The social construct and consensus around the concept Money is very fascinating to me. The whys and hows of it. Over past couple of months, I have gained some exposure to the economics of it. But this specific write-up is a mixed bag and a random one trying to connect the dots.
This write-up is my perspective into the interconnection of Money<>Crytocurrency<>WorldWar<>WorldOrder.
Thanks to Ray Dalio, he recently published a concise version of his take on Changing World Orders. Pure gold content.
There are 2 types of Money:
Money in our economy purely works based on our faith and consensus. Cash is an asset to the one holding it, and a liability to the central bank at the same time. Fascinating isn't it?
When Ray Dalio was speaking about fiat currency and its design, It got me thinking about crypto-currencies. They are also:
This is an extremely simplified comparison (Very similar to Prof Gary’s Analysis at his MIT course 15.S12). But this does make a point, if there is no intrinsic value to a currency why maintain it manually? Why not adopt a crypto-currency. (okay, cryptocurrency might need some of the current monetary system to control the inflation, deflation etc.) And there are multiple reasons to this which is actually discussed at the MIT 15.S12 course. But that’s a story for another day, once I actually complete that course! But the point is, its very logical for human kind to shift to a blockchain based digital money. At the same time, they way Money is regulated by central banks for controlling Inflation, deflation, recession and multiple other economic phenomenons is mind boggling. And I am not sure, if such methods will be possible in a Cryptocurrency regulated country. (A lot of exploration left in this front!)
Okay let me deep dive into the Changing World Order now. According to Ray Dalio, The world order has its own cycle - very similar to macro-economics cycle. World-Order is basically the country which is considered as the most powerful (This happens mostly after a War). After World War2, in 1944 at Bretton Woods agreement, Dollar was established as the Worlds Leading Reserve Currency making US the top of the world order.
Some of the specifics, based on his life-long study and resource:
A world-order lasts for ~250 Years with 10-20 years of changing period.
Based on last 750-800 years of study, Ray Dalio has found this cycle to repeat with very similar circumstances:
Excessive Money Printing (Way of Quantitative Easing)
Rising Rival Power
And Ray dalio calls this the Big Cyle:
Ray Dalio’s study of Countries included mostly 8 Parameters:
Below is a simplified version of Average of above metrics.
Based on the Ray Dalio’s study of the Rise and Fall of nations.
But Its difficult to unsee the near-decade we might be entering of potential Changing world order.
Recently for Covid-19, USA feds printed almost ~$4 trillion dollars. Almost a fifth of ALL US dollars were created in 2020. China’s economic output and trade is almost same as USAs. Indication for Changing World Orders? Can’t unsee the uncanny pattern pointed out by Ray Dalio. Plus Russia’s invasion on Ukarine, where America and Russia/China are on opposite sides is no less than a Potential WorldWar3.
Tying up all the cues, Money is a social Construct very similar to Cryptocurrency. WorldWar and Economic crisis leading to changing World Order, where Global Medium of Exchange i.e The Reserve Currency will change. But Adoption of cryptocurrency, could help ease out impact on common people and potentially can lead to more sustainable economic system? Not sure about this last poing.
In the current world where, folks are still researching the impact of Quantitative easing on an economy- positive or negative. It looks like the monetary system has a lot of tech-debts attached to it! Its difficult to speculate the impact of full fledged acceptance of cryptocurrency.