As you all know the world's economy is very unhealthy. In my opinion, one of the greatest dangers looming in the horizon is a severe loss of confidence in the USD on the forex and bond market. Some of you will remember what happened to the GBP in the early 90's. It wasn't pretty. We maybe around the corner from something even worse for the USD.
You may have recently heard that the US government is about to hit the debt ceiling again this October. A few weeks ago, you may also have noticed how the market reacted to the FED announcement that they may 'tamper' their QE policy. Bernanke may have been testing the market but he quickly made a u-turn showing the world that he has no exit strategy for his monetary policy. Mind you, he is retiring soon... Greenspan, his predecessor, retired at the end of January 2006. A few months later, the sub-prime mortgage crisis started to unfold into the huge mess we're now in. Once Bernanke retires, we may see the unfolding of the mother of all crisis: the US government debt crisis. Once international investors realizes the US government needs a Greek style bailout, the bond bubble will explode taking the USD down with it.
In the event the above does happen, since the USD is the world's trade currency, we would see some severe side effects for international trades. BRICS countries have already established direct currency swap lines for their trade thereby removing their exposure to USD volatility. China has also established similar swap lines with Australia, Japan, Iran, England and France. Smaller nations i.e. most of the world would be the most exposed to severe disruption of their import / export activities.
In my opinion, Bitcoin has the potential to help small nations reduce their exposure to such risk. It has a non-elastic money supply and it is not based on debt so it is free of inflationary risk. It is embedded with a fast and cheap international payment system perfect for world trade.
In your opinion, does the current ecosystem provide the necessary components for a group of small nations to use Bitcoin to settle their international trades? And which nations do you think would be the best candidates for such a project?
Thanks for your input.
