Deniz Kılınç / Istanbul (HNA) – The major global economies have been engaged in a currency war since 2010 and now a new phase of “money wars” has begun involving non-government cryptocurrencies and government money, according to James Rickards, the renowned economist and author, who also believes that the only serious threat to the U.S. dollar might be a World CBDC.
Rickards was among the key speakers of the fifth Turkish Capital Markets Summit held by the Turkish Capital Markets Association (TCMA). Following the physical opening speeches, the summit continued online. The summit offered 35 panels and 23 training programs under four main agendas: “Economy and Financial Markets Post-Coronavirus”, “Sustainability”, “Digital Transformation and Future Scenarios” and “Next Generation Entrepreneurship and Capital”.
Rickards, who has published books such as Currency Wars, The New Great Depression, The Road To Ruin and Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, by the Turkey-based publishing house Scala Publishing, also writes articles for the Financial Times, Evening Standard, The Telegraph, New York Times and Washington Post. In his opening speech at the Turkish Capital Markets Congress, Rickards mentioned the ongoing currency wars between developed countries and also talked about cryptocurrencies, which come forward as the new competition of governments in recent years.
In his remarks, Rickards pointed out how the major global economies have been engaged in a currency war involving repeated competitive devaluations of currencies in order to export deflation, import inflation, promote exports, and create export-related jobs. “This is a zero-to-negative sum game that leads inevitably to trade wars, which began in 2018, that also accomplish nothing unless accompanied by internal infrastructure investment and growth-oriented policies,” he said. “Now a new phase called “money wars” has begun involving non-government cryptocurrencies competing with government money.”
Bitcoin has no utility
Parallel to the surging cryptocurrency adaptation, Rickards underlined how the governments are also embracing new sovereign money called Central Bank Digital Currencies (CBDCs). He believes CBDCs are not new currencies, but rather “new payment channels for existing currencies”.
“The development of CBDCs masks an elite agenda of elimination of cash, confiscation of wealth through negative interest rates (difficult in a system that allows cash), and the perfection of a totalitarian surveillance state,” he continues. “Crypto-currencies, which are different from CBDCs, are also gaining wide acceptance. These cannot be analyzed generically but must be sorted based on criteria such as anonymity, issuance cap, governance, authorized systems, transaction speed, and liquidity.”
Although Rickards believes some cryptocurrencies have better use cases and are safer and more pragmatic than others, he doesn’t see any utility in Bitcoin. “[Because] it is deflationary by design and therefore unsuitable for use in bond markets, which is the key to reserve currency status. Bitcoin mining contributes materially to global CO2 emissions through electricity consumption. Bitcoin prices are also highly manipulated through the use of fraudulent stable coins such as Tether.
The only rival to the dollar might be World CBDC
The only serious rival to the U.S. dollar as a global reserve currency might be an authorized blockchain maintained by the International Monetary Fund, IMF, using Special Drawing Rights, SDRs, as a World CBDC, according to Rickards. He also noted how this challenge to the dollar would be more potent if the SDR-World CBDC were linked to gold.
“Gold is the classic form of money having performed that role in various ways for over 3,000 years. The issue for gold is whether it can still perform these roles in an environment of digital money. Gold’s future also points to the possibility of a new kind of monetary trilemma in which any form of money (gold, crypto-currencies, CBDCs, or SDRs) can perhaps only perform two out of three of the classic three-part definition on money – unit of account, store of value and medium of exchange – but not all three because of the comparative advantage of rival forms of money in one or more of those functions.
“Beyond that, crypto-currencies and CBDCs must be considered in light of McLuhan’s thesis that the medium is the message. Factors such as price, use case, design features, etc. are not the message, they are content, a medium-in-a-medium, and mostly irrelevant. The message is that crypto-currencies are an extension of human reach and scale and a cool medium requiring extensive involvement by the user to comprehend a mosaic of information.
“The digital currency medium has a global impact that can be a force for unification but can also be a source of obsessive behavior, greed, dysfunction, and social disruption. In that sense, crypto-currencies can undermine confidence in existing currency systems even without displacing them. Their existence has a hallucinogenic effect. Every affected party sees what he wants to see, and no two participants see the effects in quite the same way.”