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The biggest argument against cryptocurrencies is that unlike fiat currencies, they do not have the backing of any government. As multiple rating downgrades show, government support isn’t what it used to be. Thumbs down to Britain. Moody’s downgraded the credit rating of the United Kingdom from Aa1 to Aa2 on September 22, citing weakening public finances and calling into question the Government’s fiscal consolidation plans.
China in a soup. A day before the UK was downgraded by Moody’s, S&P cut the sovereign rating of China, downgrading it from AA- to A+. According to S&P, China’s prolonged credit growth had increased its economic and financial risk. The rating cut brought S&P’s rating in line with other rating agencies. It is ironic that China had taken action against ICOs and cryptocurrency exchanges shortly before its own rating was downgraded. US and Japan drift downwards. Though the sovereign ratings of the United States and Japan have not been cut recently, the trend has been negative. The US was downgraded by S&P from AAA to AA+ in 2011, after being AAA rated for 70 years.
Is government backing Important? A fiat currency derives its value from the support of the government. While currencies were initially backed by gold, governments across the world felt that this was restricting their ability to print currency and expand their economies, and withdrew from the gold standard long ago. Today, the US dollar, like all fiat currencies, is solely backed by the “full faith and credit” of the nation’s government. Clearly, this “faith and credit” isn’t what it used to be.
Misguided government policies can result in the value of fiat currency depreciating rapidly. Thankfully, Bitcoin is backed by math and nothing else.
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Very ironic, indeed! This is just showing us how inept the government can be and that there is nothing solid really when we talk about government backing. though the same system has been there since we were born, it is now undergoing so much stress due to years of mismanagement and corruption. Only a few governments in this world proved to be good managers when it comes to economy and resources.
We are living in a generation where even the government could no assure as stability. This fact has been shown in the many times that economies around the world nearly collapsed had it not been for dole-outs and bail-outs and in most cases bringing more pain to the people.
We need changes to come to the world economy...sadly sometimes changes likewise can bring in more problems.