You Don’t Want A Crypto Future. You Just Think You Do
In the weeks since the West moved to seize Russia's foreign currency reserves, (too) many market participants have exhibited an updated, more fervent version of the cognitive dissonance that sometimes accompanies the weaponization of the dollar in the service of US foreign policy goals.
Typically, the US mobilizes the dollar to target rogue regimes or flailing backwaters where someone's run afoul of the values Western nations purport to cherish, even if they don't always uphold those values dom
Speaking of the supposed end of the dollar system, Noah Smith pointed out talking about the Yuan made no sense.
As in – if your problem with the $ is that sometimes the US uses it to coerce countries then what are the chances you would choose the Yuan as a substitute? Like, which country do you trust most to not interfere and f**k you over? The US or China.
Despite gallons of electronic ink being spilled on anti-Americanism screeches, the question answers itself.
Great article. Thanks Heis
Your insights are great. I am old school and can not bring myself to even dabble in bitcoin.
I am, however, wondering what will happen to the USD as the world shifts away from fossil fuels, thereby decreasing international trade.
“having a big number next to your name… does not relieve you of your obligations” to society.” On the contrary, as far as I’m concerned it increases those obligations, something our well-heeled corporations and individuals don’t seem to take very seriously. While I remain a staunch capitalist, and with apologies to Milton Friedman, If those with enough resources to share don’t do so, who will? The bell curve applies to the distribution of nearly everything, including despair. Jesus had nothing and yet He gave even what He didn’t have to others who had nothing. Neither was He particularly fond of those who had plenty and didn’t share. If we don’t lower the level of nasty and mean in our society exponentially, and soon, we won’t have a society when the next flood comes (the one that disappears Florida …)
Ideally having more would incline one to feel more obligated to the society that benefited them, however that assumes a person was raised with these kinds of values or learned them in some way. Without the presence of those values, a rich man will not of his own inclination feel an obligation to anyone. Since values are not forced upon anyone in a free society, the only mechanism that can force accountability is the law. In the United States the law has been gutted and misread to the point that a person will only be held accountable if they are prosecuted in front of a judge that believes that person should be held accountable (and it’s really on a person by person case by case basis). With rich people having access to all measures of legal experts, they have the upper hand against civil servants who might desire to prosecute them. James Comey referred to this as the chickensh*t club and we see this continuing on today in SDNY not pursuing charges against Trump despite the fact his own accounting firm basically admitted that he lied on his taxes. On a similar note, there is an article in the Atlantic by Anne Applebaum about how we (the United States) can make a more concerted effort to stop Oligarch’s before a Putin type invades another country that is well worth reading.
Yeah, when you were posting Zoltan’s hyperbolic new-world-order stuff a few days ago, this post by Levine was all i could think about.
Then there is the following which I have been expecting:
YEREVAN, March 14 – Sputnik. The member states of the Eurasian Economic Union (EAEU) and China will develop a project for an independent international monetary and financial system. This was agreed upon by the participants in the economic dialogue “A New Stage of Monetary, Financial and Economic Cooperation between the EAEU and the PRC. Global Transformations: Challenges and Solutions”, which was held on March 11 via videoconference. It is envisaged that the system will be based on a new international currency, which will be calculated as an index of the national currencies of the participating countries and commodity prices. The first draft will be submitted for discussion by the end of March. As Sergei Glazyev, Minister for Integration and Macroeconomics of the EEC, emphasized, China was the first in the world to move to the stage of national economic recovery.
This sounds very much like the proposal John Maynard Keynes made at the Bretton Woods Conference instead of the fixed exchange rate gold standard the US wanted. He wanted an international currency which he called the Bancor based on a basket of currencies of the members. The US nixed it.
Could the above announcement be the beginning of the end of what economist Michael Hudson’s called “Super Imperialism – The Economic Strategy of American Empire”?
I realize not every reader is apprised of my policy on Sputnik, RT and/or any associated outlets, so I’m not going to remove this comment. But I do want to reiterate that policy: No quotes or links to Sputnik, RT or any of their affiliates, arm’s length or otherwise, are permitted in our comments section.
Sputnik and RT are FARA-registered entities. In other words, they are registered agents of the Russian government and operate as international propaganda mouthpieces for the Kremlin.
Again, I’m going to let this comment stand because I know not everyone is apprised of my policy, but this is a reminder.
Best Post in a long time. It addresses realities and not heavy on Biases . After watching the gum flapping in the Main stream Media for at least a month I was beginning to think there was amnesia inducing compounds in the air that made people (in general) think that no actions by any party ever have any consequential reaction by any other party. That isn’t as Geopolitics works or has ever worked or will ever work. Think back to about the turn of the century and look through a lens called objective and voila there appears a cast of villains.
Some thoughts.
– USD as global trade and reserve currency gives the US power but at a heavy cost in inflated FX level, competitiveness of manufacturing, structural deficit, lack of control over flows.
– It also requires rules-based and open legal and financial system, and a substantial level of perceived trustworthiness, which also reduces control by govt.
– If a country wants its currency to become the global trade and reserve currency, it has to take on those costs and meet those requirements.
– Will China want to do that? Govt control is priority #1.
Is the additional power worth the loss of control?
– Will other countries want to replace USD? What exactly is the motivation? Want to be able to start a large land war in Europe*** without risking the US leading a global coalition to wage financial war on you – okaaay, how many countries have that “ambition”?
– Certainly, China will be able to get “some” countries to do “some” trade with it in CNY, as a political statement. Russia obviously. Saudi likely. India likely. Those countries will accumulate “some” portion of their FX reserves in CNY. The US and USD will have less financial power over those countries. How much less? Russia went to huge lengths to hold as much of its reserves as possible in not-USD and it wasn’t enough.
Will Saudi, India, etc want to have substantially all their reserves in CNY? See the first two points. Russia, alas for it, may not have a choice any more.
*** Or somewhere else that the West considers vitally important. You can probably start a large land war in Africa without much risk to your USD reserves. Unfair but true.
Sometimes the Comedy writes itself: http://www.politico.com/news/2022/03/22/like-grabbing-smoke-crypto-collectibles-confound-taxpayers-00017779