We live in a globalized world. We trade we each other from afar, communicate through global platforms, and interact with people from very different backgrounds.

Yet, we all use an obsolete, parochial, local currency.

While it’s understandable that nation-states hold on to power through the use of a national currency, it’s also true that in this day and age paying with pesos for something that you buy in China seems a bit backward.

Since we all speak a global language, it would make sense to have a global currency — a form of money that needs no exchange rate and is accepted worldwide at low transaction costs.

Some might argue that this is the role of the dollar but it doesn’t get even close.

The dollar was accepted by most countries as the global reserve currency upon the Bretton Woods agreement after WWII. Although its use as payment for international settlements is widespread, it lacks many characteristics that would make it global money.

I travel a lot and rarely do I find a merchant willing to accept the US dollar for goods or services without charging a steep penalty.

But even as a global reserve currency, the dollar is not neutral. It is an imposition that benefits the issuer by punishing everyone else.

They print dollars by pressing a button and you have to give them tangible assets in exchange. That’s a raw deal for most nations and the only reason we’ve put up with it for 70 years is coercion.

The Gold Standard

Before using fake money, the world agreed that a scarce commodity would be the best currency. Gold can’t be printed and requires real work and energy in order to bring it into existence.

From China to the middle east, from America to Europe, and from Africa to Japan gold was recognized as a global currency that needs no trust and allows no manipulation unlike those fiat monies issued by governments.

Unfortunately, in a global world, a currency that is difficult to transport, secure, and verify lacks the velocity to be a useful medium of exchange.

The Dollar

This is why the US government, in a sly way, decided unilaterally to make the dollar the global currency while maintaining the backing of gold to give it some credibility.

But that didn’t last.

In 1971, Richard Nixon decided to break the peg with the precious metal and the dollar became an infinite currency backed by nothing.

By that time, the US was already the most powerful empire in the world and everybody had to accept the imposition even though no one was thrilled about it.

The Cracks in the System

Since the US is in charge of this fiat system, they can decide how much money to issue, how much debt is acceptable, and whether some players should be allowed to even participate in the scheme.

Imagine that you decide to play along and decide not only to use the dollar for international settlements but also to keep reserves in the currency in the form of bonds and other debt instruments.

Now imagine that the country that is issuing the currency decides to kick you out of the system unilaterally forcing you to lose billions in the process.

Well, that’s what just happened to Russia and other countries when they were banned from the swift system.

Ever since and unsurprisingly, some nations have decided the dollar is no longer a reliable system.

Commodity Backed Currency

The Brics have been working for some time on a currency that is backed by real-world assets — oil, gold, commodities — in order to move away from a trust-based system they no longer trust.

In a way, this seems like a return to the gold standard and in principle, it could be the solution to the spiral of debt and inflation most nations incur under the fiat system.

However, there are many problems with this new arrangement that have a difficult solution.

Who is going to determine how much gold or other commodities these nations hold? Will reserves be audited by independent parties? What would be the exchange rate between gold and these newly minted currencies? Can we really trust these new emerging powers?

As we can see, there are many doubts about this new attempt to break the dollar hegemony and many think that the new currency could be corrupted and manipulated easily by its issuers.

Neutral Money

Since gold can’t be used for international trade in an increasingly globalized and digital world, we need something else.

Something that has instant verification, final settlement and that can be transferred at the speed of light.

Something that is scarce, immutable, and transparent.

Something that can be minted by anyone and yet, it remains scarce and hard to make.

In a word, something like gold — neutral, scarce, and decentralized — but with the advantages of a digital asset.

Bitcoin

Bitcoin has all the ingredients to be the perfect global money. It can be mined by anyone from anywhere as long as they are prepared to pay the price.

It has total transparency thanks to the immutable blockchain where all transactions get recorded publicly.

It can be sent at the speed of light at almost zero cost.

It provides instant verification and final settlement without the need for trust between parties.

It has no issuer, no headquarters, and no leader. Like gold, is a truly neutral and decentralized asset but unlike it, has an inelastic and predictable supply.

Conclusion

The dollar is a fake currency imposed by force and manipulated by the issuer.

Gold was the perfect monetary asset in a slow-moving world.

Bitcoin is the perfect global money in a world that needs an international currency that is trustless, digital, and neutral.

Nothing comes even close.

In a few decades, people will wonder how we settle for a system as corrupt and unfair as fiat money.

Producing money out of thin air, creating an infinite debt spiral, and then exporting inflation to those nations all over the world is just preposterous.

Who thought this was a good idea?

Anyway, after the fiat fiasco, it has become apparent that we need something better. Commodity-based money won’t cut it this time unless there is a proper way to ensure reserves.

Nothing that is issued by a government will ever be trusted outside its jurisdiction. We have two choices, go back to a slow world where gold is king or, move forward to a world of instant settlements, absolute digital scarcity and total transparency.

Make sure you are on the right side of history.

https://medium.com/zen-and-the-art-of-crypto/does-the-world-really-need-a-global-currency-7918b29996a0