on the crypto
For thousands of years, there has been a dominant international currency. Until August 15, 1971, when President Nixon closed the gold window and revoked the right of foreign governments to redeem their dollar assets for gold, the dominant currencies had been gold or silver coins. or banknotes or accounts convertible into gold or silver.
Today we sail on sight
Historically, these dominant currencies came and went. The United States dollar supplanted the British pound, which had been the dominant currency in the world in the 19th century, at the beginning of the First World War.
Even though the gold had been thrown overboard by Nixon, a global monetary system still existed: the "Bretton Woods system". That system had been developed by a stellar cast, including John Maynard Keynes, in Bretton Woods, New Hampshire, for three short weeks in July 1944. Under the Bretton Woods regime, the values of the major world currencies were fixed, or at least they couldn't vary too much.
Once gold was removed from the basket, however, the Bretton Woods system broke and was abandoned in 1973. Since then, the world has traveled blindly.
The collapse of the markets
So what happened after the fateful events of 1971 and 1973? It was a bit like crossing Niagara Falls in a barrel. Above the falls, the waters are calm. Below, the waters are turbulent. The transition is brutal. Indeed, the shift from a system of "fixed" exchange rates that were linked, albeit loosely, with gold to a non-floating exchange rate system was brutal.
The value of the dollar plummeted and so did the Dow Jones which plummeted 45%. The dollar collapsed against the mighty Swiss franc, losing 65,5% of its value between January 1971 and October 1978.
In short, the 70s turned into an economic nightmare for the United States. Thanks to the decade of the seventies, the word “stagflation” entered our lexicon. Furthermore, after the tumultuous transition, navigation was not so easy. The frequency and severity of major international financial crises have increased.
A collapse for everyone
Remember the Mexican tequila crisis of the mid-90s, the Asian financial crisis and the rout of the Russian ruble? Since then, banking crises have also visited us more frequently. Who can forget the savings and loan crisis of the 80s or the Lehman Brothers fiasco of 2008?
Things have not gone well for American consumers and savers either. A 1971 dollar, after five decades of inflation, would be worth only 15 cents today.
It's time to replace our non-system with a new Bretton Woods. Bretton Woods was the result of a perfect storm: some big problems; a set of ideas that has attracted a consensus; a group of trained and capable participants; and a leader, namely the United States, who was ready to lead the world.
Today, I don't see such a perfect storm on the horizon. Furthermore, a collapse of the rapidly expanding cryptocurrency ecosystem may be enough to signal the arrival of such a storm.
