🇺🇸🤔 How might #Bitcoin undermine whole nations or the dollar - as Hillary Clinton reportedly fears?
One way to understand this is through the lenses of fiscal and monetary capacity:
- Fiscal capacity refers to a state’s administrative and political ability to tax its population.
- Monetary capacity refers to the degree to which the state can get its citizens (& others) to hold the currency.
But fiscal and monetary capacity go hand in hand!
1) with strong fiscal capacity, you get greater credibility with regards to inflation targeting (since the tax base is what in the end backs fiat monetary policy)
2) greater credibility bolsters monetary capacity as a greater number of corporations and individuals will want to hold a currency expected to maintain its real value
3) this leads to greater fiscal capacity, as liquid financial markets facilitate taxation and administration...
And on and on it goes in a benign cycle...
Until it doesn't.
Today, Bitcoin, crypto currencies, China's yuan (CNY), the potential or even likely end of the Petrodollar regime, etc, is what might reverse the benign cycle which the US may have been in since the end of World War II.
If this is what's currently materializing, we should expect:
1) lesser monetary capacity (fewer peeps wanting to hold dollars)
2) undermining fiscal capacity (harder to "get things done" via taxes, greater budget deficits, etc)
3) prompting higher inflation expectations/fears
And on and on...?
Meme snatched from #[0]
