Fiat Currency’s End Is Fast Approaching

Times are changing. Fiat currencies are no longer reliable, and we cannot rely on them forever. But luckily we have a solution. Crypto is the answer when it comes to insecurities regarding market crashes and dips. We can trust crypto to protect our life savings in tough times like these.

Exchange rates change every day. Matter of fact, five minutes after reading this, chances are you will find a different reading. We can’t really know the value of fiat currencies because of their changing nature, and it’s sad that in this age, we don’t have standardized monetary measurements as other units like volume, distance and temperature have.

Why We Need A Universal Financial Standard

First of all, by financial standard, we mean something similar to the Celsius, Liters and Meters measurements. Bottom line, a trusted standardized unit that can be applied to comprehend value.

Now, there have been attempts to this financial standard. The closest perhaps being the Special Drawings Right (SDR) of 1969 by the International Monetary Fund. The measure is based on a basket of five currencies; the US dollar, the Japanese yen, the Euro, the Chinese renminbi and the British pound.

Why is the SDR an unfamiliar currency? It’s exclusive to IMF and nation members alone. The SDR is not universal, a primary characteristic of a financial standard, and that’s why we can use it as a currency.

What IMF does with the currency instead is: use it as leverage at their discretion, to supplement a country’s reserves to boost liquidity and save the country from an economic crisis.

Why Not The USD?

Now, a lack of a universal financial standard has been the case for a very long time, and that’s why we turned to the dollar as a unit of measurement. It’s one of the most stable currency and probably why it fits the role.

However, as good as the dollar can be, several issues emerge. You see, all currencies depreciate with time, and inflation is to blame. Currencies are not truly stable, including the USD which sometimes becomes vulnerable due to decisions made by the government that backs it.

For instance, in recent times, it’s estimated that the US economy has lost $7.8 billion attributed to trade policies made by President Trump. But that’s not even more concerning as the current debt accumulation in excess of $22 trillion. Over time, economist warns that the trust that the debt will be repaid will dwindle, and you know what this could mean?

Yes, a plunge in the value of the dollar. The ripple effect will be felt globally considering the reliance of the USD. This possibility has been foretold by Ray Dalio, a billionaire hedge fund manager who warns that the crisis could be worse than the last

Is Crypto The Solution?

The crypto idea is based on the hope that cryptocurrencies would replace the fiat as a store of value and exchange means. The concept is well laid out in Satoshi Nakamoto’s white paper. The whitepaper introduced the model of the independent and borderless currency that cryptocurrencies are built on today.

Judging by the concept of crypto, it should be the ideal unit of value. But it falls short of only one thing; its volatility which is worse than Fiat’s. However, it offers the best alternative, better than fiat. Meanwhile, the search still goes on, and the latest suggestion is the stable coin, a story for another day.