Bitcoin "true believers" are an interesting group. They eagerly await the collapse of the US dollar and the other dirty fiat currencies
and a time when Bitcoin will be the true world currency (and they'll all get rich - simply a coincidence, of course), while ignoring the complete social collapse and anarchy (the bad kind) that would come from the unlikely event of this happening. But I'm not here to argue against Bitcoiners. I'm here to talk about this
article. Specifically, this part:
The U.S. Dollar is poised for a collapse of epic proportions, according to many experts. The "Great Recession" of 2008-2009 was just foreplay. A currency's "Global Reserve Currency" status lasts anywhere from 65-70 years, on average, and the U.S. Dollar has been "in office" for over 70 years now. The sphere of influence of the U.S. Military worldwide, with well over 100 nations occupied by military bases, is the main thing keeping the dollar in business right now. But times are changing.
Specifically specifically, this part:
A currency's "Global Reserve Currency" status lasts anywhere from 65-70 years, on average, and the U.S. Dollar has been "in office" for over 70 years now.
Most of the article is /BadEconomics
, but this part is so obviously bad history that I just have to take it on.
The dollar as a reserve currency.
For those who aren't in the know, a reserve currency is basically a currency that a country or large institutions within a country use for trade. For example, even though China and the United States have different currencies, the Chinese hold US dollars to trade with the United States, as the US dollar is the dominant world reserve currency.
The article claims that this has been true for seventy years. This is based on the idea
that the establishment of the Bretton Woods system in 1944 established the dollar as the world reserve currency. This is true, in a sense - the Bretton Woods system had all other currencies pegged to the US dollar. However, the US dollar was also pegged to gold
at $35/ounce. This effectively meant that every currency was pegged to gold. This held true until Nixon ended the gold standard
in 1971, basically ending the Bretton Woods system. So while it's technically true that the US dollar has been the dominant world reserve currency for seventy years, it's misleading - it's more accurate to say it's been that way for forty.
Seventy year limit to reserve status.
The first thing that we'd probably consider as a world reserve currency is the Greek drachma, which was widely used throughout Hellenistic kingdoms
from the time of Alexander the Great to their conquest by the Roman empire - about three hundred years
. This is far longer than the seventy years claimed by the article.
After that, you get in to the Roman denarius
, which lasted another four hundred and fifty years, approximately. Of course, this ignores the reserve currencies of the East, which included the tael
currency (closer to a measurement than what we'd consider a currency - I'll get to that), and punch-marked coins
of India, lasting much longer than seventy years.
The middle ages saw the Venetian ducat
, or the Byzantine solidus
. The Spanish real de a ocho
- piece of eight - was used from the time of the Spanish empire all the way through to
the start of the United States, and even beyond. It's what the United States dollar was based on, as well as many currencies in other countries (especially the peso
). The British Empire had (and still has) the pound sterling. All of these currencies lasted for at least
one hundred years. I don't know where they got this sixty five - seventy year number from, but it's not accurate (if anyone knows, please tell me).
Does it even matter?
The implication from this quote is that this supposed fact, that world currencies before the US dollar lasted for sixty five to seventy years, applies directly to the world today. As you may notice, we do not live in the same world we used to. Globalization has changed the world economy in huge ways, and you no longer need to be an empire to have the world currency (unless you're one of those people who think that America and the EU are empires,
because that's not really true
depends on what you consider as an empire - see this
What's more important is that most of these previous world currencies were tied to gold or silver (or made
of gold or silver). You can't draw parallels between a currency that is essentially a measurement of a precious metal and a currency whose value depends on what the holder values it at. If these currencies lasted for only seventy years (which, as we've established, they didn't), you can't take that number and apply it to the US dollar.
This is my first attempt at a bad history submission, so feel free to tell me what I got wrong, whether I should never post again, commit suicide, etc. I tried to leave my predictions about the future of the dollar as the world reserve currency because I'm not an expert in any sense of the word. Please don't get mad at me for criticizing Bitcoin, if you can hear me from the moon.
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