In 2011, acclaimed blogger Paul Krugman proposed that an alien invasion could save the economy, because death and destruction create jobs.
Now, what if — what if! — space aliens wanted to enslave the population, but without the massive disregard for human life? Instead of bombing us into prosperity, the aliens could lasso up a few gold-laden asteroids and buy our instant servility.
(This would probably be more effective if the aliens used a time machine to show up before the end of Bretton Woods. They’re aliens, they can do that.)
So the arrival of golden asteroids might bring an instant increase in metallic wealth, but we humans now find ourselves trapped in a horribly corrupt monetary system, where alien overlords have access to an infinite amount of gold, and as long as people rely on gold as currency, we’ll forever be their serfs. Now what?
This is happening right now in China, Russia, Iran, Venezuela and every other country facing US sanctions. Most countries keep their foreign reserves in dollars (or dollar-denominated debt). The “dollars” are actually database entries at Federal Reserve Banks, and assets can be frozen at will. We already did that to Iran! Not your database, not your dollars.
USD used to feel like a reliable store of wealth, when really it was an infinite line of credit subjugating the rest of the world to US foreign policy. Heck, even the Bank of England wants out of US dollar hegemony.
China currently has $1.1 trillion in Treasury bills. They would prefer to HODL something else, but there aren’t a lot of options. The Eurozone restricted bond issuance with austerity measures, and you can’t just buy $1.1T worth of bitcoin. Few countries accrue external debt the way the US accrues debt – that’s American exceptionalism!
It’s hard to dump one asset for another, unless there is enough liquidity to absorb the dump. In the absence of a new bottomless asset, specific cycles must be broken.
(Specific cycles, meaning the closed payment loops in which a currency circulates.)
Europe has no beef with Iran. In fact they are quite fond of Iranian oil. But with Iran blocked off from the international payments system, European banks had to create a non-USD clearinghouse called Instex. The participants technically don’t violate sanctions, because transactions get netted and batched so that money doesn’t cross Iranian borders.
Sanctions break specific cycles while creating a flywheel effect for whatever currency enables the transactions to continue. This isn’t limited to international trade; domestic chokepoints keep alternatives circulating too.
Bitcoin is for enemies, and Lightning is its clearinghouse. The inability to issue debt makes it difficult to displace fiat as a medium of exchange — but once it does, it will be near impossible to stop.