The U.S. dollar is currently the reserve currency of the world, but it comes at the cost of trade imbalances and growing debt. Bitcoin, on the other hand, provides the world with a better alternative.
Does it benefit the United States to have the dollar as the world’s reserve currency? Although often assumed to be a net positive, it comes with a few drawbacks that can’t be ignored.
The Dollar’s Strange Position on the World Stage
The dollar’s place as the world’s reserve currency is a ‘dubious privilege,’ according to a recent report from CNBC. It has led to the dollar becoming so strong that it comes at the expense of trade balances. It has also been responsible for increasing external debt which has ballooned in the past decade.
Europeans have often joked of America’s ‘exorbitant privilege’ in being the world’s reserve currency. The ‘privilege’ is due to the fact that it affirms the United States’ power — while at the same time relying on America being able to pay its bills in dollars. This is underscored by the fact that America’s foreign liabilities have increased by $1 trillion in just the first half of 2019.
Bitcoin Provides an Alternative
Bitcoin’s long-term goal is to someday be the world’s reserve currency. Being a stateless asset with no political obligations — the dream makes sense. Given that the dollar’s supremacy on the world stage comes with such drawbacks, the idea does seem quite attractive.
Bitcoin being the world’s currency would also not come as an expense to U.S. dollars, either. With Bitcoin being easily convertible to fiat, it could very well strengthen global payment channels. The dollar would only grow to become more embedded in global finance as a result.
So, perhaps we should start considering alternatives to the dollar as the world’s reserve currency. The only people benefiting currently are the U.S. banks and financiers of these systems. For everyday people, a better world is possible with cryptocurrencies.
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