If you follow the financial news, the picture of the state of the world economy is not a pretty one. Trade conflicts, skyrocketing public debt, overpriced stock markets, and historically low bond yields all combine to create an economy that is on the verge of collapse.
Many esoteric economists believe that the current financial system may be on the verge of collapse. According to these researchers, the global economy would not be able to withstand the blow if there were another liquidity or credit crisis such as the one that occurred in 2008.
The outcome would be the collapse of the whole global financial system, rendering your bank account worthless as currencies lost all of their purchasing power. Even though this is the worst-case scenario, it is still a possibility. If such a thing some commentators think that the emergence of cryptocurrencies heralds the demise of the fiat currency system. In times of a monetary crisis and collapse, they anticipate that cryptocurrency will take the place of the dollar as the next reserve currency.
Let’s look at the argument for cryptocurrencies as the currency of the future.
We can just predict that future must be holding this thing, but we don’t have any solid proof of that this is going to happen. So it is all a part of Imagining walking into a restaurant and looking up at the digital menu board at your favorite combo meal.
Following the financial crisis, when trust in governments, central banks, and major private banks was extremely low, interest in Bitcoin soared. The “revolution” of cryptocurrencies started in 2008 when a cryptography mailing list member posted a link to a nine-page proposal outlining Bitcoin’s specifications. With Bitcoin, two people would be able to exchange money without utilizing banknotes from the central bank or a reliable financial middleman like a bank or credit card business by using only anonymous digital identities. All transactions are recorded on publicly accessible ledgers that are maintained across numerous computers to replace trust in a public institution with trust that is built through a public consensus mechanism.
History of Money
We must examine history to forecast the future. Around 2,500 years ago, the earliest known money system emerged in ancient China. The world’s first coins—known as “cash”—were adopted by the Chinese, who ceased utilizing tools for trade and instead embraced them.
In 561 B.C., King Croesus of Lydia became the first head of state to mint gold coins, ushering in a new method of exchange for goods and services other than bartering. Before President Theodore Roosevelt decided to remove gold coins from circulation at the commencement of World War II in the 1930s, gold coins were the currency of choice throughout the world. As money equals value which is paid accordingly for the service or some goods.
End of Gold Standard
Countries and governments have used gold as their preferred form of exchange throughout history. However, there are numerous instances in history of governments debasing their money, which brought about the dissolution of society. Up until the early 1930s, gold coins were the primary medium of exchange. To aid in American war operations, then-President FDR ordered that the general public surrender all of their gold holdings to the government. The first paper dollars, which we still use today, were later printed by the Federal Reserve.
However, at the time of FDR’s initial seizure of gold, there was still some connection between gold and paper money. Each banknote was said to reflect a specific weight of redeemable gold. However, since FDR blocked the ability to swap gold for other currencies, people stopped using coins.
Creation of Global Reserve Currencies
The globe has relied on a system of reserve currencies for trade since the 1300s. Typically, the country that was the world’s superpower at the moment issued the top reserve currency. Before America emerged as the main powerhouse of our era at the end of the First World War, reserve currencies had been Portuguese, Spanish, Dutch, French, and English.
Since then, America and the dollar have remained the primary reserve currency around the globe. The Dollar, Euro, Yen, Pound Sterling, and the most recent addition, the Chinese Yuan, are all included in this currency basket. All of these currencies have a part to play in controlling the global financial markets, but the dollar is still in charge. According to some commentators, China will eventually replace the dollar as the primary reserve currency.
Debt and Credit Markets Worldwide
The creation of the Eurodollar system and the growth of global credit markets were both influenced by the fiat dollar system. The result was a quick alteration of the globe. Companies prospered, creating a new, globally-connected economy. It was simple for the U.S. government to gain control of the global financial system because all central banks participated in the IMF-managed reserve currency system. The United States funded its wars by issuing USD bonds, while the rest of the globe experienced the effects of imported inflation due to currency devaluation.
The globe did not begin to see the negative impacts of a financial system that was overburdened with debt until the fall of Long Term Capital Management in 1997. The global financial system was almost destroyed by this crisis. A few years later, the 1999 dot-com bust would also cause the world economy to collapse and cause catastrophe.
Dollar Hegemony Is Over
As we just discussed, history offers a compelling glimpse into the direction that money will go in the future. Every fiat money system that society has ever introduced has historically failed. Whether it was the British or the Portuguese, eventually control passes to the next government to assume charge of the world economy.
The Next Reserve Currency: Crypto?
The changeover phase is what makes all previous reserve currency regimes fascinating. Every system went through a time when the new reserve currency rose to prominence. This build-up stage lasted between 20 and 40 years for the majority of countries. What currency would replace the dollar if all currencies lost their value in the upcoming crisis, as predicted by top economists, which might spell the end of the financial system? Cryptocurrency is the only type of economic system that could endure such a situation.
It’s also noteworthy that cryptocurrency has only been around for a little over a decade. Furthermore, it is the only asset class to have evolved that poses a threat to the current financial system. So, if we look at the past, we may claim that cryptocurrency is poised to replace fiat as the global reserve currency. So yes it could be possible that crypto can become the new digital currency.