Stimulating article! The handwriting is on the wall for the world to move to a “single hegemonic currency”, most likely digital. What will be the basis for determining relative value? The US percent of world GDP is approximately 20%. It has a huge treasure of natural resources. Why are gold reserves often talked about as a basis of national value? How much will the dollar depreciate when it’s reserve currency status is lost?
Good questions. Historically, many economists have promoted a global currency tied to multiple commodities, including gold, oil, grains, etc. The reason gold is normally discussed is because it is the most limited in quantity and new flow into its overall stock is limited per year. This keeps its stock level relatively predictable. If a new global currency is digital created by the central bank, they will control its value, and since it will be programmable, be able do whatever they want with it. I agree that the next currency will be digital, at least in part. That transition is extremely disruptive to the financial system, although greatly improving its efficiency. My guess is we will see a fight between the central bankers who want to control all the money, the private banks who are basically put out of business by a central bank digital currency, and hopefully the bitcoin proponents who are growing in number by the day. Another option is a private, tech giant digital currency from a company like Facebook. That might be the worst possibility of all.
No one knows how much the dollar will depreciate. In terms of impact on our lives, I could see this transpiring to lowered stock and real estate prices, with steep increases in prices of essential goods such as energy and oil. John Williams says that inflation is already at 15% when calculated as was done in 1980, so especially in light of the recent shock to the supply chain from the Russia sanction, it doesn't take too much compounding to see very high levels of inflation. I suspect items produced in the US will be somewhat buffered. This event is terrible for much of Africa and many parts of Asia as they import much of their food stuffs and raw materials.
These are all issues I plan to address in upcoming newsletters (time permitting) but it is necessary to have a reasonable understanding of the current system in order to move forward, so I am starting with the basics. Need to understand the existing system before digital currencies make sense.
Stimulating article! The handwriting is on the wall for the world to move to a “single hegemonic currency”, most likely digital. What will be the basis for determining relative value? The US percent of world GDP is approximately 20%. It has a huge treasure of natural resources. Why are gold reserves often talked about as a basis of national value? How much will the dollar depreciate when it’s reserve currency status is lost?
Good questions. Historically, many economists have promoted a global currency tied to multiple commodities, including gold, oil, grains, etc. The reason gold is normally discussed is because it is the most limited in quantity and new flow into its overall stock is limited per year. This keeps its stock level relatively predictable. If a new global currency is digital created by the central bank, they will control its value, and since it will be programmable, be able do whatever they want with it. I agree that the next currency will be digital, at least in part. That transition is extremely disruptive to the financial system, although greatly improving its efficiency. My guess is we will see a fight between the central bankers who want to control all the money, the private banks who are basically put out of business by a central bank digital currency, and hopefully the bitcoin proponents who are growing in number by the day. Another option is a private, tech giant digital currency from a company like Facebook. That might be the worst possibility of all.
No one knows how much the dollar will depreciate. In terms of impact on our lives, I could see this transpiring to lowered stock and real estate prices, with steep increases in prices of essential goods such as energy and oil. John Williams says that inflation is already at 15% when calculated as was done in 1980, so especially in light of the recent shock to the supply chain from the Russia sanction, it doesn't take too much compounding to see very high levels of inflation. I suspect items produced in the US will be somewhat buffered. This event is terrible for much of Africa and many parts of Asia as they import much of their food stuffs and raw materials.
These are all issues I plan to address in upcoming newsletters (time permitting) but it is necessary to have a reasonable understanding of the current system in order to move forward, so I am starting with the basics. Need to understand the existing system before digital currencies make sense.