I love you. I hate you. I don’t love you, but give me more. Hit me but don’t leave me. Why I can’t live without you Certainly the relationship between the world and the US dollar is not the healthiest of them all. In fact, it is more toxic than Chernobyl. We are talking about an arranged marriage that has worked for a long time but already shows signs of exhaustion. The possibilities of divorce have occurred to you more than once. And everything seems to indicate that the days of dollar hegemony are counted as the world’s reserve currency. Of course there is always couple therapy and it is still possible that the marriage will be saved. However, if we are guided by the humor in the environment, the forecasts are not very encouraging. Is the end of the controversial dollar nearing?
Talking about the dollar in the cryptosphere is never easy because the topic triggers too many mixed passions. I assume that this is essentially due to a political problem.
The first Bitcoiners were not economists, but libertarians. And libertarians are a very American phenomenon. The individualism of the man who makes himself in the style of a Yeoman peasant. The country of the United States was founded with the tireless work of Protestant settlers in a process that is very different from the colonization process of the Spanish empire. The Protestant work ethic and culture of individual independence from the outset set an anti-government tone that is practically unknown in Europe and other regions of the world.
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In the United States, the rejection of centralism goes beyond practical or economic reasons. It is a cultural value that was inherited from the Puritans and is now manifested in his favorite grandson, the corporate culture of Silicon Valley. The “founder” of a California start-up is the direct descendant of Thomas Jefferson’s Yeoman peasant of the time, who produced everything on his farm and depended only on the land and the work of his hands, symbol of the power of individual will.
Now the archetypal “founder” is a kind of Frankenstein monster. What are the parts? Worship the individual. Protestant work ethic. Free market fundamentalism. Ultra conservatism in politics. Ultra-progressivism in technology. In other words, a typical Ayn Rand reader. An anarcho-capitalist who votes for the libertarian party and works for a technology company in San Francisco, California. And of course he hates the Federal Reserve and wants it to be abolished. They want to revive Thomas Jefferson to be the president in the land of the Jetsons.
All of these cultural values lie deep in the veins of the United States. It is a very deep feeling that is constantly trying to express itself politically. It is more cultural and political than economic. In other words, economic arguments are an excuse. Long before the arrival of the Chicago School and the Austrian Business School, libertarians who defended their teachings as articles of faith existed as worthy descendants of pioneers in the United States.
We have to be very careful here. Where’s the dogma? Where’s the valid argument? What is propaganda? What is a deep idea? Well, the truth is, Cypherpunks were dogmatic to the core. Excellent programmers and brilliant innovators, but terrible, somewhat anarchic economists and political activists. And that is our early church. Many young people outside the United States are hearing about Bitcoin for the first time and are starting to listen to the big names in this industry. I’m talking about fiat money, banks, the Federal Reserve and the end of the dollar. Everything sounds new and sophisticated in the mouths of these eccentric billionaires. However, we only have to take a book from Ayn Rand to know that this narrative is very old.
The libertarian party, the anarcho-capitalists, an important sector within the Republican Party, and the gold beetles have been talking about it for decades. Cypherpunks who were interested in money just wanted to write code to create digital gold in the context of American libertarian ideology. But the concept of the bourgeois or decentralized currency in the United States is older than fools. As well as the idea of separating the economy from the state. The culprit is Steve Jobs, who imposed the art of Silicon Valley show on the basis of his excellent presentations and bombastic stories with sentences like “something that has never been seen before” to describe his new phone.
The Bitcoin community uses these small poetic licenses to achieve a dramatic effect when it comes to Bitcoin. And it’s done because it works. “Something that has never been seen before” “Really revolutionary” “It’s disrupting the entire world economic apparatus”. The great Steve Jobs, master of the performing arts. You miss it, che!
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Now the bad dollar, the terrible Federal Reserve, the corrupt banks and the devilish impression of money. What was the refuge during this crisis? Which currency was strengthened? Ironically, the dollar has strengthened in this crisis and in times of panic, the dollar has been a safe haven for investors. Strange but true. Whether we like it or not, it was so. Despite inflationary announcements through money pressure. What we have is a dangerous deflationary picture. Yes, deflation, not inflation, as the prophecies said. Although classified as the big enemy of the economy, the Federal Reserve is now considered the big savior of the financial markets. What rays came with the collapse of the dollar predicted by the libertarians?
Well, in order to pass on this piñata, today I join this tradition as a Kryptonian. But here is a hypothesis about the collapse of the non-libertarian dollar. The collapse of the dollar cannot be attributed to a fiat money system itself, but to other factors. Everything can be summarized as follows: The loss of American leadership in the world.
Why is the dollar strong? Why does the Federal Reserve have the luxury of spending so much currency and inflation is not rising? We cannot say that these are exports because the United States’ trade balance is negative. Nor can we say that these are savings, as there are not many savings as such. One could say that the dollar remains in the world due to the prestige of the United States. Two key elements: globalization and technology.
Globalization and technology are the kings of deflation in the United States. The ticket, which is printed in the US but goes out into the world, allows the money to continue printing without causing inflation within the country. Stratospheric debt, a huge budget deficit, a growing trade deficit and an “infinite” monetary policy are only possible because the rest of the world buys dollars and the United States swallows other people’s savings. The dollar bill in my overseas pocket contributes significantly to the strength of the dollar and the prosperity of the United States.
That is, if the United States loses its leadership in the world, it may lose its golden goose. This means, The hegemony of the dollar makes no sense in the face of the United States, which is deep and isolated from the world. Apparently the Americans want that, but they become architects of their own destruction.
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Protectionism, which increases domestic wages, also increases production costs. And its blunt politics, absurd technology bans and its anti-scientific culture give China free rein as the technological powerhouse of the future. This lack of competitiveness and the loss of United States’ reputation / leadership will be fatal under the current economic imbalances.
Of course, we still have no real alternative to the dollar. Then the dollar is reluctantly turned over for a long time. However, this is a very fragile position. We have the euro, but it is an alternative that is difficult to visualize as the European Union is falling apart. And Asian currencies still don’t inspire much confidence. I don’t know gold. Bitcoin is still very immature. It could be a multilateral instrument, such as the Bancor proposed by Keynes at the Bretton Woods meetings. I dont know.
Of course, the term “breakdown” is a bit yellowish. The word “weakening” or “loss of status” would be much more appropriate. Economists like Stephen Roach speak of a potential loss of 35% (lows in July 2011) as one of the possible scenarios. There is no talk of its disappearance, but of the possible loss of this almost absolute hegemony that the dollar has had since the post-war period. ¿I still love you, but do I want to divorce? This story continues …