. . .
K “Thirty years ago tomorrow, The Economist magazine uploaded an article titled ‘Get Ready for the Phoenix’ with a cover proclaiming ‘Get ready for a world currency’ and featuring a rising Phoenix.”
J “Get ready. The Phoenix, the Bancor, the S.D.R., the Universal Monetary Unit, the Bobcoin, the Something Else is likely to replace the PetroDollar in the near future. Stay tuned.”
. . .
K “On a simple level, ‘cryptocurrencies’, etc. are digital and gold, etc. is analog. Blockchain technology underlying ‘cryptocurrencies’ is likely to be supplanted by a fast, fair, sustainable, scalable, guaranteed Byzantine fault tolerant consensus digital technology using gossip protocols and virtual votes such as Hashgraph. And Hashgraph is likely to be supplanted by even more advanced and sophisticated technologies.”
J “That’s what everyone is saying. Get ready. Stay tuned.”
. . .
[See a related and more recent article “One world, one money” in The Economist magazine dated September 24, 1998. First published as a five-part series punctuated with reprints of paintings by Gustave Courbet, “Bitcoin Doesn’t Exist – The Full Story” written by “Dr. D” for “The Automatic Earth” project/site provides some perspective on the phenomenon known as ‘cryptocurrencies’. The comments to the series and the comments on the sites that reprint the series provide some robust ideas and opinions. Much is happening quickly.]
[See the e-commentary titled “‘Bitcoin’, ‘Ethereum’ . . . ‘Blockchain Technology’ Say What? (July 3, 2017)”, “The Mandibles, FRNs, SDRs, IMF, G20, WTD! (September 5, 2016)” and “USA + FRN/PD — > IMF + SDR — > NDB + UMU? The “Universal Monetary Unit” . . . Coming To a Planet Near You (January 2, 2017)”.]
Bumper stickers of the week:
Want to improve your love life? Change your handle to “Blockchain”
. . .
The Economist, January 9, 1988, Vol. 306, pages 9-10; Cover: “Get ready for a world currency”; Title of the article: “Get Ready for the Phoenix”
THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.
. . .
At the beginning of 1988 this appears an outlandish prediction. Proposals for eventual monetary union proliferated five and ten years ago, but they hardly envisaged the setbacks of 1987. The governments of the big economies tried to move an inch or two towards a more managed system of exchange rates – a logical preliminary, it might seem, to radical monetary reform. For lack of co-operation in their underlying economic policies they bungled it horribly, and provoked the rise in interest rates that brought on the stock market crash of October. These events have chastened exchange-rate reformers. The market crash taught them that the pretence of policy co-operation can be worse than nothing, and that until real co-operation is feasible (i.e., until governments surrender some economic sovereignty) further attempts to peg currencies will flounder.
. . .
The new world economy
The biggest change in the world economy since the early 1970’s is that flows of money have replaced trade in goods as the force that drives exchange rates. As a result of the relentless integration of the world’s financial markets, differences in national economic policies can disturb interest rates (or expectations of future interest rates) only slightly, yet still call forth huge transfers of financial assets from one country to another. These transfers swamp the flow of trade revenues in their effect on the demand and supply for different currencies, and hence in their effect on exchange rates. As telecommunications technology continues to advance, these transactions will be cheaper and faster still. With unco-ordinated economic policies, currencies can get only more volatile.
. . .
In all these ways national economic boundaries are slowly dissolving. As the trend continues, the appeal of a currency union across at least the main industrial countries will seem irresistible to everybody except foreign-exchange traders and governments. In the phoenix zone, economic adjustment to shifts in relative prices would happen smoothly and automatically, rather as it does today between different regions within large economies (a brief on pages 74-75 explains how.) The absence of all currency risk would spur trade, investment and employment.
. . .
The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate – and hence, within narrow margins, each national inflation rate – would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.
. . .
As the next century approaches, the natural forces that are pushing the world towards economic integration will offer governments a broad choice. They can go with the flow, or they can build barricades. Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.
. . .
The alternative – to preserve policymaking autonomy – would involve a new proliferation of truly draconian controls on trade and capital flows. This course offers governments a splendid time. They could manage exchange-rate movements, deploy monetary and fiscal policy without inhibition, and tackle the resulting bursts of inflation with prices and incomes polices. It is a growth-crippling prospect. Pencil in the phoenix for around 2018, and welcome it when it comes.
Dragon < Eagle > Bruin; Dragon + Bruin > Eagle (April 19, 2021)
Posted in AIIB, China, CIPS, Cryptocurrency, Currency, NATO, Petrodollar, Pushitzer Prize In Commentary, Russia, Sanctions, SWIFT on April 19, 2021 by e-commentary.org[The announcement of the 2021 recipient of the Pushitzer Prize in Commentary is postponed from today to June 7, 2021.]
. . .
J “China won; China one; U.S. none; U.S. done. With each passing day, the Chinese military is outflanking the bloated pork barrel project that is the U.S. military without touching off a round or launching a missile. CIPS is swiftly circuiting and circumventing SWIFT. National currencies, gold, silver and cryptos are supplanting the PetroDollar. Technology that was lifted is now legally acquired. Critical resources that were purloined are now purchased.”
K “For decades, the Eagle kept the Dragon and the Bruin in their corners. Now the Dragon and the Bruin have found common ground to overcome their considerable differences, challenge their common enemy and push the Eagle into a corner it does not even recognize. The vote in 2015 on the AIIB was the most revealing of the ultimate winner and the ultimate loser.”
. . .
K “The U.S. is desperate to start and expand more wars and is looking to fight Russia or use proxies to fight Russia. The Bruin is going to be a bear.”
J “I am as uneasy about Russia as I am about China, but the U.S. should not go knocking on the Russian door and starting a fight on the Russian door step. When I walked the streets in different cities, I was struck by the steely resolve of the people that is totally absent in the U.S.”
. . .
K “Our goose is cooked.”
J “We are dead ducks.”
. . .
[See the e-commentary on China at “Seeing 2020: Panda + Bruin > Eagle. Oh, And Happy Chinese New Year! (January 27, 2020)”, “China: “The Silent Takeover” Overtakes Silently. Oh, And Happy Chinese New Year! (February 4, 2019)”, “The China-Russia Affair: Advancing The Petro-Yuan; Dictating The Future (March 26, 2018)”, “AIIB: China: 1; U.S.A.: 0? (April 6, 2015)”, “The Silent Takeover (May 23, 2011)”, “The Odd Couple – China & The U. of S.A. (January 12, 2009)” and “China, The 800(0) Lb. Panda (November 20, 2006)”.]
[See the e-commentary on Russia in particular on the inefficacy of sanctions at “Sanctions: Stupid, Absurd, Futile? Oh, And Happy Armistice Day / Remembrance Day / Veterans Day! (November 11, 2019)” and “Russian Interference; Russian Collusion (February 26, 2018)”.]
[See the e-commentary on the threat to world peace posed by NATO at “NATOExit? NATOExeunt? (July 4, 2016)”.]
Bumper sticker of the week:
Dragon < Eagle > Bruin; Dragon + Bruin > Eagle
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