Bane for U.S Dollar, Boom for Bitcoin
The effect of the US dollar being removed from its pedestal of the global reserve is immense; the consequences of such disruption are bound to lead to war or widespread anarchy.
A Broken System
Anyone who has dared to inspect the under workings of the American financial market usually uncovers enough disparaging information to justify immediately assuming the fetal position. For many, ignorance is bliss, the idea that your life savings can drastically lose value over night is unsettling. While this might be the case for a majority of people, those who have looked towards Bitcoin to redeem the global financial state of madness may actually be able to rejoice.
With little oversight in place for those that control the fate of the dollar, the Federal Reserve has acted irresponsibly. Since 2008 the Fed has increased the money supply by 3.1 trillion dollars. Injecting capital into the economy has long been considered a panacea for ailing economies despite modern economics disproving this concept. The Federal Reserve might retort that post WWII they were generating $2.41 of growth for every dollar they pumped. Today that growth figure has decreased to an extremely insignificant .03 cents. There might not be growth in our GDP but there is certainly growth in our debt and flourishing stock market.
In 2008 the federal reserve was leveraged at a staggering 22-1 ratio, consistent with the dismay presented thus far, today the Federal Reserve is leveraged at a whopping 77-1. Overall, the American Banking system has over 60 trillion dollars of debt on its books. Debt is growing 30x faster than our economy. This is easily overlooked though when the stock market is reaching new highs on a daily basis. In a blissful state of profit, many eager investors forget that stock market is designed to reflect the current state and value of the economy. One of Warren Buffet’s favorite indicators is the stock market capitalization to GDP ratio. Today that proclaimed ratio is over 150%, proving the overvalued prices of securities in an economy that has observed stagnant growth for the majority of this century.
A financial collapse is not unprecedented. In the last century we have seen 3 major collapses & reforms:1914, 1939 and 1971. A collapse does not equate to the end of the world, instead it forces the major powers of the world to sit down together and reform the system. This can be promising for Bitcoin. The advantages Bitcoin possess can support a globalized and fast paced world. The dollar progressively evolved into a predominately digital currency. People have not had paper bonds in safe deposits since the 1970s. The digital nature of the modern financial sphere along with potential for abuse recognized by granting a single country the reserve currency, might provide the confidence necessary to transition to a global cryptocurrency system.