Hi there everyone, TheRingMaster is back again with an exclusive crypto blog. Not everyone would agree with what I'm about to discuss but I believe most people on this platform would since Hive is a Blockchain based community.
Make America Great Again - this is a quote or statement most that follow politics or Donald Trump are very familiar with.
One thing presidential candidate, Donald Trump and perhaps his competitor current president Joe Biden agree on is the intent to keep the US Dollar as the strongest currency in the world. Everyone country is trying so hard to make their currency strong and powerful. This is no new thing because of the value that a country's strong currency brings.
But my question to you however is - Is it always a good thing for a country to have a strong currency?
Well to answer that question, I'll share briefly the advantages and disadvantages of having a strong traditional currency of a country and whether or not there's the possibility of striking a good balance.
The Good Side Of A Strong Dollar Or Traditional Currency
There's a huge positive side to having a strong traditional currency in a country and it's no wonder why many countries fight to make their currency so great. However it seems like a double edged sword.
Let's first of all, take a good look at the positive side of a strong dollar or strong traditional currency of a country.
Much cheaper Imports
The goods in a country are not always manufactured in the country and infact lots of the goods in America are imported from other countries. The interesting thing here is that since the countries Americans will import the goods from have a weaker currency compared to the dollar, the price of imported goods are lower. This makes it pretty cheap for Americans to purchase imported goods.
So in a way, a strong dollar is a blessing for American consumers who depend on foreign-made products which could include things like electronics, clothing and household items.
With this kind of an effect on the economy, retail giants like Walmart, Amazon and Costco will be able to charge low prices on imported goods and that's very good for managing inflation which we know America has quite a lot of at the moment.
Affordable Foreign Trips
One of the most interesting things that many people take advantage of is ownership and earning a stronger currency while living in a country with a relatively weaker currency.
If you live in a country where the US dollar is so much higher in value than the country's own currency, and get to earn in US dollars by perhaps online jobs or anything else, you start to have a great advantage. This is what lots of tourists take advantage of.
Most American tourists that travel abroad to nations with relatively weaker currency instantaneously look wealthy even if they're not so rich in America.
The reason is that a stronger dollar equates to increased purchasing power for Americans traveling abroad. So this lowers the costs of visiting Europe or Asia hence increasing tourism expenditure in those regions instead. It's an even funnier situation with American travelers visiting some African countries because the dollar is as high as 1 : 15. So 1 USD can equate to over 15 of that African country's currency.
Check Against Inflation
In a situation where there are so many imported products that are cheap, a strong US dollar can help fight against domestic inflation rates. Lower import prices may also counterbalance other inflationary pressures within the economy.
Inflation and debt is one of the biggest issues facing the United States of America right now. They have been borrowing for quite a while and the interesting part is that they borrow in US dollars. Every time they keep doing that, it lowers the value of the currency but since it's still recognized as the main global trading currency, they can keep a balance. This is why there's so much of a need to keep the dollar strong to battle inflation.
Disadvantages of a Strong Dollar
About 4 years ago, perhaps when Donald Trump was in his last years of being president before current president Joe Biden took over, Trump and many others were well aware of the downside of too strong a US dollar.
Check out this video
There was a talk on whether we need to devalue the US dollar a little bit because of the primary disadvantage it brought to the manufacturers. However, a slightly less aggressive decision Trump wanted to make was to lower interest rates instead of directly devaluing the dollar.
Like I said earlier on, a strong dollar or traditional currency is a typical double edged sword, the advantages are great but there's a huge downside as well.
Exports Decline
One sector that gets hit all the time due to a stronger dollar is the manufacturing industry in America. Since the value of the dollar is much higher than the currency value of countries that American manufacturers would export their goods to, making a profit becomes pretty difficult for them.
A strong dollar makes the foreign buyers pay more for American goods. If you thought an iPhone has gotten expensive, try buying the same thing in African countries.
Let me give you a great example - Take a country like Ghana or Nigeria, their currency at the moment is over 15 times lower than the US dollar.
However Apple and Google products are shipped to those countries all the time. If an iPhone would cost a $1000 dollars to purchase in America, that would be to a Ghanaian or Nigerian like spending $15,000 on a mobile phone if they earn their money in their own currency. How many Americans would spend $15K on the new iPhone, well that seems to be what lots of these folks in other nations are going through.
This downside can result in reduced exports that are very detrimental to enterprises that depend on selling merchandise abroad.
Lower Domestic Expenditure
Now a stronger dollar doesn't hurt only the manufacturers but also the entire nation and thus the people. If the US dollar is stronger that means it has a pretty high purchasing Power outside of the US in other countries with relatively lower currency value. This in a way motivates lots of people in America to travel abroad to spend their cash.
However, if the US citizens spend more money outside the country because of favorable rates of exchange, it in a direct way lessens their expenditure within the country thus having impact on local businesses and services. It affects the government income tax as well.
Tourism Drops
The funny thing is while many Americans would travel abroad or to other nations to spend their strong US dollar, less people will travel to America to spend their relatively weaker local currency in America.
What seems to be happening is that with the value of the USD rising, America is getting costlier as a destination for foreign tourists. As a consequence to this, cities and touristic businesses that depend on tourist money suffer losses from declining revenues in this sector.
So to answer the question of today's blog, having a stronger dollar is both good and bad for the country.
The Need for Cryptocurrency and Blockchain Technology
Cryptocurrency is on the rise and many industries have already adopted it. Companies like Microsoft and Tesla already allow payments or transactions through crypto to some degree.
I believe that if we could have a wider adoption of cryptocurrency in both America and the rest of the world, this problem can be managed more effectively.
I will touch on a few reasons why I think crypto and blockchain can help manage the double edged nature of a strong dollar or traditional currency of any nation.
Decentralization
America and its dollar has so much power in the global market and that's because America owns the dollar that the world has accepted as the standard and global trading currency. This gives the American government the power to manipulate the market prices in their favor. That has become a reason why so many other nations have decided to ditch or dump the dollar. Iraq about a year ago banned the US dollar for the Iraqi.
The good thing about cryptocurrencies is that they do not depend on central banks like traditional ones do. This makes crypto decentralized by nature. The decentralization can help mitigate the influence of one state’s economic policies in the global market. So we will be able to better ensure stability as well as balance.
Lower Transaction Costs
The whole world is very much connected and also for import and export to happen, there's a need for cross-border transactions. All this requires lots of currency conversion and high transactions fees.
The cross-border transactions can easily be made cheaper through the use of cryptocurrencies. Crypto transactions are very secured and the process is almost instantaneous with little to sometimes not fee required.
So by using crypto worldwide for trading and cross-border transactions, there would be no need for currency conversion and transaction fees will also be reduced which would make international trade easier and way less expensive.
Global Reach
The use of crypto for transactions worldwide will make it an all inclusive situation. You might be living in advanced or modern societies but believe it or not there are still places where banks do not operate as actively as they do in the big cities.
However crypto goes worldwide and transactions can be made to anyone anywhere as long as there's access to the Internet to make a connection between two computers or smart phones.
Cryptocurrencies can serve as a perfect avenue for financial services to reach unbanked populations around the globe. This inclusiveness will help promote economic activity in those areas where there is no access to banking services.
Safeguarding Against Volatility and Bridging the Gap
You might ask about the volatility downside of crypto and you're right, crypto is highly volatile so very much unstable. However, stablecoins such as US-backed coins with the popular one being the USDT offer a much stable crypto currency option. I store most of my money in USDT at the moment.
Can we completely replace traditional Currencies with crypto in all this?
Though many find it hard to believe that traditional currencies can be completely replaced by cryptocurrencies, a hybrid approach could be the better option I think.
I personally do not believe that there may come a time where crypto is the only currency used by all countries of the world and my reason is that both cryptocurrency and traditional cash have their advantages. We would need both to have a great thriving economy.
People would also mention crypto fraud and how fraudsters could take advantage of it when crypto is used worldwide for international trade but there are secured systems in a Blockchain and I believe it's going to get more secured as it gets adopted by these powerful nations.
Also the Smart contracts feature in Blockchain allow automated transactions when specific conditions are met through blockchain technology. These streamline international trading, limit fraud, and ensure less delay in payments.
The future of finance I believe is in the perfect blend between crypto and traditional cash. Where cash fails, crypto would help out and vice versa.
Thank you so much for taking the time to read, as always I would love to get you feedback on the blog topic. There's so much potential for Cryptocurrency and Blockchain technology and thus Web 3.0
Let's Make Web 3.0 Great ✊