Death of the Dollar or Evolution of Capitalism?
It’s important to note how capitalism has changed during the reign of the dollar. Over the past 500 years, capitalism evolved from a predominantly mercantile system to a fully industrialized system, then to a globalized system of finance and production, which favors crony capitalism over free market competition.
however, the reign of the dollar has brought about something called “Finance Capitalism.” This flavor of capitalism differs from what other reserve currencies experienced over their 80 to 100-year reigns.
1) Finance capitalism tends to reward those with the highest levels of education, skills, and access to capital, leading to a concentration of wealth and income among a small group of individuals and institutions.
2) The complexity and interconnectedness of global financial markets have made it difficult to regulate and manage risk, leading to a series of financial bubbles and collapses, such as the 2008 global financial crisis.
3) Financial institutions focus on short-term gains rather than long-term investments in productive activities. This can lead to a lack of investment in research and development, infrastructure, and other long-term projects.
4) Finance capitalism enables investors to speculate on various assets and events, which can predominantly contribute to market volatility and instability.
5) The financial sector has significant political power and has often lobbied for deregulation, which can lead to risky and unethical practices in the marketplace and politics.
6) The financial sector can be highly opaque, with complex financial instruments and structures that make it difficult to understand and regulate.
7) Finance capitalism is often characterized by high levels of debt, which can be unsustainable and lead to financial crises.
over the last 500 years, most currencies have functioned as a marker for debt. During this time, capitalism evolved from being a predominantly mercantile system to a fully industrialized system, and then to a globalized system of finance and production.
Finance capitalism involves the government picking winners and losers in the marketplace by providing preferential treatment to specific businesses or individuals, rather than allowing the market to determine winners based on competition and innovation.
This flavor of capitalism distorts competition by giving certain businesses an unfair advantage over others, resulting in a less efficient allocation of resources and a suboptimal outcome for society.
leading to a concentration of wealth and power in the hands of a few individuals or groups, limiting opportunities for social mobility and perpetuating income inequality, which is in contrast to the idea of a free and open marketplace where anyone can compete and succeed based on their own merits.
The dollar has been stretched in so many different directions it can no longer effectively be a marker for debt in the marketplace. The US dollar’s status as the world’s reserve currency has allowed the US to borrow cheaply from other countries, which has enabled the US to consume more than it produces. This has contributed to a chronic trade deficit, as the US imports more goods and services than it exports.
Currencies should be A Unit of account, A Store of Value, A Medium of Exchange, Trusted, and Fungable.
Currencies should not be a means of control. When they are, they lose trust as a store of value and medium of exchange. Eventually, they are no longer considered a unit of account and fade into obscurity. While this transition may take years, the speed of change from one world reserve currency to another has varied depending on various factors, including geopolitical shifts, economic conditions, and alternatives’ relative stability and attractiveness.
Other players are lining up BRICS, and Bitcoin. Will we be living in a multicurrency world soon?