The monetary policy of the US is fuelling inflationary dangers and could lead to a shift away from the US dollar as the global reserve currency. Those who follow this thesis also think of Bitcoin (BTC) as a possible successor.
In view of the rapidly growing national debt of the USA, the renowned business newspaper Financial Times asks whether the position of the US dollar as an international reserve currency is at risk. Guest author Ruchir Sharma believes that the US dollar’s loss of significance has already begun and sees Bitcoin (BTC) as a legitimate candidate for a global reserve currency. Sharma is chief strategist at Morgan Stanley and is known as an author of books on the global economy and its political consequences. He sees historical parallels that shake the influential special status of the US dollar.
The US dollar is weakening – Bitcoin as an alternative?
The triumphal march of the US dollar began a good 100 years ago with the founding of the Fed as a central bank. To this day, the majority of raw materials such as oil are traded in US dollars. In about a dozen countries, the US dollar is the official currency, in others the national currency is firmly pegged to the US dollar. The U.S. dollar thus enjoys trust across borders and, according to Sharma, historically Portugal, Spain, the Netherlands, France and Great Britain were previously in a position to provide the reserve currency. On average, they could have held the position for 94 years before the reserve currency changed its leader.
In the USA, the national debt has already accumulated to more than 60 percent of the annual economic output and this leads to doubts whether the debt will ever decrease again. Sharma sees this as the starting signal for the succession question for the reserve currency. But the euro, on which many hopes were pinned, could not prevail because the multi-state leadership of the EU was not convincing. The Chinese renminbi, on the other hand, would not be considered because it depended on one party and its arbitrariness. This is where Bitcoin (BTC) comes into play, which has been convincing as a decentralized currency for a good decade now.
Sharma interprets the price gains of Bitcoin in 2020 as a sign of confidence in BTC. The comparison as “digital gold” for Bitcoin prevailed and predestined the mother of all crypto currencies for the status of a reserve currency. Skeptics about Bitcoin came predominantly from the so-called baby boom generation of the postwar period and did not grow up with digital possibilities. The so-called Millennials, which will determine the future, already own 27 percent of Bitcoin themselves and see the concept of BTC as fundamentally positive.
Through companies like PayPal Bitcoin could also gain more importance as a means of payment in everyday life, according to Sharma. States such as Nigeria and Argentina would already use Bitcoin for international trade. And the longer the USA and other countries continue their policy of printing money and fail to get their debts under control, the longer Bitcoin has time to assert itself.
For all his optimism about Bitcoin, Sharma has one major limitation. If a bubble bursts at BTC, a leading currency will be sought again. This however will come from the area of crypto-currencies, the economist is sure, because the technology-affine generation will bet on a currency that does not allow money printing. And if governments try to regulate Bitcoin and Co. more strictly to protect their currency monopolies, this will only fuel the revolt against the US dollar and debt policy.
Conclusion: Will Bitcoin become a political issue?
It is not at all the well-known arguments in favor of Bitcoin that surprise Sharma. It is rather the context in which he places Bitcoin and regards it as a genuine reserve currency. In addition the place of its publication, probably the world’s most important business newspaper. The fact that such thought experiments with Bitcoin as a leading currency find a prominent place there is further proof of how far BTC has already established itself. Investors take from Sharma’s theses Bitcoin’s function as a store of value (“digital gold”) has been consolidated, and as its distribution continues to grow, BTC will be able to command significantly higher prices in US dollars.
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