In my previous articles, I discussed how China is trying to bring down the Euro-Dollar system and how this may lead to the fall of the US empire.
Today, I invite you on a journey into a hypothetical scenario explaining how the USA can utilize Bitcoin to escape this fate.
Imagine that right now, the United States treasury is secretly putting Bitcoin on their balance sheet. In a few months, they will announce that they managed to acquire 5 Million BTC.
Soon after a law is passed, recognizing Bitcoin as legal tender and guaranteeing a fixed one-to-one peg of Dollar to Satoshi (One Bitcoin is 100,000,000 Satoshi or Sats for short).
This immediately sparks panic on the international money markets. Many creditors want to quickly have their debt paid off, before the Dollar inevitably loses value. The United States government offers every claimant that they will pay USD debts in coins with a million, a billion, or even a trillion denominations.
Some take the coins, many take the Sats.
Since the USA are still the biggest military power and the Dollar is still the world reserve currency, other nations face a tough choice. Should they keep their Dollar reserves and trade in USD? Or should they switch?
US adversaries that have over proportionally large holdings of gold or silver will switch to various gold and bi-metallic currencies. Most notably China and Russia.
Countries low in gold reserves will choose Bitcoin.
By this bold action, the United States would effectively get rid of their debt and at the same time establish the hardest currency imaginable as the world reserve asset.
Granted, this scenario is not very likely for many reasons. The US might already be too weak, the corruption in Washington too big and economic understanding too close to zero.
But let’s roll with it for now, to see where it could lead.
The United States effectively defaulted on their debt in 1971. Due to their enormous military might, no country dared challenge them to pay back the debt, and everybody accepted the worthless paper Dollars.
Unfortunately, the “exorbitant privilege” turned out to be an exorbitant curse eventually.
Every transaction ultimately gets settled in goods and services.
So, while the worthless paper Dollars lead to a massive influx of cheap goods into the States, creating the illusion of a privilege, the international circulation couldn’t contain all these Dollars forever.
It’s all nice and fun, having USD on your balance sheet, while the economy is hot and growing fast. When the music stops, however, no investor with more than two brain cells wants to be the one holding unbacked paper or even worse, unbacked ones and zeros in a computer, which can be deleted at any time.
How fast this can happen, could recently be seen, when Russian central bank assets were frozen.
This moment, in the Ukraine-Russia conflict, essentially marked the second default of the US. The US of A admitted that their Dollars are just empty promises that they never intended to actually fulfil when the going gets tough.
A wider occurrence of such freezes is just a matter of time. The reason for this is simply that the US have run out of assets.
For years, the Chinese and other nations have been expecting the music to stop and started exchanging their USD reserves for physical gold and other hard assets, like US companies and real estate.
Essentially, the price for cheap goods, paid for with unbacked FED dollars, was the capital stock of the United States.
The more exorbitant the valuations of US stocks and real estate got, the less powerful the United States became. This problem was exasperated by the fact that so much cheap money leads to malinvestment, corruption and a rotting of the capital stock.
Thus, the US military (the only thing actually backing the USD) got more and more expensive, while its combat power declined.
The military industrial price inflation, is probably the worst inflation for a Fiat nation imaginable because it chips away at the very foundations of the system.
So, for every clear eyed witness, it’s obvious that the US military hegemony is very close to falling apart and being replaced by the Chinese empire.
From my perspective, the US have only three options how to continue:
- Yield to China → very undesirable
- Break the East militarily → WWIII, likely nuclear, extremely undesirable
- Rebuild their economic power → only possible with monetary reform
If history is any guide, the only viable option for the United States would be a monetary reform. Historically, this would be done by a fractional reserve gold peg, which was used in Weimar (albeit much too late) and ended the hyperinflation within one week.
The US do not have this option.
Remember, Nixon only suspended the gold standard. If the States wanted to return to a gold peg, at any level apart from the old ratio, they would essentially declare that they are not a trustable debtor.
Of course, you may say that implicitly that was already what Nixon did, but stating it explicitly, especially in a time of weakness, like the current geopolitical situation, this would likely result in WWIII, just like option 2.
The only other real alternative is Bitcoin.
If the US government had read Argentarius and thus understood money, it would be obvious, why Bitcoin is the one weapon that can overthrow China.
(Or overthrow the US, if China should be the first mover.)
In monetary history, there was seldom a second best. The hardest currency always drains the monetary premium from alternatives. The only reason that gold and silver bi-metallic standards existed is the limited practicality of gold for very small transactions.
If you tried to compete with a silver standard versus a gold or bimetallic standard, this would cost you dearly, as medieval China learned the hard way.
Bitcoin is for many reasons a better monetary token than gold. The most important advantages are the hard-coded, transparent supply, as well as it’s decentralized nature. Furthermore, Bitcoin can be transferred globally at almost zero cost (more on why Bitcoin is the ultimate currency, in my next article).
If no unforeseen calamity happens to wipe out Bitcoin, the 99% likely scenario for this century is that gold and silver will lose their monetary premium to BTC.
A trend, US adoption, would greatly accelerate.
Assuming that China has little to no Bitcoin reserves, an outsized US stack could easily tip the global power scales in favour of the Stars and Stripes banner.
Not only would such a bold move into a Bitcoin standard, essentially wipe out all the Chinese dollar reserves, it would also reverse the “exorbitant curse” dynamics of the Euro-Dollar system.
The world would still need to trade in the USA currency, be it Bitcoin backed USD or Bitcoin directly, but suddenly, they would find themselves in a situation, where there is more purchasing power in the US than current economic power.
This first mover advantage would allow the US to interest rate free finance the rebuilding of their broken economy and infrastructure.
Furthermore, it would likely topple the already cracking Chinese real estate market, leading to a monetary crisis in China.
In a nutshell, this means that a surprise Bitcoin standard has the best risk/reward profile, of all available options, from a United Stated perspective.
So, even though I am not a big fan of the US empire, I think the best chance to keep our freedom is if they win the currency war. Otherwise, a Bitcoin standard might be preceded by decades or even centuries of CCP style social credit dictatorship.
What are your thoughts?