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US Facing Disadvantage Without A Digital Dollar Soon

Digital Currencies
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EDITOR NOTE: Does the US face an existential crisis if it fails to get a digital dollar up and running soon? This claim comes from billionaire investor and bitcoin bull Mike Novogratz. Let’s think about it for a moment. He’s worried the internationalization of China’s digital yuan may be the fiery salvo that sets the dollar’s world reserve status alight, eventually burning it down. Whether it’s the digital yuan or the forthcoming SDR issuances, Novogratz claims that America can save itself by digitizing an asset (the greenback) that’s already lost its illusion of monetary luster so that somehow it can remain relevant, accelerate its own decline, and further subjugate those who use it by controlling not only its value but every aspect of the transaction process all the way down to storage (who needs banks once the Fed issues it directly to you?). Misguided, it is. Digitization isn’t a guarantee that the dollar’s newfound efficiency would prompt sovereign economies to allow themselves to be reinfected by the same monetary illness that spurred them on to de-dollarize in the first place. The same can’t be said about the yuan. The dollar, digital or not, presents no winning odds and no winning hand. The dollar game is rigged, and the only way to exit the burning casino is to acknowledge that the value of money should never be wagered in the way you would your farm. And that’s the shining opportunity that non-CUSIP gold and silver present to us at this crucial pivot in monetary history. 

Wealthy investor Mike Novogratz says that the U.S. has its fate in its hands but will be at a major competitive disadvantage if it doesn’t come up with a digital dollar soon.

Such a move would be particularly important as China has fired the first salvo on the digital currency front, he explained.

“To me it is a existential crisis, we need a digital dollar,” Novogratz, chief executive of digital merchant bank Galaxy Digital GLXY, +9.46%, told MarketWatch in a Friday interview, ahead of the second part of a MarketWatch and Barron’s “Investing in Crypto” virtual event series set to continue Wednesday.

The digital yuan has long been viewed as not just the evolution of money for China but also a way to compete with the U.S. and other major developed economies. The virtual yuan now being minted by China is controlled by its central bank, which will issue the new electronic money, the Wall Street Journal reported.

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China’s apparent embrace of a digitized yuan has lent some support to the broader digital-asset complex, exemplified by bitcoin BTCUSD, +1.07%, a decentralized cryptographic asset that has long been seen as a potential store of value if not a payment system by enthusiasts. At last check, bitcoin was changing hands at $58,477 on CoinDesk.

Novogratz says that the U.S. can currently control its future but noted that Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell will have to “land this supertanker,” referring to the trillions of dollars of monetary and fiscal spending done to help stave off the worst of the economic aftershocks from the COVID pandemic.

Read: China’s bitcoin crackdown contradicts Peter Thiel’s belief that it is a ‘financial weapon’ against U.S.

“If our fiscal and monetary policy starts looking like its from a Banana Republic…you are going to run into some Minsky moment where confidence breaks down,” Novogratz warned. Chicago-born Hyman Minsky, who died Oct. 24, 1996, espoused a view that a period of distortions in the financial system eventually ends very badly.

Stock-market investors have been fretting about a surge in U.S. inflation, which has already created some wobbles in trading in the Dow Jones Industrial Average DJIA, +0.89% and the S&P 500 index SPX, +0.77% in recent weeks. But record highs for stock indexes markets on Friday imply that investors may be accepting the Fed’s expectations for a go-slow approach in normalizing policy and a transitory burst of inflation in the aftermath of the coronavirus crisis.

President Joe Biden was slated to meet with bipartisan members of Congress on Monday in an effort to gain support for his $2.4 trillion infrastructure plan, White House press secretary Jen Psaki said Friday, CNBC reported.

Meanwhile, Novogratz said that there is “zero evidence of the Chinese government buying bitcoin” much less weaponizing it, referring to comments recently made by angel investor and billionaire Peter Thiel.

Sometimes “he likes to say things that are provocative,” Novogratz said.

Thiel made waves Tuesday when he suggested that bitcoin could be thought of as “in part a Chinese financial weapon against the U.S.,” because, he argued, bitcoin undermines the U.S. dollar’s status as the world’s reserve currency.

Original post by MarketWatch

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