A society cannot thrive if wealth accumulation is possible by impoverishing those seeking productive means. This is the flaw in modern fiat currencies. Conversely, sound money ensures prosperity only through value creation, directing societal efforts towards production, cooperation, capital formation, and trade.
20th-century government-issued currencies facilitated interventionist and controlling policies, contributing to the rise of totalitarian and authoritarian regimes. In contrast, a hard money-based economy naturally limits a government’s ability to fund economically unproductive endeavors. Without the incentive to continually finance such activities, these policies would likely be abandoned relatively quickly.
In the 21st century, the concept of government currency expanded and emerged as reserve currency, beginning to apply in international transactions. Through this, Western civilization has developed by cheaply exploiting the labor of developing countries through reserve currencies backed by military power, technological benefits, or energy resources like oil, accumulating wealth and widening the gap. As a result, the development of developing countries, represented by regions such as the Middle East, Southeast Asia, and Africa, has lagged significantly behind. While there are various reasons for the gap between developed and developing countries besides reserve currencies, it’s clear that the existence of reserve currencies, which can be printed as needed and arbitrarily devalue labor, has had a significant influence on the current world order.
However, as expectations grow that Bitcoin might replace gold’s position as hard currency, which gold uniquely held in world economic history, I feel that cracks are slowly forming in the current economic system. Intuitively, it seems like signs of a big change.
Recently, following El Salvador, The fact was revealed that Bhutan also holds a significant amount of Bitcoin (in fact, Bhutan holds more than El Salvador). The fact that countries considered developing nations, or groups consisting of a small number of individuals, which were thought to be far behind developed countries and not a threat to the world order, now hold large amounts of Bitcoin - what changes will this bring to the world order in 5 or 10 years?
They have no incentive to provide cheap labor as they do now, nor to sell their natural resources cheaply. They can buy weapons and talented individuals. (Of course, this is idealistic talk. Many developing countries are quite corrupted.) In this situation, how long can Western countries without labor force or natural resources (except for the U.S., of course) endure? Moreover, unlike gold, Bitcoin can be held intangibly and it’s difficult to identify owners, so there’s no realistic way to prevent using it using traditional financial methods like asset confiscation or transaction suspension.
The value of sound money lies in the difficulty for any particular group to devalue labor and value as they wish. Personally, I hold quite amount of assets considered as hard currency, including gold and Bitcoin, and I’m increasing this portion. If the current U.S. bet on debt monetarism for the future succeeds (which personally feels like a fairly rational bet), we might experience an explosion of labor power due to machines. To possess this explosive labor power, I feel we need to move assets from continuously devaluing fiat money to hard currency. Regardless of the success of the U.S. bet, fiat money is currently heading down an irreversible path.