I quoted the research study that explains exactly what I say. You forget the fed can choose its policy. If it starts to lose ground and the velocity of the usd increases and puts pressure on the relevance of the usd, rational self interest will cause it to shore up the difference.
This is the logical and natural response from a self interested actor.
You are completely delusional if you think that the Fed is going to adjust their monetary policy at all to improve the "quality" of their money, much less to "compete" with Bitcoin. They don't give two shits about Bitcoin. After another worldwide financial crisis, they will slam interest rates back to zero and fire up QE4. If that doesn't stop banks imploding around the world, they will send interest rates negative and print dollars into oblivion. They will even airdrop helicopter money directly into people's bank accounts if they have to.
No this is not the rational viewpoint, you are speaking of a world in which the citizens don't have an alternative option for hedging.
In the near future there may be a smaller number of major currencies used in the world and these may stand in competitive relations among themselves. There is now the “euro” and the old inflationary history of the Italian lira is past history now. And there COULD be introduced, for example, a similar international currency for the Islamic world or for South Asia, or for South America, or here or there.
So here is the possibility of “asymptotically ideal money”. Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based value comparisons. The currencies being compared, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their users and by those who may have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened rate of inflationary depreciation in value.
And this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the “great democracies” that they should be better situated to be able to understand whatever will be the monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their “savings”.
