Currencies, hard currencies anyway, are an asset class. Gold and gold warehouse receipts are one of the oldest and longest serving assets we know of. We have cold currency coinage that is more than 2700 years old. Paper money, likely first seen in China, is at least 1400 years old.
Money came to the US in 1971- a brief 47 years ago. Crypto is even younger, perhaps the chronological age of an older child of the end of the Gold Standard. This gets us to our point. It may be a gathering storm in leading fiat currencies that it is increasing the interest and value of Crypto? This would give a partial basis for a fundamental value of Crypto?
The gathering storm in non-Crypto fiat currencies is real. It is also real that all currency investments involve relative bets on ebbs and flows of the fortunes of various economies and authorities. The latest forecasts from the Congressional Budget Office, CBO, suggest that US debt will balloon under the tax and spending policies that are presently codified in law. The US is heading to run 4–5% of GDP deficits over the next 10 years. This will result in a debt level of at least 100% of GDP.
In dollar terms we should expect to double the $17Trillion held by the public in 2017 to $27Trillion by 2028.
The Eurozone has already experienced significant instability and economic contraction as government indebtedness has hurt economies and reduced public faith in institutions. In the EU, government debt has already reached 87% of GDP and is forecast to stay between 86%-89% of GDP through 2020.
These average numbers hide several states in far more dire circumstances. The world watched as Greece, Portugal, Spain and others struggled over recent years. Political and economic instability and loss of faith in public institutions followed. Non-Crypto asset options have lost a lot of their shine and perception of strength in this process.
All of this is to say, we have currencies that are not twinned to central banks and governments that are drowning in debt. Today’s dominant currencies have many strengths and much value. The historical cornerstone of this value is full faith and credit of the states that enjoy a monopoly on issuing fiat. Maybe loss of faith and declines in credit are driving some of the movement to Crypto currencies?
Maybe the rise of Crypto currencies has some fundamental economic support? This would recast part of the recent crazy run up, as a story about non-Crypto weakness as much as anything else.
