The world needs to move past a 'reserve currency'

When nations began trading extensively, the world order settled on a world reserve currency.For context, a brief history lesson.

USD 1920 to 2020 (100 years)
UK 1815 to 1920 (105 years)
France 1720-1815 (95 years)
Netherlands 1642 to 1720 (78 years)
Spain 1530 to 1641 (111 years)
Portugal 1450 to 1530 (80 years)

Using history as a guide, the US is due to end the USD reserve status.
But I do think this time is different, the world does not need to depend on China, Russia, Europe, or US for a reserve currency, we need a better system.

First, lets cover money and the way its created and how the world checks and balances work through economic trade pressures.   FIAT currency we use today is based on scarcity and 'faith' in the currency.  Part of the strength to currency is each country will only allow government (taxes and payments) to be done in the local currency, creating a demand.   Some countries operate solely on the national currency, while others may accept local or a foreign currency (typically USD) for purchases.

Oil for example, until recently was settles only in USD in all oil supplying countries, creating yet another demand mechanism for USD trade.

The leader in world trade becomes the defacto reserve currency.  Other countries once economically tied to the reserve currency nation has incentives to ensure their currency maintains an exchange rate favorable to that nation.

For example, if the Euro moves from a 1 to 1 USD changes to a 1 to 2 USD ratio, products bought in the USA from Europe will raise significantly in price.  For simplicity if we assume a direct relationship, a BMW that costs 50,000 will move to 100,000 USD if made in Europe and shipped to the USA.

World trading systems have been hedging by putting assembly plants in the target country to reduce import or currency variations. This system has historically maintained a relative stability compared to world history.

However the world economic model is increasingly becoming strained, and I believe the root cause is the rate of new money creation disparity that is required by each country.   It is also becoming strained due to world demographic challenges. When the USA has been the world leader in innovation and value creation, the US is creating dollars faster than other countries enabling it to expand.  Other countries through a combination of trade demand and their central bank money creation controls keep a balance of their money creation to maintain an equilibrium of value within reason.   

As long as the world reserve currency is the lead creator of wealth, the system remains stable as other countries are controlling currency valuations based on their economic 'catching up'.

The USD has seen extreme currency valuation strength on the world stage, and I believe because the world is increasing its value/money creation at a pace that is exceeding USD dollar creation.  In effect, the world WANTS to have more USD created than organically is being created by free market.

This enables the US to generate more and more debt accelerating quicker based on the model that functioned well when the US was the organic world value creator.

The issue is at some point, the US cannot keep up with demand for new USD in true value, and is in effect just 'creating dollars' based on the trading demand.  This is when it becomes materially dangerous for a world fiat currency.   If there is at any point, a drop in demand the debt machine will be materially large compared to true new value creation from the reserve currency country.

It could find itself in a position when the currency turns out of favor, and to create more debt will require more interest , collateral or trading value.  The easy debt machine becomes a drag that could last a generation.  This debt trap was avoided when countries used gold as the trade settlement between countries, as there really wasn't material debt in the system outside of the country.

I am NOT in favor of gold as a currency, its a terrible way to trade, but it did have the effect of avoiding the math trap of paper debt.

So what to do?  The problem is what benefit does China, Russia, or Europe bring to the table?  Does any one of those countries bring material NEW value to the work trade through innovation at a pace that exceeds world demand for FIAT currency trade for the next 100 years?

I think not.  The world economies are maturing.  Combined with demographic challenges  (see picture at bottom) we are seeing currency shifting from scarcity to abundance.  Each country is producing more value to the world stage than it did compared to leaders 25 years ago, the gap is closing.  Look back to India and China in 1995 to today, wow.  What a difference the last 25 years has made.

This is why a new currency valuation trade system is required, one not based off of a country.  There are other reasons, like currency abuse.  The US recently for the first time in history created 2 trillion dollars circumventing the bond market, and allowing the Federal Reserve Bank to purchase collateralize debt.  Further the FED setup a shell company to enable activity that it is bared from legally doing in the world of finance.

These games will help alleviate near term pressure without addressing the root problem, money creation imbalances.   At some point, 1 year? 10 years? I have a hard time believing 20 years the system will fail under this strain.  And does anyone think China, Russia, or Europe wouldn't do worse?

This is why Crypto Currencies are a critical part of our monetary evolution.  The models setup today are not valid for being a currency.  However the infrastructure to accept payments and store 'coins' is essential developments for the next non-nation based reserve currency.

So while we may stay on USD or our local currencies, I believe a crypto-based reserve currency is in our future.

On the way there, I expect Gold to get a resurgence as people will return to 'tried and true' international trade settlement only to find , yet again over the last 500 years, that gold is a terrible reserve currency.

This is why I own Crypto's and Gold miners, it is the only way out of a once in 100 year shift of world value.  When that shift occurs, I am not sure what the value of USD will be when the dust settles, and I am 65 years old.

Good luck!

Population Growth according to UN 2019.  We have increased wealthier humans, but less new people, a combination that is a problem for growth.