Sovereign nations and their currencies have unavoidable life cycles.
Money evolves with power shifts that re-direct economic value and flow, as well as with technological innovation that improves a currency’s utility and interoperability.
Since the end of World War II, the US dollar has been the world’s de facto currency. But this reality is changing before our eyes.
The sun has begun to set on the US dollar and - if history is any indicator - this will likely be a 10-15 year transition.
The Current Reality of the US Dollar
Imagine investing in a digital asset where you don’t know the total supply or quantitatively defined deflation/inflation dynamics. Would you buy BTC without knowing how many Bitcoin exist, how many will exist, or the process for determining the total supply?
This is the reality of the US dollar. Information about the money supply is not accessible to US citizens.
Let’s look at other signals. How are the dollar’s vital signs?
> US dollar has lost 99% of purchasing power in last century
> Post-COVID, US banks can issue/print new money (as debt) without limit since reserve requirements have moved to zero
> 80% of all dollars to ever exist were printed in the last two years
> US has now crossed a threshold where they print money to service interest payments on international debt
> The US has reached it’s $31.4 trillion debt ceiling (again) and faces a looming decision about how to proceed
> The Pentagon failed its audit for the fifth year in a row and is unable to account for $9 trillion (the whole US economy is $15 trillion)
> The Bank Term Funding Program (March 2023) warmed-up the printers for another $4.4 trillion. In the future, banks who are underwater with their bonds (essentially, dollar futures) can swap those bonds to the Fed for fresh cash.
These are the facts. And they do not tell a story that communicates deep faith and trust in the dollar.
The Future of the US Dollar
There are only two possible futures for the US dollar. This crossroads hangs in the balance of legislative bodies and regulatory entities.
Some leaders and officials are open to a US CBDC (central bank digital currency). Without getting too into the details, a CBDC expresses the polar opposite values of crypto. A CBDC is the first and primary tool for a surveillance state. If the US chooses this route, they are rejecting the ethos of crypto at large. Regulation surrounding crypto would become much more strict in an effort to drive adoption of the CBDC.
While there are politicians who seek to further centralize and surveil financial systems, there are other elected leaders who imagine a different future. Their goal is to embrace creative ways to embed this economic renaissance into the national financial infrastructure. And there is no CBDC in this vision.
What if democratic governments released control of money just as they have released control of religion? What would become of the US dollar in that scenario?
Any currency is an expression of trust, and for the reasons listed above, many people feel sincerely violated.
Over the last decades, poor monetary policy and poor financial stewardship have poisoned the US dollar, and some day - like every currency of every empire throughout history - the US dollar will die.
What will the US hand to citizens at the moment that the decline of the US dollar is apparent to all? Will they hand us a CBDC and ask for heightened power and greater trust? Or could the US find a way to embrace the financial innovation of its own citizens and allow decentralized stablecoins like Silk to integrate with our economy?
What Can You Do Now?
At the beginning of this piece, we mentioned that money evolves based on two factors: power shifts and innovation that improves monetary function.
Network effects are a lagging indicator of the ideas that people find valuable. That means it's okay to be early as long as you are confident about where you are planting your flag in the ground.
If you want a future where non-dollar pegged, privacy-preserving, decentralized stablecoins are viable for daily transactability - and maybe even economic architecture - then lean into that now.
It’s easy to go with the flow of what is. But every river comes to a natural end.
Ask yourself, “What is money evolving to become?” and “What do I want to trust as currency?” Answer those questions honestly for yourself. If enough people do the same, we might just wake up in a future that reflects our values.
Information provided in this post is for general informational purposes only and does not constitute formal investment advice. Please read the full disclaimer at shadeprotocol.io/disclaimer before relying on any information herein.