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The markets are closed today, but I wanted to take the time to wish you a happy and prosperous Fourth of July.
This is one of my favorite holidays.
It always has been.
You see, I’m more than a techno-optimist.
I’m an American optimist.
Like Ronald Reagan, I believe that — at our best — we can be that “shining city upon a hill.”
And I believe the world is a better place when the U.S. dollar is the dominant global currency.
But are the days of dollar hegemony behind us?
The Star-Spangled Stablecoin
This brings me to a conversation I had with Addison Wiggin last week.
If you don’t know Addison, he’s the 3-time New York Times best-selling author of Demise of the Dollar, Financial Reckoning Day and Empire of Debt.
He also wrote and edited The Little Book of the Shrinking Dollar in the John Wiley & Sons series.
He’s a publisher and a filmmaker…
And he’s the Founding Director of the Grey Swan Investment Fraternity.
Addison graciously asked me to join him last week to discuss a host of topics, and I wanted to share a portion of that conversation with you now…
Because I believe it will resonate with you on this Independence Day.
(Editor’s note: The following transcript has been edited for brevity and clarity.)
Addison asked: “Do you think that the stable coins are going to be white labeled?”
I replied:
I am not sure.
I mean, I don’t see Walmart and JPMorgan [white labeling a stablecoin.] These companies are kind of like tech dinosaurs, so they’ll probably have to work with an issuer like Circle to issue a stablecoin.
But the bigger thing is just the USDC (stabelcoin) and what it means from a macro perspective, because I don’t want to lose dollar hegemony…
Which means that I want the dollar to maintain its reserve currency status.
And I think anyone who doesn’t agree with me doesn’t know what type of cycle that could tip off if the dollar wasn’t a reserve currency.
Because we’ve been the reserve currencies since World War II, essentially since Bretton Woods.
And there have been things that have happened since then that have maintained dollar hegemony…
Just to [explain] really quick, [during the] Bretton Woods [system the] dollar was tied to gold.
Addison, you’re the expert, so I’m just going to summarize this for everyone.
Basically, in 1971, Nixon did away with the gold standard and the convertibility to gold.
However, soon after that, the petrodollar came around. So the U.S. was buying oil from the Middle East in 1974 — I think that’s when PEC was established — and the Middle East would take those dollars and basically repatriate them back to the United States.
They would buy treasuries with them [and that] was keeping U.S. treasuries low.
And you could also say that China joining the WTO and our trade imbalances with Japan throughout the eighties allowed us to have this dollar hegemony and keep interest rates lower than they should have been.
So if we have a cycle where the rest of the world isn’t always reaching for dollars…
The best thing about being an American citizen, I believe, is when the s— is hitting the fan anywhere else, people buy dollars in treasuries.
This pushes our interest rates down, and we recover quicker than everybody else when there’s financial chaos.
And that is our exorbitant privilege.
But we might be losing it, right?
I mean, there’s a chance that us being more isolationist — which I don’t think is the case — we could be losing dollar hegemony.
But as I wrote about six months ago, [this stablecoin] crypto dollar [allows] anyone in the world that has a smartphone and Wi-Fi connection to own a U.S. dollar.
And in my travels, I always say that Andrew Jackson is the most famous human being in the world. Because you can go to rural Pakistan and they will take a $20 bill. They all know who he is.
They might not give you the best currency exchange for your $20 bill, and sometimes you don’t get change at all.
But the reason why I think dollar hegemony is going to stay is because of the USDC.
Let’s say you live in a South American country where defaulting on bonds is like a national pastime, and printing money is a national pastime. And all of a sudden you want to own something else than your fiat currency.
Well, you can own bitcoin. That’s great.
You might own gold, but it’s hard to store.
But now you can own a USDC.
A U.S. dollar [in stablecoin form.]
And I believe it’s going to [help us] maintain dollar reserve currency.
Do you agree with me?
Or do you think the dollar’s days as the king of currency are over?
Let me know in an email to dailydisruptor@banyanhill.com.
And don’t worry… we won’t reveal your full name in the event we publish a response.
From our entire team here at the Daily Disruptor, have a wonderful 4th!
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
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