Christine Lagarde dreams of a digital euro supplanting the dollar in global exchange reserves. The United States is betting on Bitcoin.
In short
- Christine Lagarde calls for strengthening the euro as an intrusion reserve currency to compete with the dollar.
- The hegemony of the dollar could have dropped several times in the 20th century, but came out each time, for lack of a credible alternative.
- Faced with the impasse of a federal euro and the structural decline of the dollar, Bitcoin stands out as a reserve of stateless value.
Berlin Calling
It's official, Europe has joined the Brics sling against the dollar. Christine Lagarde challenged Donald Trump from Berlin, calling for the whole world to place her reserves in European debt.
The euro is currently the second international reserve currency. It represents “20 % of exchange reserves, compared to 58 % for the dollar,” she said. Increasing the share of the euro “would allow European governments and companies to borrow at a lower cost”, According to IMF data.
In short, this would allow Europe to better control its own destiny – giving us a little of what Valéry Giscard d'Estaing called the “exorbitant privilege” 60 years ago.
Christine Lagarde
It would not be the first time that a dominant currency has left its place. The dollar dethroned the pound sterling in the mid -1920s to reach 64 % of world exchange reserves in 1931.
The president of the ECB stressed that the hegemony of the dollar could have collapsed twice already. In 1933, when President Roosevelt suspended the convertibility of the dollar into gold, then again in 1971, under Nixon.
In both cases, the position of the dollar as an international reserve currency stretch frankly. It increased from 60 % to 20 % of world exchange reserves in the 1930s, and from 70 % to 50 % in the 1970s.
But each time, the greenback got from business.
For what ?
Because there was no alternative currency that could take over. There was only gold, whose share in the exchange reserves flew away. It climbed 97 % of exchange reserves in the 1930s, and 60 % in the 1970s.
But the dollar will return in force thanks to the Second World War before definitively establishing its hegemony in the late 1970s thanks to the petrodollar.
Gold has never been able to impose itself in the duration of the fact that it is a poor payment system. The emergence of the Swift network will be another decisive advantage for the dollar at the dawn of globalization.
For Christine Lagardethe big difference compared to previous eras and that there is an alternative today: the euro. In practice, central banks prefer to accumulate gold.
Gold purchases have been at the highest historic since the start of the war in Ukraine. Gold represents 20 % of world exchange reserves, especially thanks to Sino-Russian Tango which no longer wants to finance American debt.
Also remember that the European Central Bank has frozen nearly 300 billion euros belonging to Russia… who can believe that the BRICS will fall from Charybde by Scylla by swapping their dollars for the single currency?
Christine Lagarde seems to believe it. To this end, it proposes to strengthen European military power and unify the debt market. Central banks place their reserves in the debts of countries “Who can honor their alliances by their military power”she said.
Bitcoin, the reserve currency of the 21ᵉ century
Despite decades of efforts to converge economically, the dream of a European debt market remains an Arlesian. Efficient countries like Germany and the Netherlands oppose the pooling of debt.
It is a question of national sovereignty. Germany's debt/GDP ratio is 63 %, against more than 140 % in Italy … Why would the Germans agree to pay for others? It is possible to force Greece to austerity, but not France or Italy.
In this context, it is difficult to see how the euro could cut deales to the dollar. Besides, is it really desirable?
After decades of exorbitant privilege, the United States has an annual trade deficit of more than $ 1,000 billion coupled with deindustrialisation. There is no miracle, everything is paid for sooner or later.
Shouldn't we rather give up this double-edged privilege? Would it not be wiser than the world trade in a stateless currency, like Bitcoin. THE BTC now weighs $ 2200 billionor as much as the overall reserves denominated in euros …
Bitcoin has the great advantage – unlike gold – to be a currency at the same time as a payment network. A network that is not censurable, unlike the Swift network. Bitcoin is also a much better reserve of value.
The United States has understood this and intend to redo the icing by selling gold to accumulate bitcoins. Meanwhile, Christine Lagarde dreams of launching a digital euro. Another beautiful fiasco in perspective …
It is time for the old continent to wake up. Let’s at least incit energy like EDF to undermine bitcoins instead of selling our electricity while eating our nuclear power plants.
Our article on the subject: No blackout with bitcoin minors!
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