Where Does Bitcoin Fit in the Global Reserve Currency Game?
This is going to shake out how disruption manifest in real life is really hard to predict. But at this point, we do at least know what appear to be different paths that this thing could take if some sort of cryptographic. DIGITAL MONEY OUR future. So Andreas I'd like to throw this one to you to start us off. You've got privately issued. You know literally anybody can do it crypto currencies. You've got so-called corporal coins like the Libra, you've got national digital currencies like we see coming out of China, and then you've got things like bitcoin. So like what are kind of the attributes of these different things? What are the strengths and the weaknesses of each approach or perhaps I'll ask it a different way. What could actually work and what do we know won't Well I'd like to just take a brief that back and say you know even though the US has abused his position, the dollar, and even though there are a lot of contenders for the kind of multipronged geopolitical power structure that doesn't mean the US dollar is anywhere near losing his position as reserve currency in it may lose some of his control but the problem is that there is no good alternative in traditional currencies, not the not the. Ruble the politics. There are two fraud together. One likely contender is not a crypto currency or digital currency at all but is some form of synthetic currency built and managed by the International Monetary Fund's so some kind of SDR based synthetic basket currency that is constructed, which may or may not have a blockchain is kind of unnecessary. It would be a centralized currency that emerges to replace the dollar. But again, you know the IMF isn't an independent organization. Ezer and the problem is there's a vacuum right now in terms of something to replace the US dollar and so we might end up with a brief period where in fact, there are a number of competing monetary and payment systems because it's not just the reserve currency social, the payment system, the US dollar as reserve currency goes hand in hand with swift as the international wire transfer settlements and payment system and control of both gives the US. Enormous geopolitical power now, Europe and China have tried to build alternative versions of swift. So they can bypass controls. The US imposes unilaterally a great example of that would be the embargo on Iran, which Europe, and many other countries under the previous agreements have essentially allowed Iran to sell oil, and yet the US continues to maintain an embargo on his backed out of its treaty obligations. So in that particular case, there's a need for an alternative payment system. The payment system going hand in hand with the reserve currency actually gives us a hint as to the importance of blockchain's in this base, and because of blockchain is simultaneously a payment system and currency and the consensus rules govern both. Now, whether a nation states could make a central digital currency CDC, it's called whether corporates currency could survive or whether it would be some former crypto currency that emerges to fill that vacuum I mean that's a really loaded question and I don't think any of us can answer right now I think what's going to happen is we're going to simply end up in a world where there's a lot more fragmentation. Will Continue to work for some things. The you on and Euro will work. For other things. We'll be libra other corporate currencies that will be central bank digital currencies like digital yuan or digital euro. They'll be her tow currencies and we're going to enter a period of massive fragmentation where things are going to be complicated, and there's going to be more limited liquidity more complications in trade and more exchanges happening across all of these different forms. At. The beginning of this episode, we talked very briefly about how one of the sort of use cases of global reserve currency is to store value in some form other than the one that your government has control over, and we've seen this sort of throughout history with different episodes of heavy inflation hyperinflation in some cases where the money that people think they've saved and have simply goes down in value and can buy less effectively at the end of it that I think is really important part of this conversation and I have increasingly been thinking that. Lacking an alternative lacking a system that actually has neutrality Bilton as a base level assumption you're looking around for what's the best option of all of these bad options right because again, like using the US government's money as your reserve currency when you're in Zimbabwe will, that's much better than using Zimbabwe's hyper inflating currency. But on the other hand, the US is integrate situation either it's essentially the cleanest dirty shirt one of the things that I've really been curious about. With regards to the Central Bank digital currencies. As you said, so called CBD's is whether or not these could behave like a truly neutral system or whether we're just talking about taking the existing very slanted system, which is in favor of whichever country has sort of, as it's called the exorbitant privilege of being able to just essentially right blank checks that you don't have any money to backup, which then people use as their own form of savings in their local country. Whether that changes the equation here whether having something like Bitcoin that although it's neutral and available for use by everyone can't be influenced as we used to say a lot more, you can't hold a gun to the head of math, right? Like there's some protection that's built into that neutrality and I just wonder if that's something that we could ever see or that any government would ever allow to happen in a nationally issued central