Bloomberg recently published an article in which the Bank of England took a position in the crypto debate. Mark Carney spoke on behalf of the Central Bank and he said it is time for the dominance of the dollar to decrease. Cryptocurrency could potentially play a major role in this. He even mentions Libra as an alternative to the dollar.
Response from FED
There was also room for a reply from the FED, which of course waits in the corner of the dollar, with raised boxing gloves. Simon Potter spoke on behalf of the FED and said that the dollar as a world reserve currency has ensured that each country has benefited more in the long run than the dollar has hindered them.
Mark Carney and other countries may see it differently because the US uses the dominance of the dollar to increase reach and lower financing costs.
The dominance of the dollar
Both men have a point of course. But first, let’s look back at how the dollar got that dominant position. Zach Owen of San Francisco Tribe writes that the dominance of the dollar actually started around 1900.
Owen writes that that is the beginning of the industrial revolution and the transport revolution. America and its currency were seen in the world by men such as Andrew Carnegie (Steal), John Rockefeller (Oil), Cornelius Vanderbilt (boats and railways) and Henry Ford (Automobiles).
Fewer debts than the rest
Owen also writes about the First and Second World War, with the impact on the United States being much less than on other countries. It was not necessary for the US to borrow a lot of money to pay for those wars.
Because America was one of the few countries that had no debts, it eventually lent money to the United Kingdom under the Anglo-American loan. Over time, the dollar became the global standard, as it was backed by gold at the time and was the only currency that stood strong.
About 75 years later, the world is in a completely different scenario. The dollar is no longer supported by a commodity or anything other than the US military. The world economy is stronger than ever before and there is currently more wealth in the world than ever before in history. And that prosperity is mainly in the private sector.
Private sector
The private sector is now taking matters into its own hands. You notice that the Bank of England and the US Congress are afraid of the idea that the private sector makes its own currency. That fear was mainly reflected in the fact that Facebook developed Libra.
The whole idea behind fiat (money spent by the government) is that the government can steer the economy like this. Think of banking systems, interest rates, government financing etc.
If the monopoly on money creation shifts from governments to the private sector (as Libra can potentially do) then the government loses an important instrument of power.
Crypto as national currency
That is also Potter’s position (FED) according to the Bloomberg article. He considers it unlikely that countries will ever declare a cryptocurrency as a national currency. But companies can enforce this:
“Central banks must be very concerned about the private sector. The control of a country over its currency is designed to protect people and achieve good results. The private sector is much more interested in selling products. “
Owen believes that Potter has a point here. Large companies such as Apple, Google, Facebook, Amazon, Uber and similar companies do not care about the individual. The average person is just another word for conversion.
The government, on the other hand, should have the sole purpose of protecting its citizens. They have various means for this: maintaining order, providing good facilities, ensuring affordable health care, maintaining infrastructure and defending the country. These are not roles for private sector companies.
Crypto good for the government
That is why Carney (UK) thinks that a cryptocurrency might take a leading role. And why Potter believes that a currency cannot be managed by a large consortium, with all their own interests.
It must be a coin that belongs to the people and is also carried by the people. And that role would fit perfectly with bitcoin. A global currency that is not managed by companies and is completely independent of any country.
Bitcoin is a coin designed by the public, is protected by a global network, is independent and is resistant to censorship. Whether bitcoin will take over the role of the dollar as a world reserve currency is uncertain. But what is certain is that companies such as Facebook should definitely not take on that role.
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