In fact, most agree today, that this growth would never have been possible if the Dollar had stayed on the gold standard. Nothing of the sort happened and the US Dollar has been the stable basis of a large part of the world’s economic growth for half a century now. If that $50 dollar bill in your pocket was no longer exchangeable for ‘real’ gold, they thought, there might be widespread panic and a collapse of the monetary system. When the US Dollar was removed from the Gold Standard in 1977 a lot of leading economists and bankers were nervous. Yet we have great confidence in that note and can buy many bananas with it. To use the banana metaphor, the paper itself is worth less than a banana.

It goes to show how extremely different the views of cryptocurrency can be and for this reason, are we in the early stages of a reinvention of money? A Currency Must Evoke ConfidenceĪ $50 note in your pocket has no intrinsic value. Could history repeat itself with China doing what it did a millennium ago - this time developing a regulated cryptocurrency? El Salvador on the other hand recently made Bitcoin a legal tender. Interestingly, a thousand years after those original paper notes were banned, China has now banned cryptocurrencies. As paper grew in popularity, the government outlawed it and surprisingly thereafter, issued its own notes as legal tender and the world’s first real national paper money was born. Incidentally, the warehouses that stored large volumes of bulky coins became the first banks. Transactions were completed by handing the paper-note after which parties visited warehouses where the exchange of coins took place. When making large coin-based transactions proved difficult, merchants came up with a mechanism where pieces of paper had text inscribed on it indicating its value. Just like crypto today, it was not the government that originally invented it. The first time that paper money was used in China, more than 1000 years ago, it was also met with confusion and widely condemned. While some have apologized for their skepticism, others are now looking to build their own cryptocurrencies in some of the world’s largest financial institutions. And most of the crypto commentators are also beginning to change their tone on this subject. I must confess that I used to agree with them and saw crypto in much the same way.īut I've changed my perspective.

Crypto currency today