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The Future of the World Monetary System

Last year, discussions about the future of the dollar received additional impetus, when many countries announced the transition to a de-dollarization policy. Therefore, it began to appear more and more predictions about what will happen to the currency of the future. The new assumption is cryptocurrency.
be-in-the-loop - The Future of the World Monetary System

Last year, discussions about the future of the dollar received additional impetus, when many countries announced the transition to a de-dollarization policy. Therefore, it began to appear more and more predictions about what will happen to the currency of the future. The new assumption is cryptocurrency.

Let’s understand firstly: how does a currency, that is, the currency of one country, turn into super currency — world money?

The current position of the US dollar – now, its cumulative share in reserves around the world is 60–65%, and in international payments and transactions – 40–45% (only according to SWIFT, in fact — up to 70%) – this is the result of evolution, which provided economic, political and geographical factors.

A powerful economy that produces almost everything — starting from food to aircraft and computers, the world’s largest consumer market, remoteness from theaters of war during both world wars, profitable participation in the post-war (twice in 30 years!), economic recovery of the Old World, an active political and military presence in all regions – these are the foundation that ensures the place of the dollar in the global economy.

be-in-the-loop - The Future of the World Monetary System

The refusal of the United States to exchange the dollar for gold in 1971 and the demonetization of gold through the IMF mechanism, which was promoted by them in 1976 — the official and global rejection of the gold standard — did not weaken the American currency at all. Quite the contrary – it strengthened by removing the competitor. From that moment, the dollar became the only currency with which it was possible to pay almost everywhere in the world, and after the collapse of the USSR and the socialist system, everywhere in the whole world.

Of course, the economic and political weight of the United States is declining, and, accordingly, the presence of the dollar in the world is decreasing. Moreover, its use by the US authorities as an instrument of political pressure increases the number of countries that would like to completely live without the dollar.

Can the Cryptocurrency Take the Place of the Dollar?

This is unlikely. The number of cryptocurrencies that can now be bought on trading exchanges with international access is already more than 2,000 and is constantly growing. And none of them is provided with anything, except for the willingness of investors to sell it more expensive than they bought. Ensuring is not only a gold reserve and reserve currency; it is also the quantity and quality of the economic products of the respective country. 

In other words, cryptocurrencies are monetary units without a foundation. It is impossible to calculate the cost of the things that you can neither estimate nor predict.

Also, the largest countries in the world — Russia, the USA, China, India, and the key countries of Europe, Asia, and Latin America — will never let go of one of the most important functions of the state – the organization and control of money circulation. And cryptocurrencies are private money.

be-in-the-loop - The Future of the World Monetary System

What will be the Monetary System of the Future?

It is impossible to give an accurate forecast since many factors influence the state of the financial system: economic, political, social, demographic. And now, all these factors have constantly growing dynamics.

But you can identify key trends and outline the contours of the future. The dollar will weaken in parallel with the decline in the role of the USA in the world and the increasing instability inside the country. And the smoother this process is, the better will be for everyone. At the same time, the strongest positions of the dollar will be in those regions that are most dependent on the United States.

be-in-the-loop - The Future of the World Monetary System

There is a more difficult situation with the euro. If the inevitable disintegration of the European Union will take place through the separation of a group of developed countries (Germany, France, Austria, Benelux countries, Italy, especially its northern part), then, if there are a number of conditions — getting rid of socio-economic ballast in the form of Eastern and Southern Europe, illegal migration and saving the euro as the single currency of the developed countries of the European Union – it will even strengthen. While maintaining the current state of affairs, the euro will weaken.

In Southeast Asia, there will be a struggle for economic domination between China, Japan and South Korea. At the same time, all three countries strongly depend on both the American sales market and the American financial system. Africa, the Middle East and much of Latin America will be in the zone of influence of foreign countries and their currencies — the dollar, the euro, and possibly the yuan.

With any succession of events, we can confidently say two things:

1. Strong currencies will be only those currencies that rely on a real economic product that is in demand in the market.

2. An inevitable period of regionalization, i.e., a situation, where the range of currencies used in each country will naturally be limited by its own currency and those currencies with which countries of issuers have the closest economic ties.

And only after the world economy stabilizes, global leaders (or leader) will appear in it and their currencies will take the place that today occupies the dollar.

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