A friend sent me an article today on various currency crises across recent decades. What stood out to me was not so much how each country got into them as how they got out of them.
How They Ended the Currency Crisis
Germany 1923 - Introduced a new currency, the rentenmark, backed by agricultural land.
Hungary 1946 - Implemented drastic tax reform, reclaimed gold assets taken abroad, and introduced a new currency, the forint, backed by gold reserves and world currencies.
Yugoslavia 1994 - Adopted a new currency, the "new dinar," backed by gold and hard currency reserves.
Zimbabwe 2008 - Abandoned its currency and adopted the US dollar and the South African rand as the main means of exchange.
(See the full BBC article here)
The Pattern
What we see in each of these cases is that when hyperinflation took root, the only way the countries managed to uproot it and restabilize their economy was by adopting a new currency.
In most cases this was by issuing a new state currency backed by hard assets like gold or productive land. People had lost faith in the currency of the nation, and they needed to be given a currency in which they did have faith.
That's the key idea: Faith in the value of the currency must be there for a currency to be stable
The Zimbabwe case was a slight exception in that they let citizens use a currency of 2 other countries, but the same idea was at play. It was simply that they considered those other currencies to be worthy of faith. They thought them to be backed by something.
But what could the US dollar be backed by?
It certainly isn't gold. Nor is our dollar pegged to our arable land. Hmmm. What could it be?
Let's see... There was Granada, Iraq, Afghanistan, Korea, Vietnam, Haiti, Panama.... I think I'm seeing a pattern. It's our military! We invade other countries sometimes.
And US annual military expenditures represent as much as the next 2 largest spenders, Russia and China, combined. That's adjusted for the value of the currencies each is spending in. So we are working to make sure that this military dominance is stable. That's how we stabilize the currency. We stabilize the threat we pose to the world.
Well that's one way to put global faith behind the value of a currency. Let's consider another possibility.
How About Crypto?
Another way we might instill faith in a currency is by seeing that it has intrinsic value in attributes of the currency itself.
Take bitcoin, for example. It is decentralized, so can't be corrupted (or shut down). It is publicly verifiable, so you don't need a third party to guarantee transactions and create trust. It is global, so not vulnerable to the policy decisions of any one country (what got all these other countries into the hyper-inflation in most cases).
Well I may be leaving a few virtues out, but I think that's plenty right there. What if the value of bitcoin doesn't require gold, land or a military threat behind it, yet still exists? What if people have a new "technological supremacy" reason to have faith in crypto?
This is what the financial pundits of the old guard can't understand.
Anyone who says bitcoin has no value, doesn't understand what gives a currency value in the first place!
Bitcoin is one example I give, but I could also use DASH and NANO as examples. They are even faster to transact with and with negligible fees. And then there's STEEM that has its own extra intrinsic values, as well as no fees and very fast transaction times.
None require a middleman, exorbitant fees, or days to send from one country to another.
What We Actually See
In currency crises since the rise of crypto, we see this thesis born out. I can't say how the governments will end the crises in Venezuela, Turkey or Iran, but I can say what the people are doing now. They are using BTC a great deal in Iran and Turkey, and Dash and Nano a great deal in Venezuela. That's for daily transactions, whenever they can.
As volatile as crypto is for those of us who have access to stable national currencies, crypto is an outright mountain of stability in comparison with currencies halving in value from one day to the next, for months at a time with no end in sight.
So my friends, don't let the naysayers plant the seeds of doubt in you. Prioritize your crypto acquisition, whether by buying, mining, accepting as payment for services, airdrops... whatever works. (You and I are earning currency just by interacting on this article, aren't we?)
I hope the national currencies of your nation and mine will continue to be stable enough for us to depend on for the rest of our lives. But if we let history teach us, it seems it is a good idea to hold other currencies that can provide greater stability should that not be the case. Crypto is one the government can't easily confiscate, the way they previously have gold.
Resteems always appreciated