The Demise Of The Dollar: What Comes After That? (Part II) – OpEd


A good start

Whatever one might think about which currency is better suited to be used in trade or as a benchmark or as a central bank reserve, the fact remains that the USD’s days as the “only right answer” to that question are numbered. It might not happen tomorrow, but a credible challenger will eventually emerge. 

As Patrick Barron also highlighted in his analysis: “Led by China and later by Russia, some nations of the world, not wholly within the US orbit, have been building the necessary infrastructure and rules for conflict resolution and increasing trade and investment. Countries representing the vast majority of the world’s population, and also most of the world’s proven commodities, are intent upon industrializing as did the West. The basis for world economic development is sound money, which means gold. Only sound money can provide the irreplaceable information about the true costs and benefits of economic development. Only sound money can reassure investors–whether they are individuals, corporations, or governments—that their investments are secure and that payments will be made in non-depreciating money.”  

Indeed, there has been talk of a gold-backed solution for quite some time now and it certainly seems to resolve a lot of the “trust” issues that the Greenback die-hards always like to bring up. It is definitely easier to trust something that is even partially guaranteed by a bar of the yellow metal, than to take the word of the Chinese Communist Party or of Vladimir Putin. In fact, it would be easier to trust that than the word of the Fed or the ECB too. However, the good news is that we don’t even need that kind of currency to emerge as a threat to the USD to usher in a new, fairer and more productive era in our monetary history.

Even an exiting fiat currency would do. Sure, it would not offer any additional benefits or add any real value, but it would at least offer an alternative to the USD. And that’s the first step towards ending the current absolute dependency on it and curbing the dollar’s unchecked power. 

The thin end of the wedge 

Meaningful, lasting and history-altering shifts never happen in the blink of an eye. It might seem to us, in retrospect, that it was this or that single event that changed the course of history, but that’s never actually the case. It is always an incremental process. There is always something else that had to happen before that “big trigger” could come, there is always a smaller domino that had to fall and one before that too and countless more, that you’ll only see if you “zoom out” and appreciate the bigger picture.

This is why even a poor substitute to the USD, if taken seriously enough and seen as a viable alternative, would still be a step in the right direction. Sure, choosing between the Yuan and the dollar is basically like choosing between pest and cholera. But at least there is a choice, even if it is between two evils. This is seemingly insignificant change could be that first, smallest domino that eventually leads to something much more meaningful down the road. 

Once nations, companies and ultimately, individuals, realize there is “another way”, a tiny seed of freedom can be planted. This is the start of much more important reasoning process: if we can replace one dysfunctional, manipulated and intrinsically worthless currency with another that is equally unfit for purpose, if not more, then why can’t we replace all those bad options with something better? Something that actually works for those who use it and something that manages to fulfill at least the basic functions of money. Why allow just one alternative to compete, and why not allow every alternative, every idea to have its chance in free market arena?  

There are many benefits to this scenario. The obvious one is that through the tried and tested process of truly free competition, subpar currencies will end up in the ash heap of history must faster than they would should they continue to be legally protected, artificially propped up and forced upon all of us. Better money will emerge and this will provide unimaginable advantages in every corner of the global economy. 

However, one of the less apparent advantages that this kind of monetary free market would offer, is that we do not have to agree about what currency is best. We don’t have to theorize and to guess and to debate ad nauseam the same issues that have already been discussed for over a century. We just need to set all ideas free and wait. Most likely, there will be more than one “winner”, and there will not be “one currency to rule them all”, which is the ideal outcome in any situation. 

A single company, or even a single person, will end up using a mix: maybe crypto for privacy and instant transactions, gold for saving and some kind of asset-backed token for investing. It’s too soon to tell, but the good news is we don’t have to. We just have to wait and see.

Claudio Grass

Claudio Grass is a Mises Ambassador and an independent precious metals advisor based out of Switzerland. His Austrian approach helps his clients find tailor-made solutions to store their physical precious metals under Swiss and Liechtenstein law. He is the founder of and recognized as an expert on monetary history, economics, and precious metals. A financial and economic speaker and publicist. He writes about global markets, international finance, geopolitics, history and economics. Claudio is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics, he is convinced that sound money and human freedom are inextricably linked to each other.

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