Re: #ticktock USD, Cryptos, and Fiat Currencies
Had a good discussion with Hank Scorpio over on Kirk's thread. I am providing my final comments here to keep the discussion regarding a global currency in one place.
This is a reply to: Message 34126098 Which you can backtrack to its beginning.
tick tock
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You pov is a relatively common one, so I am going to try to address each point:
>> All of my economics professors and the textbooks they used told me that the value of a fiat currency is directly derived from the ability of the said country to leverage the value and output of its citizens.
That is a fairytale. The kind that adults or governments tell their children/citizens to put their minds at ease. Governments have always had the ability to tax their citizens. Yet traditionally their currency's value had nothing to do with their GDP or ability to tax. Why was that?
Now the reason your professors can sell that myth to their students is that the mechanics of balance of payment mean that in general when a country's GDP grows more than others, then it creates a net increase demand for their currency, which in turn increases the price of their fiat money. But peel away the onion layers and it still boils down to some sucker perpetuated the myth that the monopoly money has some value.
In fact likening a fiat currency to game credit clarifies the point. Many of the modern games have a currency within them. You can use this currency to buy weapons, tools, or decorate your home and character within the game
There have been endless debates and court cases as whether or not the play money is real money. On one hand, the game producers (and many courts) have held that it is not a currency or anything of value. They say this because it is in both of their interests to perpetuate the myth and to safeguard the national currency myth.
On the other hand, people spend hours earning these play monies. And they are willing to pay real hard currency to gain some of that play money so they can buy the digital assets within the game. And in some cases they have resorted to violence to gain and/or protect such digital assets and money.
Nobody can objectively distinguish how the game money is different than a national currency.
>> Your argument wrt. oil is a meaningful point.
Thank you. But the really fun one was the Eurodollar. Most people don't realize that the Fed has only limited power regarding the USD because there is ~15x - 30x more Eurodollars than US dollars in circulation and the two are indistinguishable. This is one of the reasons why I find the transition to a global digital stablecoin inevitable. It is not in the US national interest to maintain the world's reserve currency. This point will be exceedingly clearer as the time goes by.
>> All of this said, however, it still doesn't address where crypto gets its value. Even if I accept the argument that a countries' currency has value simply because people think it has value, that said country has infinite more ways to back and extract that value and cause those people to think that the value is there. Crypto has nothing more than a mass psychosis. ;)))
The whole point crypto, or at least Bitcoin, is that the government should not be the only entity capable of inducing the said mass psychosis <vbg>. The collective power of masses around the world is greater than any single government.
In China, when you shop from Alibaba's network, you pay with some Ali Coin or what not. *By convention* 1 ali coin = 1 RMB. But that is just to keep the match simple. This is one of the key reasons why Jack Ma got so much flak from the government that ended up disappearing from public life to focus on painting.
Meta (then Facebook) had the right idea with their Libra currency. And the government was scared enough to scare all the backers aways. Zuckerberg however did not get the drift and had to be hauled in front of the congress.
If Amazon decides to issue its own coin across its network that will be valid for all regions and AWS services, you will have a real private fiat coin, not backed by the ability of any government to tax you. But Bezos is too smart for that ;)
The bottom line is that there are people who are willing to storm this castle and risk having their heads on spikes and eventually one of the will succeed. Is it going to be Bitcoin? I doubt it. Will it be Either? They are closer to government sanctioned digital coin, but they don't address the real issue of being free from the government. Will it be some the other cryptos? Certainly not.
The end picture will be a digital stablecoin that is tied to a basket of currencies and commodities and bypasses SWIFT or any other unilateral governing body. It may fall under the auspices of IMF or something like it. But it will need to be more inclusive than SWIFT or the US government. |
