Contributed by Joe Montero
Digital currencies are here and set to explode into the scene. To most people they are still something confined to the internet and not real. Digital currencies are very real though, and will increasingly intrude into our lives.
The context for this goes back to the liberalisation of finance and financial flows in many countries and the global economy, merging from a series of its own factors, not part of the present subject. Liberalisation almost freed the banks and other lenders from government regulation, and this enabled them to strengthen cartel behaviour. They were left free to collude on ways that boosted their collective interests.
Rather than creating competition, liberalisation reduced it.
Banks and other lender were free to invest wherever they liked, without consideration of the negative impacts their decisions might have on society. They were freed to foster the creation of speculative bubbles and create debt at will.
A long-held dream of the banks had long been to be able to create their own money. Liberalisation, together with the of online payments meant they could do this. The ideas that money is created by governments running the printing presses still holds. It no longer does in practice. most money is now created and put into circulation by banks though online transactions.
A consequence is that a ballooning supply of money meant its devaluation. This is the reason everything costs so much more than it did a few years ago. Along with it came the fall in interest rates. Today they are close to zero, and in some countries, they have hit the negative.
Low interest rates might be good for buyers. They are bad news for investors, banks, and other financial institutions, who profit from interest.
In countries like Australia, the American banking system dominates. Don’t be fooled by the mirage big four domestic banks. They are now largely American owned. Liberalisation let in global heavies like Citibank and HSBC to set roots in Australia and take an important slice of business banking.
International trade means interacting with a global payments system in the firm hand of the International Monetary Fund, the World Bank, and the Bank for International Settlements. The United States is the dominating factor in all of them.
Control of global finance under one power is prompting some governments to move towards the use of digital currencies. China, the world’s second biggest economy has already taken this step and may soon expand its use to break out of the existing global monopoly finance cartel. Other countries are contemplating making a similar move. It this respect, the rise of digital currencies can have a democratic aspect, so long as it is regulated by governments and managed through central banking authorities.
The alternative would be the banks and other private lenders will be even less regulated and effectively left free to issue their own digital currencies. They will use them to create new short-term profitable bubbles, aid a massive level of tax avoidance. Is it any wonder that the banks are talking about making the move?
Something is holding back the rise of digital currencies. This is that they threaten to undermine the American economy and topple the United Sates Dollar as the major global medium of exchange. The shock could pull down the global economy if not managed adequately.
This contradiction between the rise of digital currencies and the American economic interests, is only holding back the rise of digital alternatives for now. Any relative weakening of the global strength will encourage a shift, and the use of economic war through the imposition of sanctions could work to hurry this along.
Countries not seeing an advantage in remaining locked into the global monopoly finance cartel have an interest in breaking away. A breakaway will most likely take the form of a trading block involving China, Russia, the more than 130 countries involved in the Belt and Road Initiative, and those suffering under Washington imposed economic. sanctions, like Iran, Syria, Cuba, Venezuela, and Nicaragua.
A move on this scale will transform the global economy.
Ibn addition, there is talk within the European Union about making its own move and the World Economic Forum uses Special Drawing Rights in the form of digital currency, for aid to nations in trouble.
Digital currency will eventually become the norm. The question is whether it will do so in a form that benefits society or become another millstone.
Australia will have to decide on where our future lies.
Will we trade with digital currency and return to a higher level of regulation, or will we continue to be tied to unregulated American institutions and dollar?