Traditionally the world’s strongest power has the world’s reserve currency. From Nick Giambruno at internationalman.com:
International Man: In a recent interview, we discussed the battle for monetary supremacy between fiat, bitcoin, and gold—but in the geopolitical sense, the country with the “best” money ultimately imposes its dominance on others.
Today, the US dollar is still the global reserve currency, but the US fiscal and monetary policy now resembles the destructive money printing of every other country.
What does this mean for the US and its financial chokehold on the rest of the world?
Nick Giambruno: First, I think it’s important to clarify something.
You often hear the media, politicians, and financial analysts toss around the word trillion without appreciating what it really means.
A trillion is an enormous, almost incomprehensible number.
The human mind has trouble wrapping itself around something so big. So let me try to put it into perspective.
One million seconds ago was about 11 days ago.
One billion seconds ago was 1989.
One trillion seconds ago was 30,000 BC.
So that’s how big a trillion is.
When politicians carelessly spend and print money in the trillions, you know you’re in dangerous territory. That’s precisely what is happening in the US right now.
After the onset of the COVID hysteria, the US government adopted a policy of printing money to finance growing multi-trillion-dollar deficits forever. This is what Modern Monetary Theory (MMT) is all about, and it’s already here.
Likewise, the COVID stimulus checks are the beginnings of a Universal Basic Income (UBI). There is no way any politician will ever be able to roll them back, much less stop them entirely. Who is going to beat Santa Claus in an election?
By embracing MMT and a UBI, the US has embarked on the most dangerous economic experiment since communism.
Eventually, all this spending financed by money printing will destroy the currency.
This is precisely the same problem that has trapped Argentina in a perpetual cycle of hyperinflation and economic collapse. And even then, it’s politically impossible to get rid of the freebies, so the process starts up again.
Here’s the bottom line. With MMT and a UBI, the US has gone beyond the monetary point of no return.
That’s why individuals, companies, and foreign governments will inevitably look to alternatives to the US dollar and financial system. As they do, a large part of the US government’s geopolitical leverage will evaporate.