As Trust Is Reimagined, Bitcoin Is The Solution
The following is a direct extract from Marty’s Bent Issue #1174: “Trust is reevaluated in real time.” Subscribe to the newsletter here.
What a time to live. The world is currently witnessing the revaluation of confidence in global markets in real time. Trust is a key element of stable and peaceful economic activity. When trust is lost, it leads to increased friction in economic activity. When the United States decides to freeze and seize money held in reserve accounts by countries it does not like, those countries cannot trust the United States to hold their money. Worse still, it allows doubt to begin to creep into the minds of other countries watching from the outside. “If they can do that to them, they can do that to us. What’s stopping them from doing that to us?”
It’s a line of questioning that leads to the death of the US dollar as the world’s reserve currency. There is no turning back. Trust has been lost and it will not return. Especially when one takes a critical look at the way the dollar system has been managed since the Great Financial Crisis. “They’re going to print trillions of dollars out of thin air on a whim and then have the nerve to tell us we can’t even access it? I’d be crazy to hitch my finance cart to that horse.”
By opening this Pandora’s box of questioning, many believe that Russia, China and other BRIC countries will begin to increase the volume of trade settled in their native currencies and on tracks that do not come from the EU. West. Visa, Mastercard and PayPal have banned tens of millions of Russians from accessing their means of payment. Rumor has it that there will be a tectonic shift to Unionpay in China, which was already facilitating almost half of all payments in Russia before last week. There is another rumor that Russia and China will launch gold-backed currencies or start requiring their commodities like oil, natural gas, and wheat to be purchased with gold.
Speaking of raw materials, they turn out to be very valuable in a world where trust is massively lost. It turns out that when you show distrust by using your monetary power to berate entire countries, those countries will respond by using their durable assets as leverage to send a message back to you. Russia is learning to trust others to hold your money, and the United States and Europe are learning to trust others to produce the products needed to run an economy. The West would be wise to take this lesson seriously and begin to become more independent and more energy and food secure so that it does not have to trust the countries with which it is engaged in a proxy war for said goods. .
I think it’s safe to say that things are pretty…messy right now. The world is in a very volatile time as it attempts to appropriately revalue confidence globally. Many will learn hard lessons. Yes, turning to Unionpay, settling trade in non-dollar currencies and bringing parities back to gold seems like a better alternative than being subject to the whims of the US government right now. However, doing these things doesn’t really solve the core problem of trust. You should always trust Unionpay. You should always trust that your trading counterpart will not mess up their currency. And you should always trust that the custodians of the gold you plan to back up are not re-mortgaging your gold by creating paper claims that exceed the amount of gold in the vaults. All of these solutions are temporary at best if your end goal is to lower the level of trust needed to be comfortable resuming serious and free trade with counterparts who have lost your trust.
The only solution that offers this kind of trust minimization is bitcoin, the peer-to-peer distributed money system that cannot be controlled by a single person, government, corporation, or coalition. The only way to ensure that your money is safe, that your relative piece of the overall pie is preserved over time, and that you can spend it when and how you want is to use bitcoin as money. It really is that simple.
The world is heading into a period of chaotic experimentation with alternatives to the dollar that will employ a number of different strategies that are bound to fail in the long run due to the level of trust needed to make them viable. In a world where you can’t trust anyone because trust has been eroded, the only viable option is free, open-source distributed software that anyone can join and validate on their own. Bitcoin has never been such an obvious solution as it is today.