Some thoughts on reserve currencies, world empires, power, Satoshi Nakamoto and Mark “Data” Suckerborg.

#bitcoin #cryptocurrency #Libra #facebook #Zuckerberg #Satoshi #Nakamoto

Thread.

If bitcoin were ever to obtain a status equal to that of a reserve or international currency, it would put the old whales - for the sake of ease, let’s call them the “Nakamotos” of this world - in a de facto Central Bank role - or even that of the IMF, like it or not.

The reason for this lies in the exorbitant size of funds they are holding, which would quite literally amount to a world reserve.

In a similar way, facebook would be placed in a similar role if Libra would ever make it that far.

Personally I’d prefer Satoshi over Suckerborg. But think about the powers that would come with the above, because they are truly mind boggling.

“Power grows out of the barrel of a gun” (Mao Zedong), but money buys guns. In other words: Monetary clout leads to economic clout leads to physical power.

Nothing provides more monetary clout than the “exorbitant privilege” (Ben Bernanke) of being in charge of a world reserve currency. Ruling empires have usually imposed their national currency upon the world as the one and only reserve currency. Currently that is the U.S. dollar.

Apart from issuing the world reserve currency, the USA has also forced almost the entire international oil industry to only trade oil in US dollars. Wars have been fought and nations destroyed to keep it that way.

This has created a huge demand for USD, in turn leading to its extreme valuation of the past. My interpretation of the USA’s prosperity of the 1950s to 1970s is that it was mainly due to a hard, gold backed dollar which was in extremely high demand.

All that began to change after Nixon took the dollar off the gold standard and secondly due to the deregulation of the financial sector under Reagan and Tatcher, inspired by Friedman.

While named deregulation obviously gave the USA a brief, artificial financial boost which enabled it to outspend the USSR, which ultimately led to the USSR’s demise, this game is about to end.

Trump, helped by the FED, under the delusion that a weaker dollar will benefit the USA, is about to hammer the last nail in the coffin of the USA’s prosperity of the late 20th and early 21st century.

Perhaps issuing the world reserve currency will soon no longer be the privilege of empires or nation states.

If bitcoin - or any other cryptocurrency for that matter - would manage to become positioned as a de facto reserve currency, then, for the first time in history, the powers and privileges that come with it would no longer be in the hands of a nation state.

But in who’s hands would these powers then be? In the case of bitcoin, perhaps nobody’s - however as indicated above, a lot of it would likely fall into the laps of the Nakamotos of this world. But would they become a geo-political power like nation states currently are?

Bitcoin has no geographical location, but Nakamotos could have, or could choose one. Would they have to compete with nation states? Nation sates will, after all, not disappear overnight. Would they be able to bear the responsibility? Would they perceive it as a responsibility?

Would they - and do they - even perceive it as a possibility? For now I think these questions are difficult to answer as all this is still a new, hypothetical paradigm.

But I think it is worth it and maybe even necessary to start thinking about these things, because it is well possible that not too far in to the future it will cease to be hypothetical.

Then think about this: What if Libra manages to position itself as a de facto world reserve currency? Unfortunately, this is even less hypothetical. Facebook already has the user base.

Libra as a kind of “stable coin” (although that's a gross misnomer), probably backed by a basket of national currencies, if successful, would literally suck up billions, if not trillions of monetary backing, putting whoever is in control of it in an extremely powerful position.

Mark Zuckerberg knows this very well and he has the brains and cunningness to pull off such a game.

Up until now crypto communities have seen Libra more as a competitor to fiat and CBDCs, not so much to bitcoin. Within the current paradigm of fiat issued by nations’ Central Banks and a fiat reserve currency linked to a nation state this may be correct.

But if cryptocurrencies (and other digital currencies, as Libra is strictly speaking not a cryptocurrency) would become a more dominant factor on the financial world stage, this would change. Then Libra would definitely start to compete with bitcoin.

Like I said, I prefer Satoshi over Suckerborg - but I am far from certain there is enough awareness within the crypto community regarding the powers and responsibilities in play - neither that this community will be able stop Libra from taking over when it comes to this.

Suckerborg's facebook & Libra is a well organised bunch. Perhaps we need some sort cryptocurrency alliance to counter that. Alas: enter politics.

Or is there a way?
Please tell me.