Has the US Dollar Failed?
While many like to proclaim that the death of the dollar is at hand, depending on your world view, there's ample evidence that perhaps we've already had a fairly ...
I wanna see if this guy wants to be on the camera. You want to be on camera? Two seconds of your time. Just say, ask me a cool, quick question and then you walk away. No? Okay, that's fine. Enjoy your day. Are you ready? What's up, party people? This is Chris Derose.
I'm the Community Director of the Counterparty Foundation, and today I have a question that is, well, it's something that a lot of people think of in the bitcoin movement but I don't think they think of it in the way that I think of it. So, let's get to the question. The question is, "Has the US dollar failed?" So, let's explore this topic. I see a lot in the Libertarian circles this notion of the decline of the dollar, the decline of America, and the conspiracies around it that typically come out and I think that they're actually kind of right in some ways, but not in the way that they think. I do think that the dollar has failed as a currency, and let's elaborate on that, because it's a little bit more nuanced than just that opinion. The dollar has failed as a currency in the simple sense that we just don't use it to conduct transactions.
When I go to the store and I go to the merchant and the amount is due, I take out my wallet and I take out a piece of plastic and I pay with that, and as a Millennial, that is a very common way to end your transactions. And I think that the numbers are something to the effect that it's greater than 50% of all transactions are using plastic now, and not only that but we're already starting to discuss what happens next. Things like Apple Pay might be on the table. Certainly I believe bitcoin's on the table, and you say to yourself "Well, what is the dollar at that point?" Now, the answer that is, I believe, the dollar's greatest success is that it is a wonderful unit of account, that it works magically and reliably as a way to denote value for goods, even if it's not the payment mechanism. So, I think that, in a lot of ways, we probably should reframe this in sort of a post-money context, because when you try to discuss money now, in the 21st century, it becomes clear that it's not a "currency world" anymore. We've decomposed the parts of value into unit of account, store value, and payment mechanism and other similar such notions.
And, in that context, the dollar serves really well as a unit of account. We see it being used as a unit of account because it's reliable. We see it used all over the world as a unit of account because it is reliable. You will see it used as a store value often, but even there, as Americans, we choose not to store our value in the dollar because we all know that the dollar inflates. Now again, in the Libertarian circles, they try to paint this as like a big scandal, a conspiracy from the Fed to take away your earnings or some such thing, but no. I think it's a really easy and obvious way to understand that the unit of account of the dollar is inflating is so that we invest in our economy, and we all do this.
We know that the dollar will be losing value, so we put it into things like the S&P 500 or we put it into real estate or we put it into bitcoin or whatever we choose. In that sense, the dollar hasn't failed in the sense that it is working as it is designed to grow the economy. But, again, we are doing this in a way that is not a payment mechanism at point of sale, and is not necessarily a means for the exchange of good and services. It's more of a framework with which to debate and discuss the actual value or the notion of some scarcity on any good. You know, this really gets into the Counterparty system of things because, in Counterparty, one of the things that we have that's probably the strongest thing that we have in Counterparty is the ability to define units of account. So, will the dollar be popular on the bitcoin blockchain? I think so.
I think what we're going to see is people transacting with Chase USDs or Wells Fargo USDs, things like that on top of bitcoin blockchain, because that unit of account works really well and we'll be seeing bitcoin displacing credit cards from the payment mechanism function. Where it gets kind of interesting in the Counterparty world is where we go from there. It's conceivable that, at some point, the dollar may not actually be a great unit of account. We may supersede it with better financial products. I don't know what those will be. It may some combination of energy futures, baskets of goods, all kinds of exotic options from there.
I know that Ven, for example, is a company that is exploring this option, V-E-N. They themselves are working on a unit of value that is, a unit of account, excuse me, that is an inflation-proof, or as close to an inflation-proof unit of account as there can get. Would it be successful at large market depths? I don't know, but I do know it's a great experiment and it's a very interesting company and there'll be more like it on top of the bitcoin blockchain. So, we shall see, when time goes on, what happens with the dollar. I think that this should be no way construed as thinking of the dollar is doomed or even bad. It's been functioning really damn well as a unit of account but in every other way, it's starting to fail.
So, yeah, it depends on how you're asking the question. If you see money as this all-encompassing collection of these attributes, then the dollar's failed, quite simply, because it is only succeeding as a unit of account. If you are seeing money in the sort of post-money world now, in its discreet units, then the dollar's a really good unit of account and sometimes not a bad store of value. Yeah, I think that's it. What do you think? Why don't you post your comments below? Tell me what is your favorite Libertarian conspiracy or perhaps what it is that I missed in the debates. And, if you have any questions, always tweet me on Twitter, @derosetech is my handle and subscribe to the channel if you liked what you see.
Later, party people.