The dynamism of geopolitics, along with domestic policies, have begun to situate globalized markets in a precariously delicate position. Global economics builds itself on the ebbs-and-flows of world events. Over the past decade alone, the world has burdened a housing-market deflation, debt crisis, seizing of countries, several economic crashes, and devastatingly disastrous failure of a nuclear power plant. Any single catastrophic event would strain globalized markets—collectively, they pave the way for some colossal complications. One significant fear that arose from the past decade is the plausible worldwide collapse—or dynamic shifting—of currency values. In other words: there is a fear that our dollar will be worthless. We have seen significant shifts in USD value over the past few years, especially in comparison to other nations’ currencies. With the rising turmoil in world events and economics, is there an alternative monetary source? Could Bitcoin and cryptocurrency save us?
The World was in a compromised position after the deflation of the American housing market in 2008. The deflation spread out from the U.S. borders into the global markets. The expanse was due to the interwoven relationship of globalized markets, along with clever selling units of restructured debt to foreign investors—both countries and individual firms. Essentially, U.S. bankers attempted to outsource its housing debt. During the recession, major corporations were bailed-out since they were “too big to fail.” In reality, all the bail-outs did was postpone a natural collapse—and needed restructuring and reforming. Cedric Muhammad, a writer for Forbes magazine, illuminates how U.S. monetary policy missteps have almost assured the collapse of the USD within the next decade. There have been contributing factors outside of the U.S. to a global financial failure.
The World watched the debilitating collapse of Greek government’s debt crisis in 2014. The crisis itself began in 2007-08 but came to fruition seven years later. Thankfully, members of the European Union—namely, Chancellor Merkel from Germany—voiced their intent to help bail out the failing Eurozone state. Even though Germany is one of Greece’s largest debt collectors, provided the finances to restructure the Greek government, Greece continued to collapse. While the Greek debt crisis is what was publicized more on American media sources, the crisis was a single facet in a more massive Eurozone debt crisis. The European debt crisis has been ongoing for well over a decade with Portugal, Ireland, Spain, and Cypress faulting on debts or unable to repay their national debts. While each nation has their reasons for failing to pay off their debts, they are all built upon decisions from the Union, and it’s trading policies. The Euro is worth more than the dollar, but will they be able to maintain their value with continual failing states, revolutions in neighboring countries, and failure to reduce their debts?
China has been making significant expansions into different markets over the past few decades. However, the country is known more for its production of inexpensive items. However, recently China has been making bold steps into different markets and expanding their economic reach. The outstretching of China’s commerce and investment is due to a 2015 Economic restricting plan: “Made in China 2025.” Premier Li Keqiang planned to move China out from low-value labor production to high-end manufacturing—tools, machines, robotics, aerospace, and information technology. Along with “Made in China” is the “One Belt, One Road” (OBOR) initiative that focuses on improving the infrastructure for China’s future investments—the hope is to enhance productivity and lower costs for trade. Essentially, China is setting itself up to become a dominant player in the world market—where the UK, the U.S., and Germany sit.
Even with the significant growth and diversification of assets, It is no secret that China is offsetting their expected depression and crash by outsourcing their debt to other markets. The government and government-controlled companies are inflating other markets by investing in foreign currency. In the U.S. alone, there was a significant increase to the USD from the Chinese Renminbi. David Woo—the head of Global interest rates, foreign exchange, and emerging market research for Bank of America—said in an interview that China was one of the primary sources for the appreciation of the USD in 2015. Currently, China has $1.32 trillion invested in the U.S. Treasury. Globally, Chinese companies increased their investments in other countries by 44% in the last year. In Europe, China has been a primary investor over the past decade by purchasing several ports, companies, and high-tech assembly plants. A few significant acquisitions include Kuka (a German-based robotic company), the Piraeus port (Greece’s biggest port), and 51% of Lotus. With the breadth of China’s economic reach and influence, several nation’s and industries will be devastated if China goes into a depression.
While the expansion of China’s trading reach is slowing from increased regulations and restrictions within the U.S. and the EU, they are still setting up the infrastructure for rapid development and possible market control. However, historically every country that goes through an industrial revolution eventually dives into an economic depression. China powered through their industrial revolution during the time of Chairman Mao and quickly moved on to the production of their products—primarily through automotive and technological companies. Even though China is making advances to become a manufacturing hub for high-end products, they have to deal with the deflation and depression season for their markets. The Globalized markets need to prepare for a dynamic shift, whether the markets collapse from the precarious ‘house-of-cards’ being set up by geopolitics and debt crises, or if China attempts a partial equilibrium power move by pulling their investments from the USD to cause a crash.
Where do Bitcoin and cryptocurrency fit in the discussion of global economics? Bitcoin resides outside of the traditional world commerce—currently, every country has some central banking group to regulate and control their currency. Bitcoin is decentralized and under no regulatory control of any central banking group or nation. Bitcoin’s value is not dependent on a gold standard nor the ebbs-and-flows of a world politics—it resides outside of the system. While Bitcoin is still vulnerable to theft—through the acquisition of personal codes—it can be sturdier than most currencies on the global market. The uncertain influencing factors on Bitcoin are quite intimidating to a significant part of the population. However, other countries have expressed their interest in a globalized currency—namely, Bitcoin. Other countries, like Venezuela and Estonia, have even expressed interest in creating their cryptocurrency—mainly to streamline trade. Regardless of someone’s reservations, Bitcoin does present an appealing alternative to a nationalized currency. Bitcoin shows promise of saving us from global economic collapse— notably, with the new generations of Blockchain technology to help secure the vulnerabilities with Cryptocurrency.