Tether And Bitcoin Have A Loud, Routinely Ignored Dollar Problem

SYMBOL - 23 April 2024, Baden-Württemberg, Rottweil: The logos of the cryptocurrencies Bitcoin ... [+] (BTC), Ethereum (ETH), the stablecoin Tether (USDT) and Binance Coin (BNB) can be seen on the trading platform CoinMarcetCap. (Image with longer exposure time). Photo: Silas Stein/dpa (Photo by Silas Stein/picture alliance via Getty Images)
dpa/picture alliance via Getty Images
Private, or “crypto” money will eventually replace government money. Bank on it. As written in The Money Confusion, profits from the trading of fiat currency chaos ($7 trillion per day worth of currency trading) ensure the eventual erasure of those margins. The speculation here is that stable, private money will be the instigator of the erasure.
The problem, at least for now, is that there’s no logical replacement for the dollar and fiat currencies like it that referee most global exchange. To which some will reply that Tether and bitcoin are poised to throw the dollar into history’s proverbial dustbin. The replies don’t impress much.
Take Tether. Presently it facilitates four out of five crypto-style transactions. The previous stat is both impressive and a look to the future, but let’s not forget that Tether’s stability as a medium of exchange is an effect of its peg to the dollar. And the dollar’s own instability can presently be found in the flashing market signal that is $7 trillion worth of daily currency trading.
Let’s also add that assuming economists, politicians and pundits ever get real on what inflation actually is (a shrinkage of the medium of exchange) as opposed to what they want it to be (rising prices when the opposing political party is in office), the dollar has inflationary tendencies like all the other global currencies. And while the dollar’s volatility is less notable than the typical currency, readers should simply chart it over the last twenty-five years versus the euro, pound, yen, CAD, AUD, CHF, and gold to see just how unstable it’s been.
Which is a long way of saying that while Tether does something truly brilliant (provide a world bereft of remotely trustworthy currencies with a dollar proxy that everyone can avail themselves of digitally), it’s not a replacement of the dollar. It’s an extension of the dollar’s relative turbulence to private money. This is something to keep in mind considering the routine assertion that cryptocurrencies were a response to the instability of government-issued fiat money. In truth, the most stable of them are just an extension of that instability.