Many people are looking at countries such as China or Russia when it comes to banning a revolutionary, freedom-enhancing currency such as Bitcoin, but the fact of the matter is the United States has more to lose from Bitcoin than anyone else. One of the main things propping up the American way of life right now is the fact that a large percentage of the world needs to hold US dollars in reserve for use in international trade. Although there are many flaws with the US dollar, the reality is that it’s a much better option than most of the other fiat currencies in the world. After all, the US dollar was supposed to be “as good as gold“. There is a lot of extra power and leverage that goes along with basically turning paper into gold, which means the US has a lot to lose in a hypothetical situation where countries turn to bitcoins as an alternative to dollars.
The Dollar as an Instrument of Power
The fact that the United States controls the dollar is really one of the only things keeping this country together right now. It creates a situation where the government doesn’t really need to pay attention to budgets or trade deficits because they can always inflate their problems away. The United States is currently the largest debtor nation in the history of the world, and this situation was only possible thanks to the Dollar Standard. The trade deficit in the United States is also worse than the other nine countries in the bottom ten combined. The only reason the United States is able to function with such a horrific balance of trade is that their main export is inflation. Without the power of the dollar, the standard of living in the United States would be unsustainable. The fact that politicians never want to be in office while the standard of living in their country is dropping means that Bitcoin would definitely have a target on its back if it started to become an acceptable form of money around the world.
The China and Russia Decision
In the opening pages of Currency Wars by Jim Rickards, the author describes an economic war game he participated in at the Pentagon. In that war game, he was able to basically flip everyone’s perspective on global economics by creating a deal between Russia and China where the two countries would create a new gold-backed reserve currency. While this was just one scenario used as a thinking exercise, the reality is that China has already revealed that they no longer wish to continue adding more dollars to their reserves. The strange situation that these two countries face is whether they want to embrace freedom or the US dollar. By supporting Bitcoin, they could hit the United States with a huge economic blow that would have serious implications in the standard of living in Beijing, Moscow, and New York. The only problem is they would also have to embrace a new currency that brings extreme economic freedoms to their people by default. While Russia has decided to take a negative stance on Bitcoin, it seems that China has not ruled out the possibility of Bitcoin being a “lesser of two evils” when compared to the US dollar. At the end of the day, every country besides the United States has an incentive to embrace Bitcoin because it levels the economic playing field.
Last modified: February 4, 2014 14:14 UTC