Key facts:
Creddit Suisse analyst believes that the world economic order is falling with the war in Russia.
He estimates that if bitcoin survives the crisis, it could benefit from a new world order.
Analyst Zoltan Pozsar, from the renowned Swiss financial institution Creddit Suisse, published on March 7 a document anticipating that the war that Russia started against Ukraine will bring down the monetary system as we know it. In this context, he pointed out that bitcoin (BTC), the cryptocurrency with the largest market capitalization, could play an important role in this new era of money.
“After this war is over, ‘money’ will never be the same again and Bitcoin (if it still exists then) will likely benefit from all of this,” declared the financial analyst. He put it this way after mentioning that he believes the US dollar will be much weaker than it already is.
Pozsar maintains that war and economic crisis could strengthen bitcoin, if he manages to survive everything that is happening. Something that would not be strange for cryptocurrency, considering that it emerged after the 2008 financial crisis and was further strengthened during the 2020 crisis caused by the pandemic.
In addition, the analyst believes that in this context the renminbi, China’s currency that has the yuan as its unit, could strengthen. This is because it would be backed by commodities, which would be positive for Russia, given that it has its reserves in the Asian country.
“In wars, national currencies are in danger,” warns Pozsar
In a participation he made a week ago in the podcast of BloombergZoltan Pozsar said: “Wars tend to become momentous junctures for world currencies.” And with Russia losing access to its foreign exchange reserves, a message has been sent to all countries not to count on that money.
Therefore, he believes that global reserve managers will lose interest in holding dollars for safety, since they could withdraw them when they are most needed. This would encourage central banks to diversify away from the dollar and anchor their currencies in assets less susceptible to US or European governments, he argued.
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In this way, the situation would lead to the formation of a new world monetary order, where countries would be less interconnected through international bank accounts and reserves. These are not normal times, Zoltan Pozsar warned, so he recommends thinking nonlinearly to recognize and survive system changes.
This panorama of crisis is something that specialists from various parts of the world are visualizing. For example, the Argentine economist Natalia Motyl, the author of the book “The philosophy of Bitcoin” Álvaro D. María, and the analyst flix1, who, as reported by CriptoNoticias, have warned that there will be an economic recession, which could be the largest in the last forty years and arrive in 2023.
Bretton Woods III began, the new world economic model
Against this global economic backdrop, Pozsar warns: “We are witnessing the birth of Bretton Woods III, a new world (monetary) order centered on commodity-based currencies that is likely to weaken the Eurodollar system and also contribute to inflationary forces in the West”.
“Bretton Woods” is a term used for the agreements signed in 1944 between different countries to establish a new post-war world economic model. They serve to set commercial and financial rules between the most industrialized countries. Something similar to what happened in 2008 at the Washington Summit during a context of political and economic instability after the global financial crisis with banking and stock market crashes that gave rise to Bitcoin.
The financier maintains that we have moved from the Bretton Woods era backed by gold bullion to Bretton Woods II, which is backed by domestic money (Treasury Bonds with uncovered forfeiture risks). And now considers that the world passed Bretton Woods III, a stage backed by external money (gold bullion along with other raw materials and perhaps bitcoin).
“This crisis is unlike anything we have seen since President Nixon removed the US dollar from gold in 1971, the end of the era of commodity-based money,” he notes. These commodities are mostly seen as safe-haven commodities, a category to which bitcoin has been pegged due to its limited supply, so it makes sense that the cryptocurrency would also benefit from this new form of value.
Commodity crisis affects traditional money and would benefit Bitcoin
The financier’s document warns that a commodity crisis is brewing affecting money and the monetary system. He maintains that the price level of raw materials will condition the entire market. For example, gold and oil have been growing in valuewhich is why raw materials have been targeted by investors as safe haven assets against inflation and market fluctuations.
“Commodities are collateral, and collateral is money, and this crisis has to do with the growing attractiveness of foreign money over domestic money. Bretton Woods II was built on insider money and its foundations collapsed a week ago when the G7 seized Russia’s foreign exchange reserves,” he explains.
By this he means that, as bank money is confiscable and internal money is useless when there are international sanctions, investing in raw material found in other countries is a safer bet to safeguard value. In this sense, also could go to private money and anti-censorshiplike Bitcoin and cryptocurrencies, as safe-haven assets in the midst of this crisis of confidence due to war.