My readers know what I believe is at stake over the next few years is the global dysfunctional financial system, and there is only one way out, the USD must lose it's status as the global currency reserve.
I have been thinking of crypto-currencies for a while, and I am starting to think the best way out is for a virtual currency (doesn't have to be bitcoin) must become the standard-bearer of currencies, the new global reserve currency. What MUST happen is USA, Japan, Europe, hopefully (but likely not) China, and Russia agree to disagree, that NONE of them can take over for the USA as global reserve currency. That only a NEUTRAL reserve currency none of them control must be the standard bearer.
Then all currencies will trade freely against each other against the standard.
That is the only way out for the old currency system to survive to the new one. For the USD reserve currency is becoming a problem mathematically and politically for the world.
Unfortunately, I have learned the hard lesson since 2006, that when I make certain observations, the world refuses to acknowledge the new realities. Stupid world ;)
I now understand this is the way it must be.
The current system is run by politics, and political decisions must appease those who most influence those decision makers. So when a new reality hurts the them, they basically instruct the politicians to RESIST making the right changes. In fairness to the politicians, most probably have zero clue what to do is right vs wrong, and they just go along with the flow. No one person can know what is right for all angles of their current job responsibilities.
When it comes to Global Currency reserve, we are asking those in decision making positions to make decisions that are PERFECT and have best outcome for USA, and the entire world!
I have never met a person who makes perfect decisions, much less at the complexity level of a multi-trillion dollar global economy.
So back on point, now that I am convinced this currency system is headed for a fundamental change, and even though I see a potential way out that would minimize damage, this of course is NOT the way the world will go. The decision makers will fight tooth and nail to keep the existing fiat system, no matter the collateral damage on everyone. Therefore I expect between now and 2017 the most un-fun economic atmosphere I will ever have the displeasure to experience. :( Doesn't mean life won't be fun, for as things change, it does tend to be gradual, I do not expect a sudden currency crisis of epic proportions.
That can't happen until many other events transpire first, starting with stock market volatility, which I believe is next up. See my next post for why.
What I think may happen is China and Russia want to take over the fiat currency system, and if USA is smart, they will let them! I know that seems insane to say, but once they get the old system under their control, USA will be free to adopt an alternate system, hopefully one based on virtual currencies. In a weird way, the USA may know this system cannot sustain, and best let someone else hold that bag as it terminates. The old system is based on demographics, cheap oil, and dependency of the world to agree USD as a value standard. (I need to make a new post, will update link here)The termination of the fiat currency and rise of virtual currencies as dominate winner may take a decade, but should begin in earnest by 2017.