Unmasking Digital ‘Fraud’, its more personal than you think …

Fraud prevention is a core discipline in more than just finance and in an era where the digital economy increasingly dominates every facet of daily life, the issue of digital / Cyber fraud has understandably taken centre stage. Whilst headlines frequently spotlight identity theft, phishing scams, ‘Mule’ accounts amongst many other sophisticated cyber-attacks, which collectively cost consumers and businesses billions annually, a recent client discussion turned my mind to a dimension of fraud that occurs every minute, intimate to each one of us and under our very noses. While society is fixated on combating those headline, highly visible Cyber threats, a subtler, more insidious form of expropriation continues largely unchecked; the systematic debasement of the money in your pocket (fiat currencies) through central bank monetary policies and government fiscal policies.

Digital transactions have transformed economic landscapes, making convenience and speed paramount. Online banking, crypto exchanges, and e-commerce platforms thrive, facilitating billions of daily transactions. However, behind this booming digital economy lurks a troubling truth, citizens across the globe are unwittingly being shortchanged by the silent erosion of their purchasing power, orchestrated through central banks’ expansionary monetary practices.

Central banks, driven by short-term economic targets and political pressures, often inject massive amounts of liquidity into financial systems, ostensibly to stimulate growth and employment. Such monetary expansions, frequently justified as necessary fiscal interventions, paradoxically lead to significant currency devaluation. In effect, citizens’ hard-earned savings diminish in real value, eroded by rising inflation that these policies inevitably trigger.

This erosion of purchasing power constitutes a hidden yet pervasive debasement. Citizens rarely perceive it directly as they would identity theft or cybercrime, yet its impact is arguably more devastating, affecting generations through diminished standards of living and lost economic security, with the burden to pay forced on future generations. Inflation, fuelled by unchecked currency printing, disproportionately impacts ordinary people, reducing their real wages and savings, while benefiting asset-rich elites whose holdings inflate in value.

Ironically, the transparency and accountability demanded in digital transactions contrast starkly with the opacity surrounding central banks’ monetary policy decisions. While regulators worldwide impose stringent rules to combat online fraud, they rarely scrutinize monetary authorities with equivalent rigor. The financial indicators that should illuminate this expropriation are themselves dysfunctional, as Goodhart’s Law in its original formulation states ‘Any observed statistical regularity will tend to collapse once pressure is placed on it for control purposes’. This will resonate in many aspects of life where instinctively the sense is that something is not right despite the tripe peddled by politicians and central bankers, ‘lies dam lies and statistics‘.

The arrogance around this systematic debasement is blatantly articulated in an International Monetary Fund (IMF) paper ‘The Liquidation of Government Debt‘, which coins a chilling term for this clinically invidious fraud – ‘Financial Repression‘. The IMF’s term ‘financial repression‘ powerfully underscores the morally ambiguous and economically detrimental aspects of inflationary monetary policy. While financial repression, including deliberately inflationary policies, is ethically controversial and economically damaging, particularly to savers, pensioners and bondholders, it does not generally meet the strict legal definition of fraud due to its status in lawful policy decision making.

Addressing this form of expropriation requires heightened public awareness and demanding greater transparency and moral accountability from monetary and fiscal policymakers. Citizens must understand how central banks’ hidden tax, inflation, undermines their financial security. Only through informed public discourse can society begin to challenge the fundamental unfairness embedded in modern monetary practices. The digital economy promises unparalleled opportunities, but ensuring equitable prosperity demands confronting the quiet, invidious erosion of global citizens’ wealth and trust.

When policymakers rely on data that’s been meticulously cooked by their own previous manipulations, it’s like using a carnival mirror to guide cosmetic surgery, the outcome is inevitably not pretty. Unsurprisingly, as demonstrated eloquently by the financial circus post-2008, when the clowns drop the ball, it’s always the average citizen left paying for the ticket.