Jack Dorsey retires from Twitter to dedicate himself to other things. Apparently, from now on, he will concentrate all his efforts on strengthening the payment platform, Square. Twitter is a very influential place. But, financially, it is not the most profitable company in the world. A lot of noise, a lot of politics, a lot of discussions. However, not many sales. Everything seems to indicate that Dorsey has decided to follow the money. In fact, she is a huge Bitcoin enthusiast. He has even said that Bitcoin will replace the dollar. Let’s talk about the possible collapse of the dollar.
The “Californian ideology” is practically the official creed of Silicon Valley. Its influence, throughout the Internet, is evident. But he is not the only force in the game. Californian ideology? It is a mixture of several elements: Libertarian thinking, technological idolatry, and countercultural leanings. What we have is a free market fundamentalism where the state is replaced by technology. In this context, technology is always a force for good. That is, do not trust God, do not trust the Government, the banks, or others. But you can trust the code. It is the utopia of the algorithm.
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In this case, Bitcoin fits like a glove in the Californian ideology. The dollar, on the other hand, is a relic of the past. It is the antithesis. The dollar is not libertarian. He is progressive. The dollar is not a private entity. It is public. The dollar is analog and retrograde. It is not state-of-the-art technology. Ladies and Gentlemen, we have here a political division in the postmodern style. And here begins the debate of the libertarians. The dollar is “hyperinflation.” The Federal Reserve is not really a public body after all. The dollar is money out of nowhere. The ideal is the separation of the state and the economy.
Now, nobody wins a political argument. My intention here is not to enter one. Because nobody changes their political position by reading an opinion piece. However, it might be appropriate to remember that The dollar is not the reserve currency of the world by chance. In other words, his rivals to the throne don’t have it easy. On the other hand, it is perfectly possible to believe in Bitcoin as an investment and exchange asset without embarking on the fight against the dollar and its hegemony.
First of all, the United States is in control of the seas. And peace on the seas is vital to international trade. Second, the United States is a huge market. It is important as an exporter and as an importer. That implies dominance in world trade. In addition, the country serves as the headquarters of many multinational corporations. Finally, it has the most important financial market in the world. In other words, credit dominates the world. All of this occurs under the jurisdiction of your State. In other words, under US law. I mean taxes, courts, institutions.
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Why is international trade done in dollars? Let’s say Mexico exports oil to India. Why in dollars? Because for all participants it is simply better. Banks, creditors, suppliers, contractors, insurers, ships, personnel, etc. If your obligations are in dollars (credits, payments, taxes), it is simply easier to use the dollar as the main currency. Why do most countries have dollars in their reserves? Because they want access to the American financial market and because the United States is a very important trading partner.
Let’s talk about El Salvador for a moment. President Bukele speaks like a lion with a microphone in hand. And he certainly has political control of his country. He passed the Bitcoin law in three days, for example. And now Bitcoin is legal tender. We’ve all heard his strongman tone. He is always talking about the sovereignty of his country to do and undo. But, at the same time, it borrows abroad. He wants to sell Salvadoran bonds to international capitals. Unfortunately, international creditors require certain conditions to lend money. Bukele speaks “Californian ideology” but also wants old school honeys. Now, financing in dollars has a price.
The authorities have no problem with Bitcoin as a commodity. Just as they have no problem with gold as a commodity. After all, there are many goods in circulation. The problem lies in having a citizen currency without state control as the only legal tender. In other words, as a replacement for the dollar. That would mean monetary chaos. It would be to return to the middle of the XIX century. It is very difficult for libertarians to understand, however, that not all of us are libertarians. In addition, there is current economic thinking. And I am afraid that the libertarian ideology would go back to the mistakes of the past.
Now, the idea that Bitcoin, due to its increasing popularity, will sooner or later replace the dollar is somewhat naive. This is underestimating the political forces. One of two. The State will end up invading Bitcoin or Bitcoin will end up invading the State. But a total separation is not feasible. Suppose that Bitcoin is used by everyone. Well, the same users will ask the State for some kind of regulation. And the state will find a way to intervene in the economy.
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Finally, the dollar is the goose that lays the golden eggs of the United States. Nobody gives up so much power voluntarily. In fact, foreigners around the world trust the American system. It is no accident that people invest so much in the United States. To a large extent, it is a matter of legal certainty. I mean, it’s very easy to be a libertarian in California. But if you live in a country without legal security, there you do value a good judicial system. It is very easy to be an anarchist in a country where the laws are followed. But if you live in anarchy, order becomes an extremely precious commodity.
I do not know the future. And I certainly don’t know the outcome in this story. But nevertheless, I can’t find enough evidence to say that the dollar is collapsing due to the rise of Bitcoin. Obviously a lot of people are investing in Bitcoin. But that does not imply an eventual replacement of one hegemony by another. In any case, what you see is a fragmentation of everything. That is, a plurality of options. Multiple forms of payments. Multiple investment assets. And the dollar as a reference at the base.