Economies around the world are struggling with rising national debts and the threat of inflation. However, the digital dollar could be a lifesaver for the United States economy.
In an extensive tweet on August 3, the author stated that the largest export of the United States is its currency – the dollar. It is currently the largest money network in the world, used for 40-50% of global trade and international credit settlements.
Che says that thanks to its reserve currency status, the US can “get away from murder” for its monetary policy and bring its debt to catastrophic levels. World trade is expanding every year, as is the demand for the dollar, so providing a medium of exchange and storage of value for the entire planet is a lucrative monopoly.
Digital dollar to the rescue?
Currently, the United States continues to accumulate debt to other countries. This is especially true of China, which sells its exports and accepts Treasury bonds and IOUs as payment. Trade deficits accumulated over time will be equal to the US external debt.
Che suggested a dollar-as-a-service (DaaS) export mechanism where America would benefit from intangible income from issuing money. Since this would not be recorded in the books of account, the trade deficits minus the “DaaS” would be equal to the external debt.
“If the United States wants to cut its debt, it must increase the value of its dollar and service exports. But how? By making the USD money network larger and easier to use.”
The dollar becomes less and less available outside the US, but a central bank’s digital currency could change all that. Broadcasting cryptocurrency around the world via big tech companies, sharing APIs so anyone can build on them, and making the network interoperable with major public blockchains could be beneficial for the Federal Reserve.
Stablecoins like USDT and USDC have already highlighted the demand for digital dollars, so the official one could be a way to “arm” the currency. The United States is already afraid that China is doing exactly the same.
Just talk, little action
While China has already launched several pilots for its central bank digital currency, the United States still lags far behind, constantly stumbling over its own regulatory hurdles and pushing on stablecoins.
On July 30, Federal Reserve Governor Lael Brainard outlined a number of reasons why the issuance and development of the US digital dollar urgently needed to be addressed. He said the Aspen Institute Economic Strategy Group:
“The dollar is very dominant in international payments, and if other major jurisdictions in the world have digital currency, a CBDC deal, and the US doesn’t have one, then I just can’t imagine it. It just doesn’t sound like a sustainable future to me.”
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