The End of U.S. Hegemony
Statements that the Western world unjustly controls or consumes the majority of the world’s wealth overlook the production side of the argument. For example, with a population of 317 million—or about 4.5% of the total world population of 7 billion—the United States of America produces 22% of all world output, the world’s largest market share. It is not entirely unfair to own a large share of wealth if you produce it, too.
But wealth production requires access to, or control of, natural resources, minerals, fossil fuels, and cheap labor. Being the largest economy on the planet affords you the best army to secure such resources. A nation’s military might and economic wealth are interlinked, strengthened by this positive feedback loop. Stronger armies secure access to more resources. Access to more resources produces greater wealth to afford stronger armies.
The Problem of Long-Term Wealth Storage
How do nations, corporations, and individual billionaires store their wealth in the long term while minimizing the risk of devaluation? The wealthy look to land, scarce minerals, housing projects, luxury Manhattan apartments, or even war, but, ultimately, they store their wealth in currencies they deem stable, namely those of wealth producing nations such as the United States of America.
The currencies backed by stable-growing economies are the safest bet to store wealth. Unsurprisingly the world reserve currency is presently the U.S. dollar, followed by the Euro as a distant second. There are others, too—currencies of nations that produce large shares of global wealth that are expected to continue to do so, such as the upcoming Chinese Yuan.
When Hungarian-American billionaire George Soros was interviewed at a 2013 Davos event and asked whether he keeps his savings in Euro, he denied. While Soros likely stores much of his wealth in the U.S. dollar, others openly attack the dollar’s status. The anti-dollar movement is growing stronger. Li Chang wrote for Xinhua, China’s official news outlet,
Being the world’s number one world reserve currency offers its backers an unfair advantage in global purchasing and negotiation power. But to me, the blind belief in a single world reserve seems even more worrisome. Rather than decentralizing the risk of collapse, the world reserve currency is centralized and centered on the assumption that the United States can continue to enforce its military domination of the world.
In this sense, money is a threat of violence disguised as status quo.
From National Currencies to People’s Currencies
Historically, no currency has been the world reserve currency for more than give or take a century and neither will the U.S. dollar. This won’t mean the end of the USA. Even if the European Union or China surpass the USA in terms of productivity and global market share, the U.S. productivity per capita may nonetheless increase. But as other entities come to afford bigger armies, it will mean the end of U.S. military hegemony.
This brings me to the world of cryptocurrencies like Bitcoin, the digital gold for the internet age. Why should the free people of the world continue to accept a centralized, government-controlled currency as the go-to denomination of wealth?
It would be a revolutionary idea to introduce a People’s Currency, not restricted by national borders or centralized authority. In recent years, we have already seen million-dollar investments in Bitcoin. The idea of a decentralized and cryptographically secured reserve currency, supported and controlled by democratic peoples, seems a possible next step in the evolution of finance.