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Tuesday, September 21, 2021

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The dollar and Bitcoin standard

It was the best possible example of serendipity. That gringo word means to make decisions for one reason, but with very positive consequences for other reasons.

It all started half a century ago. In 1971, Richard Nixon put an end to the gold standard by creating the “dollar standard”, without knowing exactly what he was doing, or the positive scope of the measure for the United States. At that time, it was even feared that the nation would lose its status as the head of the West as a result of the economic collapse. I remember, as if it were today, the nervousness of John Connally, his Secretary of the Treasury and former Governor of Texas, breaking one of the sacred “Bretton Woods” agreements. It seemed like the world was falling apart.

Only nothing happened. At the beginning, it was not known what would happen, but, little by little, nations were comparing their currencies with the dollar and most of the transactions that were made in the world were denominated in the American currency, including trade non sancto of drug traffickers. This freed the debt capacity of the United States to limits then unsuspected, without diminishing faith in the American currency. It was not strictly a question of objective data, but of the trust, always subjective, that American society aroused.

What was really judged were the quality of the Armed Forces, the best 20 universities on the planet, research centers, inventiveness, imagination, comfort, superhighways, great American cinema, and, above all, the legal security of one of the largest countries in the world. Until the arrival of Donald Trump to power, with his lies about the “fraudulent elections”, denied by sixty Democratic and Republican judges, it did not seem that anything or anyone endangered the US leadership.

Faced with this powerful image, the other alternatives, incapable of approaching the US dollar in people’s perception, could do nothing: the Chinese yuan, the Russian ruble, the Japanese yen, the British pound sterling. Even the euro, signed by 19 nations, including Germany and France, engines of continental Europe, plus five smuggling countries (Montenegro, Vatican, San Marino, Andorra and Monte Carlo) were not substitutes for the dollar. Not even the Swiss franc served these purposes, perhaps because of the smallness of the example, a currency linked to perhaps the best-governed nation on the planet.

I make this story because some nations, like El Salvador, try to open a false door to the Bitcoin and to others cryptocurrencies as an alternative to dollarization and that is not possible today. In the first place, by the amount of remittances yearly. Almost 150 billion dollars leave the United States every year for Latin America and other latitudes (of which about six thousand go to El Salvador and constitute 16% of the national GDP). Second, due to the speculative nature of the Bitcoin It lends itself to scam. Right now there are some 32,000 people who feel ripped off and have collectively sued one of the operators.

The character managed a “Ponzi pyramid.” He had thousands of clients to whom he paid hefty interest, as long as fresh money came in. When his income failed, due to the volatility of the cryptocurrency, the scam was discovered. Carlo Ponzi was the Italian who perfected this type of fraud. He learned it from Baldomera Larra, the youngest daughter of Mariano José de Larra, the columnist for “Come back tomorrow,” the best-known chronicle in Spanish journalism about a cruel feature of the national bureaucracy.

It is true that today we are going through a period of inflation, but do not panic. It is exactly 5.37% per year. It is less than half the inflation that existed in the Carter and Reagan times, despite the fact that they did not have a pandemic. In any case, what exceeds 2% for a prolonged period is negative, but without going beyond that line. Japan has passed and its economy has not grown for a good number of years (although the percentage of unemployed is low: less than 4% of the workforce).

I go back to serendipity. The gold reserves, indeed, was a laudable solution to the value of the national currency, but it is still very rare that this mineral is extracted with great work from the mines, turned into shiny ingots, to end up in the vaults of the banks, which is the modern version of the mines. Perhaps the subjective perception of society is much safer. Convertibility into US dollars, as the British pound used to be, provides tremendous security that cannot be seen by Bitcoin or none of the cryptocurrencies. Nayib Bukele, the president of El Salvador, will fail in the endeavor.

Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: [email protected] Phone: +1 513-209-1700

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