Bretton Woods 2.0 is knocking on our door, and he’s not here to help


Just 100 years ago, at the turn of the 20th century, people could exchange dollars for gold at their local bank. While gold was too difficult to trade between people, banking institutions held gold and gave people money. It was during what was known as the gold standard. The value of each sovereign currency has been determined relative to a fixed amount of gold. However, in the decades to come, this standard quickly changed.

Towards the end of World War II, dozens of powerful people convened a meeting to discuss a new monetary deal intended to minimize the economic damage caused by the war. This meeting is named after the place where it took place: Bretton Woods, New Hampshire, United States.

It was a long-term plan with several parts that spanned decades. And Bretton Woods delegates decided that several fiat currencies would now be backed by the US dollar rather than gold itself. At first, the dollar was found to be stable enough to support the Bretton Woods agreement in 1944 – until not in decades to come. During the Vietnam War, President Richard Nixon called for more money. There was no more money in circulation. So he started printing.

In 1971, President Nixon ended the convertibility of the dollar into gold, which effectively ended the Bretton Woods agreement after nearly 30 years.

The abolition of the gold standard turned each country’s fiat currency into a floating exchange rate that was no longer fixed. Money was no longer measured by the dollar; now each currency was measured against all other currencies, with prices constantly changing, creating volatility in the forex market.

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Bitcoin as opposition

Today, one asset that fiat currencies are measured against is Bitcoin (BTC). As I mentioned in 2019, I think Bitcoin is the best currency investment in the sense of a healthy currency.

In some countries – like Brazil, Argentina, and Venezuela, to name a few – the price of Bitcoin is currently at an all-time high relative to their national fiat. Relatively speaking, this would equate to Bitcoin’s price already being around $ 20,000.

The problem is, Bitcoin isn’t ready to be a monetary system on its own. Most people who have Bitcoin simply hold it – they don’t sell it or use it as currency due to its potential to appreciate quickly, despite the downside risks.

Bretton Woods 2.0

Meanwhile, the International Monetary Fund is now calling for a second Bretton Woods era to be announced in 2020. This would establish the Special Drawing Right, or SDR, as the new reserve currency as opposed to the US dollar. The SDR is the most stable investment option for the IMF. Its value consists of the five major global fiat currencies as protection against volatile movements in the forex markets. The problem with the DTS approach is that it could worsen the economic situation even more than it does today.

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History has shown that when people have inflated power when it comes to money, they use it. Just look at President Nixon during the Vietnam War and the original Bretton Woods agreement in the mid-20th century. Worse yet, now almost all central banks print more money, which in turn leads to inflation as fiat currencies lose their purchasing power.

We cannot have one powerful entity with the power to imprint itself out of temporary problems, especially if that would put us in future debt that would be unmanageable. It is the opposite of democracy, where only a few people control the big monetary decisions that affect everyone. Cryptocurrencies like Bitcoin aim to solve this dilemma, thanks to their limited supply, among other favorable qualities inherent in blockchain technology.

Blockchain technology has a solution

Blockchain has raised our standards to expect decentralization in the institutions that are supposed to serve us. True decentralization is achieved when the hierarchy is broken. Everything becomes transparent and incentives are offered to move the system in the right direction.

Sogur, for example, is a startup tackling the ambitious challenge of creating a new monetary system based on its SGR cryptocurrency that models the SDR while leveraging blockchain and smart economic design advised by economists. world famous.

I like the idea of ​​currency baskets which are a much more reliable and stable medium of exchange. I don’t like the IMF having endless decision-making power over our global monetary system. Blockchain-based solutions are different – they have a foundation that is governed by an assembly and, for example, can give SGR holders a veto over every decision at any given time.

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Blockchain technology can combine the elements of decentralized governance in a classic corporate structure, in order to comply with international laws and anti-money laundering requirements, while using a binding curve based on smart contracts. to tame inflation and volatility, which remain two of the biggest problems with traditional fiat currencies that can be solved.

The views, thoughts and opinions expressed herein are the sole ones of the author and do not necessarily reflect or represent the views and opinions of TBEN.

Charlie shrem was one of the earliest Bitcoin entrepreneurs and has been a founding member of the Bitcoin Foundation since 2012, as vice president from 2012 to 2014. He is best known for having founded BitInstant in 2011, one of the first platforms to buy Bitcoin. Starting in 2014, he spent two years in prison for operating an unlicensed money transmission business. Since then, Shrem has served as COO of Decentral, which developed the Jaxx cryptocurrency wallet and founded Crypto.IQ. He currently hosts the podcast Untold Stories where he interviews leaders in the crypto industry.