The industrial revolutions have had a direct impact/consequences on the social, economic, political, and health of the human race globally, but for the purpose of this discourse, I will be much concerned about its influence on the monetary system of finance.
The first industrial revolution started from 1760 to 1830 and mostly confined to Britain which gave rise to the use of steam engines and railways with London as the financial powerhouse with the use of pounds sterling as a medium of exchange for trade.
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The pounds sterling was replaced with the gold-backed dollar between 1925 and 1944 during the second industrial revolution in the 19th Century with the advent of electricity, crude oil, and gas, and centred around Britain, Europe, North America, and Japan. This era witnessed the establishment of Bretton Woods Institution (World Bank and International Monetary Fund) and the Bank of International Settlement in 1930 until the paper dollar replaced the gold-backed dollar in 1971 by Former President Richard Nixon after the beginning of the third revolution in 1969.
The third revolution brought forth the rise of electronics, telecommunications, and of course computers. This opened the doors to space expeditions, research, and biotechnology. This period has witnessed a massive increase in global trade and gross domestic product(GDP) with the rise in economic power blocs like the BRICS nations (Brazil, Russia, India, China, and South Africa), Gulf Cooperation Council comprising of Saudi Arabia, Qatar, United Arab Emirate, Bahrain, Kuwait and Oman and the ASEAN nations like Singapore, Malaysia, Indonesia, and the Philippines.
The Societe for Worldwide Interbank Financial Telecommunications (SWIFT) was formed in 1974 to facilitate cross-border payments and messages amongst financial institutions. With the United States as the global watchdog and its currency, the Dollar serving as a hegemonic reserve currency accounting for about sixty-two percent of world trade(see The Dollar: The world’s reserve currency www.cfr.org) it has had its downside effect of recording successive trade deficits in the nation’s balance of trade with mounting debt profile also known as the Triffin Dilemma Effect.
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The sustainability of this debt-based monetary economy was been put on trial after the global financial crises in the year 2008 leading to the fall of confidence in the Dollar, (a repeat of the loss of confidence in the Pounds Sterling and Gold.
Dollar backed Standard) and a 27.63% increase in the price of Gold from $872.37 in 2008 to $973.66 in 2009 as investors look for safe havens to preserve wealth. The current price of gold per ounce as of March 10 2021 is $1,717.60. With the advent of the Internet built upon the third (digital)industrial revolution, emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, quantum computing, nanotechnology, and blockchain technology evolved.
A blockchain is also known as Distributed Ledger Technology (DLT) is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat. It’s essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. The first pioneer digital asset (cryptocurrency) created on this blockchain is bitcoin. It is designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computer database.
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A major pitfall of bitcoin is that it has remained anonymous under the name Satoshi Nakamoto whose face has remained unknown, without an office or company behind it, its mined majorly in China and uses up large amounts of electricity which makes it not environmentally friendly and sustainable with no utility or use case but as a source of storage of value and mainly used for speculation.
Other private digital assets, stablecoins, global stable coins by private firms, and recently Central Bank Digital Currency (CBDC) by countries has evolved for cross border payments which are faster(it takes four to five seconds to receive value and settlement), cheaper in terms of transaction cost($0.0004 per transaction), negligible energy consumption, very scalable(perform 1,500 transactions per second) and interoperable(works across the network).
There is no doubt that distributed ledger technology is disruptive and bound to replace the obsolete and antiquated SWIFT system which has been in operation for over forty-six (46) years and capable of unlocking over twenty-seven trillion united states dollars in nostro-vostro accounts that are lying dormant in global financial institutions according to McKinsey & Company Report.
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It’s important to highlight the major policy and legal changes in the ecosystem of the global financial system by the leading superpowers and trading nations to aid the smooth transition to this new international monetary system otherwise known as The Global Reset.
The Office of the Comptroller of the Currency (OCC) in the United States of America formerly chaired by Brian Brooks made a press release on the 22nd of July 2020 captioned ‘Federally Chartered Banks and Thrifts May Provide Custody Services For Crypto Assets’. Another press release was made on the 4th of January 2021 captioned ‘Federally Chartered Banks and Thrifts May Participate in Independent Node Verification Networks and Use Stablecoins for Payment Activities.
The Federal Reserve Chairman Jerome Powell said the central Bank is looking closely at the prospect of issuing a “digital dollar.” The US Treasury Secretary Janet Yellen has also signaled interest in backing digital dollar research. US Lawmakers introduce Bill to clarify Crypto Regulation.
Christine Largade the President of the European Central Bank gave a speech, ’Payments in a digital world” at the Deutsche Bundesbank online conference on banking and payments on the 10th of September 2020 clearly supporting the use of digital assets for payments. The European Central Bank will decide in April whether to move ahead with a preparatory work to launch the digital euro.
The Bank of England will issue e-pounds within two years as cash dies out. The President of the International Monetary Fund (IMF) Mrs Kristalina Georgieva has called for a NEW BRETTON WOODS MOMENT.
China has launched its digital yuan officially dubbed Digital Currency Electronic Payment(DCEP)in the Shenzehen region as a second trial of electronic cash.
SWIFT made an announcement on the 20th of April 2016 about a collaboration with Accenture to explore blockchain technology with the use of Distributed Ledger technology in financial services. This collaboration and upgrade /migration resulted to the change of messaging language from ISO 15022 to ISO20022.
The London Interbank Offer Rate known as LIBOR enters its final chapter on the 31st of December 2021 for a full switch to Secured Overnight Offer Financing Rate SOFR.
It’s my strong opinion that we are days and months away from this transition through mass adoption by Central Banks and financial institutions to a new monetary system with the use of digital assets with a gradual and complete phase-out of fiat currency. There is a narrative being built in the media to support and reinforce this transition, that fiat currencies transmit coronavirus, the pandemic that has brought global trade to a halt.
Just as the internet transformed our lives forever and made most post offices redundant, made access to telecommunication services cheaper, faster and more efficient, so also will this new technology lead to the growth of fintech companies acquiring traditional commercial banks and a redundancy in most bureau de change houses and people hawking foreign exchange or forex on the streets of most cities in Nigeria.
As our sovereignty is at stake here, I look forward to seeing the Central Bank of Nigeria issuing further directives and regulatory clarity to navigate the nation’s economy under this new global financial order.
Article was written by Anitche Ndudim Rowland
Trade flourished in the Golden age (18th to 19th century) because hard money – gold – was used to facilitate trade. People could embark on long term projects and inventions knowing that the money held its value. Even conflicts were limited because you could not print gold to pay for war – only with paper substitutes and gold redemption suspension was that possible.
All fiat currencies have failed because humans will always abuse that power to inflate the currency supply. This causes the loss in purchasing power of these currencies and enables state to wage ever ending wars because they can just print more money. Coupled with the fact that banks keep fractional reserves and lend out money that doesn’t exist. This is one of the main reasons why bitcoin was created.
With that much power, would you think the current system won’t want to hunt and kill Bitcoin’s creator? Look at how Julian Assange is being treated for exposing the truth about war crimes committed by the US and co. Bitcoin will succeed because it is decentralized. It will win because a lot of countries are tired of US’ hegemony and abusing their dollar privilege. Russia, China, Iran, Venezuela, Pakistan, Iceland and much more are mining bitcoin. It will be an international money like gold was. Why does the identity of Satoshi matter? Does anyone care who invented the wheel? Yet we use it because it works.
The current system consists of thousands of banks, with a lot of air conditioning, transportation to and from work in cars, planes etc. The US military basically backs the dollar, look at how Gaddafi was dealt with because he wanted to trade oil in another currency, Saddam Hussein as well. Look at Libya and Iraq now. All those bombs, aircraft, missiles are definitely not good the environment. However, because of the nature of the Bitcoin network, looking for cheapest form of energy is in miner’s interest. This includes using green energy, capturing energy that would have been wasted like hydro and waste products that are harmful to the environment – flared gases. Moreover, Bitcoin is a voluntary system, other currency systems are not and a lot blood have been shed and ensuing suffering for that defiance.
In the 16th Century, The Church was separated from the State. The printing press disrupted The Church’s ability to control the truth and the masses by extension. Similarly, Bitcoin will separate money from State. Gold emerged as money on the free market because it was hard to produce; before it was co-opted by governments and central banks. Bitcoin is emerging as the money for the digital age. You do not need permission to use it, it can not be taken away from you, it’s monetary supply can be verified by running a node, and it is not controlled by anyone. Would you be part of system where some people can inflate the money supply (thereby stealing your time and savings) but not you, or would you be part of the system where no one can increase the money supply including you? Choose wisely.
Also, there are second layer solutions to scale Bitcoin’s network – Lightning network and Liquid. Read up on Jack Maller’s work on Strike.
Apologies for the long essay, but I see a lot of disruption and collapse this coming decade. A deep fight between the legacy system and Bitcoin. If the proposed system from Bretton Woods 2 involves more of the same inflation – which it will and the system will just be a digital fiat currency – Bitcoin will win, it is inevitable. Old institutions will collapse and be replaced by new ones. And places that embrace Bitcoin will flourish.
Thanks so much for this enlightening comment. We are glad to have site visitors like you
You are welcome sir, I enjoy reading the content here and try to contribute the little I can.
We got a lot of value from your comment, especially the historical narrative you gave to money in the context of states and institutions. We will like more of that
But Bitcoin is rapidly inflating m like an African nation on steroids and will continue to do so because of greed, your logic is irrational as Bitcoin is not stable enough to trade
And your argument is not based on facts. When you have read about how the network works, how bitcoin blocks are created, how much bitcoin is emitted roughly every 10 minutes, what the bitcoin halving is, what the difficulty adjustment is (which strengthens the security of the network), what a node is, how nodes ensure that the rules of the protocol are adhered to (like how there can only be 21 million bitcoins), how there is a balance between the nodes, miners and developers to ensure no one controls the network, and how no one can change the rules of the bitcoin protocol, only then we can have a reasonable argument.
You can audit how much bitcoin there is in real-time, but do you know the exact number of naira (dollars, euros, yen etc) in circulation right now and how much there will be in 2140? No, but you can do that with Bitcoin.
You can start by reading Inventing Bitcoin by Yan Pritzker or The Bitcoin Standard by Saifedean Ammous for an economic perspective. Also read about the Byzantine empire and how they flourished for hundreds of years because they used hard money (gold). If you have time look at how the paper marks lost value against gold marks in the Weimar Republic after World War 1. Also look at how the dollar has lost over 95% of its value in purchasing power since 1913; you can find it on the Federal Reserve’s official website.
Bitcoin is becoming money in real-time that’s why it’s fluctuating. But if you zoom out you will see its trajectory. It’s a totally different type of money so there has to be skepticism, but do your research. People thought that cars won’t replace horses because horses have been used for thousands of years, but see what happened.
I wish you luck on your research, a lot of amazing material (essays, videos, books, podcasts) out there.