a speech to UK Finance, a trade association representing over 300 firms in the UK’s banking and financial services sector. “It would, as many in this audience know, have major implications for the way we transact with each other and, more broadly, for the financial sector and the economy in general.”

An Extra Layer of Operations

One major implication is the impact it could have on the current banking system. As the UK-based economist Richard Werner and author of the critically acclaimed book, Princes of the Yen, has noted, if central banks were to offer retail CBDCs directly to individuals and businesses, meaning they would all be able to hold the equivalent of a current account at the central bank (as long as they have a smart phone and don’t engage in the wrong sorts of behavior), it would more or less mean the end of banking as we know it:

“All you would need is a shock or a crisis. All the money would move from the bank deposits to the central bank and the banking system shuts down.”

This would lead to the creation of what Werner calls “mono-banking,” in which just one lender, the central bank, is able to operate.

To avoid this outcome, the BoE is considering imposing a limit on the holdings of the new digital pound of £10,000 to £20,000 ($12,017 to $24,033) once it comes into existence. The digital pound would also not bear interest.

The last thing the world’s central banks want to do is wipe out large private banks, whose interests they tend to serve above all else. In fact, central banks are working hand-in-glove with many TBTF lenders to set up the CBDC infrastructure. Instead, what the BoE and many other central banks are talking about doing is creating an extra layer of operations within the financial system. And while the BoE (with help from the private sector) will create the currency, private banks will be the main public interface for that new layer, as Cunliffe himself posited in a panel discussion last June:

We will produce the asset and the rails but the interface with the public would actually be done by private-sector payment providers. It could be banks that will have the customer accounts payable to integrate money into their digital applications…

There are other models. One model is we allow the private sector to do the tokenization, to provide their own money that we back one-for-one with central bank money.

So, CBDCs will probably not be used to supplant the entire private banking system, as some feared. But what they could — and probably will — end up doing is put out of business small, local banks and credit unions, which will not be able to cope with the added layers of regulatory costs, burdens and complexities. In the US, the National Association of Federally-Insured Credit Unions (NAFCU) warned last year that the issuance of a digital dollar could erode financial stability, arguing that the costs and risks associated with introducing a CBDC are likely to outweigh the touted benefits.

Other Implications of a CBDC

So, what other ramifications could a CBDC have for households and businesses? At the risk of repeating myself, here is a brief recap of some of the most important ones (please feel free to add more), taken from my previous post, Unbeknown to Most, A Financial Revolution Is Coming That Threatens to Change Everything (And Not for the Better).

CBDCs will grant central banks far more power over our payment behavior. As Agustin Carstens, general manager of the Bank of International Settlements, the central bank of central banks, famously admitted at a 2020 summit of the IMF:

We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.

Given the key role central bank policy has played in exacerbating wealth and income disparities in recent decades, the idea of central banks grabbing even more power should give serious pause. Indeed, one of the major risks highlighted by the House of Lords’ Economic Committee’s report on CBDCs is that it would grant central banks “greater power without sufficient scrutiny”.

Central banks will be able to “program” our spending. In June 2021, the Daily Telegraph reported (behind paywall) that the Bank of England had asked Government ministers to decide whether a central bank digital currency should be “programmable”. As the article noted, “digital cash could be programmed to ensure it is only spent on essentials, or goods which an employer or Government deems to be sensible.”

Tax evasion, money laundering, terrorist financing and other unapproved transaction would also become more difficult. Fines could be levied in real time. As NS Lyons, a Washington DC-based political analyst and blogger, notes in his article, Just Say No to CBDCs, “a CBDC would allow government to operate at much higher resolution. Targeted microfinance grants, added straight to the accounts of those people and businesses considered especially deserving, would be a relatively simple proposition.

By the same token, Lyons warns, CBDCs could be used to significantly curtail public choice. In a cashless CBDC-dominated world, less socially or politically desirable people or organizations could even be denied access to the financial system — something we already saw happen with the Freedom Convoy in Canada:

“The most dangerous individuals or organizations could simply have their digital assets temporarily deleted or their accounts’ ability to transact frozen with the push of a button, locking them out of the commercial system and greatly mitigating the threat they pose. No use of emergency powers or compulsion of intermediary financial institutions would be required: the United States has no constitutional right enshrining the freedom to transact.”

Other potential forms of programming applications include setting expiry dates for stimulus funds or welfare payments to encourage users to spend it quickly.

No limit on negative interest rates. Beyond providing central banks with greater control over people’s spending habits, CBDCs would also grant them the possibility of taking interest rates into far deeper negative territory. If there is no cash, there is no means for people to escape negative rates no matter how negative they go. This is one of the benefits often lauded by Harvard economist Kenneth Rogoff of a completely cashless society. Yet central banks continue to insist that physical cash will not be eliminated once the CBDCs are fully operational. But as I’ve noted previously, central banks are not exactly known for keeping their word.

Greater Government Surveillance of Your Personal Data. As I’ve repeatedly warned over the past year, including in my book Scanned, central bank digital currencies will almost certainly go hand in hand with digital IDs. In 2021, the FT wrote: “What CBDC research and experimentation appears to be showing is that it will be nigh on impossible to issue such currencies outside of a comprehensive national digital ID management system.” That will mean even broader and closer scrutiny of your most personal data.

Given as much, it is almost certainly no coincidence that last week — just days before the BoE underscored its interest in developing a digital pound — the UK government quietly unveiled a public consultation on draft legislation for the establishment of a digital identity framework. The government is also proposing subsidising private digital ID schemes. As readers may recall, it has also signed a digital trade agreement, or DTA (yes, they do exist), with the Urkainian government that includes a commitment to collaborate on digital identity.

The British government insists that any future digital ID will not be made compulsory for British citizens. But governments, like central banks, have an annoying habit of breaking promises, particularly on the important stuff.

Greater System Fragility. As the House of Lords report warns, a CBDC risks creating “a centralised point of failure that would be a target for hostile nation states or criminal actors.” It would also be vulnerable to power, telecoms and IT outages, which countries are experiencing with ever great frequency.

Meanwhile, the Bank of England bank and UK Treasury insist that the decision to go ahead with a CBDC has still not been taken, and won’t be until around 2025:

The Taskforce’s conclusion is that we are not yet at a point where a firm decision can be made to implement a digital pound.

And if you believe that, I’ve got a digital bridge to sell you.

As the BoE itself notes, the process of building the infrastructure for a digital pound will be painstaking, and will probably take a number years. Yet we are to believe that it won’t be until the infrastructure has actually been built that the decision will be made as to whether to use it. It’s a bit like sending troops halfway across the world to the border of a country you are thinking of invading, such as, say Iraq, but putting off the decision as to whether to actually invade until the very moment that all the troops are amassed.

Creating a Global Monetary Laboratory

“CBDCs could equip central banks with new tools to significantly help soften the impact of forthcoming financial crises, given they would provide a real-time view of risks and currency outflows,” Martin Hargreaves, chief product officer at blockchain firm Quant, told Bloomberg.

Martin Hargreaves is also a member of the steering committee of the Digital Pound Foundation, which describes itself on its website as an “independent organisation whose mission is to work with a variety of stakeholders and participants towards the implementation of a well-designed digital Pound and an effective and diverse ecosystem for new forms of digital money.”

The organization was incorporated less than two years ago, on June 22, 2021. On its home page, the foundation’s chairman, Jeremy Warner, says the following in a short video:

The world has become a global laboratory, trying to understand the ramifications of this fast growing phenomenon. Governments and private enterprises are developing something that will serve humankind better than any past or current forms of money. This new form of money is only possible because technology is transforming all the interactions between human beings, which themselves need money, and money must therefore adapt to serve those interactions. The ramifications of this will affect every one of us.

It is unlikely that we will see a global version of this form of money until we have a form of global government so nation states, regional governments and private enterprises are also working on their own versions.

So, unbeknown to most people, we are living in a global monetary laboratory. We are being steered through a financial experiment that threatens to change just about everything (and for most of us, not for the better).

According to the Atlantic Council’s CBDC tracker, 114 countries, representing over 95 percent of global GDP, are exploring a CBDC. That’s up from 35 countries in May 2020. Eighteen of the G20 countries are now in the advanced stage of development. Of those, 7 countries, including China and India, the world’s two most populous nations, are already in pilot. Eleven countries have fully launched a digital currency, with the latest being Jamaica, and China’s pilot is set to expand to most of the country in 2023.

A Warning from Nigeria

But only one largish economy has actually fully launched a CBDC, and that is Nigeria. And the results have so far been disastrous.

The eNaira has so far been a total flop, as I reported for NC in July and November last year. One year after its launch, in October 2021, fewer than 0.5% of the population had downloaded an eNaira wallet — a thoroughly underwhelming number in a country with an estimated population of 225 million people. Worse still, only 282,600 of those accounts were currently active. Meanwhile, interest in cryptocurrencies has surged.

To try to salvage its monetary experiment and essentially force people to use digital means of payment, preferably the so-called “eNaira”, Nigeria’s government launched an all-out assault on cash in December. Taking a leaf out of India’s book, the government began issuing redesigned high value notes from mid-December and gave residents until the end of January to turn in their old notes. When it became clear that the banking system wasn’t even close to ready to disburse the new notes, the deadline was extended to Feb 10 (i.e., today).

According to the Nigerian Central Bank and government, the demonetisation campaign is intended to mop up excess cash liquidity, stay ahead of counterfeiters and take greater control of Nigeria’s money in circulation, more than 85% of which is currently outside the vaults of the country’s banking system. But another key goal is to salvage Nigeria’s floundering central bank digital currency, the eNaira. And the result has been total chaos.

In a country that was already grappling with a currency crisis, soaring inflation and fuel shortages (despite being Africa’s largest oil producer) and whose sovereign rating was recently downgraded even deeper into junk territory, there is now an acute shortage of money. As in India, the result has endless lines at ATMs. Commuters in the capital and beyond have been left stranded with no cash to pay for transportation back home. Many small businesses, which represent the lion’s share of the economy, and predominantly rely on cash payments, have had to shut down as their customers have no money to pay.

Astonishingly, as the central bank has withdrawn the old notes from circulation, Nigeria’s mint has not come even close to replenishing the money supply with new notes. In fact, the central bank does not even know how much new currency is being printed. When grilled by members of the House of Representatives during a plenary session, Aishah Ahmad, the deputy governor of CBN, admitted she had no idea “how much was printed of the new naira notes”.

This is a monetary experiment going very badly wrong in real time, and one which other central banks will presumably be learning from. But even as Nigerians’ lives and businesses have been plunged into chaos, the government and central bank see it as a small price that is well worth paying. Godwin Emefiele, the CBN governor, has hailed the experiment as a success, given that 80% of the $7.2 billion previously held in private hands had been deposited with financial institutions, which he labels a success. Finance Minister Zainab Ahmed concurred, saying: “The only sore point is the pain it has caused to citizens.”

https://www.zerohedge.com/crypto/was-another-big-week-central-bank-digital-currencies-cbdcs

'Very Disturbing Possibility' US Manufacturing Helped Build Chinese Spy Balloon: Sen. Hawley

 by Frank Fang via The Epoch Times (emphasis ours),

Republican senators raised concerns that U.S. manufacturing might have assisted in the construction of the Chinese spy balloon that flew over the continental United States for days before being shot down.

Sens. Josh Hawley (R-Mo.) and Dan Sullivan (R-Alaska) took part in an all-senators classified briefing on Feb. 9, held by officials from the Office of the Director of National Intelligence, the Pentagon, and the State Department. The agencies held a separate classified briefing for House lawmakers on the same day.

After the briefing, Sullivan told reporters that the question of whether American companies helped build the Chinese balloon was raised, but officials didn’t provide a conclusive response.

American companies shouldn’t be helping build spy satellites that are used against their own citizens,” Sullivan said, according to Fox News. “Maybe there’s nothing to be said about that … but somebody asked about it, and nobody, nobody in that briefing said, ‘Oh, it’s not a problem.'”

Hawley later confirmed to Fox that the question was asked by a senator during the briefing. The Missouri senator added that he was “concerned” about the possibility of the balloon being built with some form of U.S. help.

“I don’t think there was any definitive answer on that,” Hawley said, before adding it was a “very disturbing possibility.”

The Chinese spy balloon, 200 feet tall and weighing a few thousand pounds, entered the U.S. air defense zone north of the Aleutian Islands on Jan. 28 and flew over Alaska and Canada, before reentering U.S. airspace over Idaho on Jan. 31, according to the Pentagon.

The balloon floated over Montana and several Midwest states, before being shot down by an F-22 fighter jet about six nautical miles off the South Carolina coast on Feb. 4.

While the U.S. military is still trying to recover debris from the balloon, the State Department has already said that the balloon had multiple antennas that could monitor communication signals.

Briefing

President Joe Biden has been under heavy criticism from Republicans, saying he should have taken more swift action instead of allowing the balloon to stay adrift for days.

However, Sen. Chris Murphy (D-Conn.) said Biden made the right call to shoot the balloon down off the South Carolina coast.

Just left the classified briefing on the PRC balloon. Everything I learned confirms Biden made the right choice,” Murphy wrote on Twitter, referring to the acronym for the People’s Republic of China. “Those that argue we should have shot down the balloon over Alaska are overhyping the threat and underappreciating the intelligence we collected.”

Hawley told Fox that the Biden administration and the Pentagon were not prepared for such an incursion.

“The other thing that it made was crystal clear from this briefing was how unprepared, totally unprepared the administration and frankly, the Pentagon was for this to happen,” Hawley said.

“They’ve already made it public that we’ve known that there have been previous balloon flights over U.S. territories and, of course, the United States in years past,” Hawley continued. “They knew that already, and yet they had nothing prepared to deal with this espionage balloon that came right over the United States.”

Hawley added, “I mean, it’s really it is, it is an incredible, incredible lack of planning. And frankly, I think major, major lapses of judgment.”

Sen. Steve Daines (R-Mont.) said he left the briefing with “more questions” than when he went in.

“It’s unacceptable & infuriating that the Chinese spy balloon was allowed to hover over MT & our missile bases & was then allowed to travel across the entire US before it was brought down,” Daines posted on Twitter.

Before being shot down, the balloon flew near Malmstrom Air Force Base in Montana, hovered near Offutt Air Force Base in Nebraska, and came close to Whiteman Air Force Base in Missouri.

Malmstrom is home to some Minuteman III intercontinental ballistic missiles, Offutt is the home of the U.S. Strategic Air Command, and Whiteman houses the B-2 stealth bomber.

Sen. Gary Peters (D-Mich.) said his concerns remain with China’s surveillance operations and that Beijing must be held accountable for its actions.

“After receiving a classified briefing today and as new details continue to emerge, I remain deeply concerned by the Chinese government’s surveillance activities and reiterate my call for accountability,” Peters wrote on Twitter.

“We must continue to have the resources and capabilities to detect, deter and intercept any and all incursions that threaten our airspace and national security.” 

https://www.zerohedge.com/political/very-disturbing-possibility-us-manufacturing-helped-build-chinese-spy-balloon-sen-hawley