It could be called a megaton “bombshell” by the Fed and the ECB, if their executives and presidents were free to speak as they pleased.
Trump’s decision to appoint David Zacks, a former executive of the notorious “venture capitals”, a partner of Musk (…) and one of the main original players of PayPal, to the role of the White House responsible for “cryptocurrencies”, is perhaps from the most critical decisions regarding economic policy and the monetary system for the next day.
The reason is clear. The new American administration is “legitimizing” the entry of cryptocurrencies through the “backdoor” of the White House, into the highest sphere of political and economic power in the USA. Which means others will follow…
The consequences of such a move are still difficult to assess but there are some elements for which we can already predict the consequences.
Cryptocurrencies are – among other things – “tools” of informal (unsupervised) transactions, without any supervisory authority or counterparty being able to guarantee their “value”.
The official currencies, such as e.g. the dollar, derive their “value” from the fact that they represent the “value” of national and non-national economies (e.g. USA, but also the Eurozone) and are issued by the state institutions, constitutionally designated for this, such as are the Central Banks.
Until 1971 (August) the value of currencies was officially determined by the Bretton Woods Agreement and was based on the fixed relationship of an Ounce of Gold equal to 35 dollars.
After the US unilaterally canceled this “guarantee” and the adventures that followed, the value of the currencies was supported by national decisions for the Central Banks to gain their so-called “independence”, so that the management of the currency depended only on the rule/condition of price stability, i.e. currency stability. And this is still valid (…) to this day as a guarantee basis for the currencies despite the crises that have intervened and especially the crisis of 2008-2009.
Cryptocurrencies
Unlike national currencies, whose value is guaranteed by the nation/state issuing the currency and supervised by the “independent” Central Bank, cryptocurrencies are a product of the blockchain and have no counterparty that guarantees the stability of their value. Which, moreover, is not associated with another institutionally protected “product”, or circulating value.
Their only cause of “value” is the independence from any oversight of the agreement of its shareholders, that it has or is attributed value (!). Hence the fact that it is par excellence the object of speculation with huge changes in its pricing inside and outside stock markets especially in recent years.
One therefore understands what can happen to the international monetary system when this “Backdoor” is opened at the highest point of the financial markets and without any supervision by the Fed or the SEC of the American financial markets.
We remind here that in order to avoid this uncontrollable “risk” for international transactions, i.e. to destabilize not only international trade but also foreign exchange transactions – because this could be an obvious result – the Central Banks for 4-5 years they are working on the systematic, but centrally supervised introduction of the operation of digital national currencies (digital dollar, euro, etc.).
At the same time, the BIS, that is, the Central Bank of Central Banks in Basel, is working with an international staff formed by the Central Banks, on an international monetary system of transaction of the digital currencies prepared by the Central Banks. And they’re not ready for it yet…
This “backdoor” is being opened by the new Trump administration and it is unknown what will follow in the … “Queen of the Dollar” and other national currencies. Obviously the risk for the dollar in such an environment will not be about BRICS plus, but the US and the choices that will be made in Washington and Wall Street.
An easy prediction, of course, is that in such an environment of direct questioning of fiat currencies (much more of those that do not have the “privilege” of the dollar, such as the euro), gold will emerge even more as the safe haven of saving values…