"The $100 bill is the world's bitcoin" - the USD & the future of money

SpacePete · Aug 23, 2014

Interesting perspective on the USD.

"The $100 bill is the world's bitcoin," Colas said. "It's anonymous. It's easy to use. It's actually easier than bitcoin, because you don't need a computer or even power."

"What makes a viable currency is trust in order for people on both sides of a transaction to use it. The Illegal transactions, the arms transactions, the drug transactions that take place all over the world... take place in dollars. The US dollar is not just a petro dollar, it is also an illegal transaction currency that speaks a lot towards how much people trust the US dollar." (From the short video clip 'Gold and oil and guns' in the article.)

On Bitcoin and virtual currencies: "The really interesting story in money is its digitization, and the huge amount of friction that exists in the system, and the way that technology destroys all those costs,"

You may disagree with the conclusion in the article title, but it covers some interesting ground.

The US dollar to reign supreme for decades to come

In 25 years the U.S. dollar will probably still be the world's reserve currency, and bitcoin may not be around at all.

The very volume of dollars in the world has given many people a conviction that the currency is worthless and doomed to lose its status as a global reserve currency. But if you want real insight into the dollar's status as a reserve currency, said ConvergEx chief market strategist Nicholas Colas, a good place to start is the $100 bill.

Many economists look at the hundred as a proxy for foreign demand for U.S. currency. Roughly 77 percent of the total $1.2 trillion in circulation in 2013 was denominated in $100 bills, according to Federal Reserve data. And most of those hundredsabout two-thirds of them, according to one Fed economistare held outside the United States.

"And demand is increasing for hundreds," said Colas, who added that the dollar is likely to remain a global reserve currency as long as it's the way global markets price "gold and oil and guns." (Just like global markets for crude oil and gold, arms transactions of all sizes usually take place in dollars, largely because the United States makes more than two-thirds of those sales.)

"The $100 bill is the world's bitcoin," Colas said. "It's anonymous. It's easy to use. It's actually easier than bitcoin, because you don't need a computer or even power."

In short, the dollar is trusted for transactions domestic and international, legal and illegal.

Bitcoin.. may not dominate the world as a virtual currency in 25 years, but the idea of digitized money may. And the reason is as old as capitalism itself: lower costs.

"The really interesting story in money is its digitization, and the huge amount of friction that exists in the system, and the way that technology destroys all those costs," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management.

From a purely technological perspective, the ability to pay anyone instantly in any currency exists already, with minimal or even no transaction costs. Banks are resistant to such a no-fee money marketplace, because they now profit by acting as intermediaries for transactions.

...Bitcoin's value is as a medium of exchange, not as a currency per se, said Christopher Vecchio, currency analyst at DailyFX. In fact, most money today is already electronic form. "The bank isn't holding a lot of money in there. The money in your account is data," he said. "It's a set of zeros and ones."

The best thing about bitcoin, Vecchio said, is that it's basically free to use. Of course, so is cash. "The future of money will really be on finding ways to transact in a lower-cost way, and that's a societal trend, not just bitcoin," Vecchio said.

When it comes to the dollar, the case for the status quo is stronger than the case against it, said Colas, but he acknowledged that the Federal Reserve has put the United States into uncharted territory. Quantitative easing represents an unprecedented level of monetary engagement by the Federal Reserve.

Many regular investors, especially fans of gold, think an overabundance of U.S. dollars in the world means that the currency will inevitably collapse. The more strident in the gold camp think the United States will go down with it.

But over the next 25 years, said DailyFX's Vecchio, the more likely scenario is that if the dollar declines as a global currency, it will do so because America's portion of the global economy declines, not the other way around.

More: http://www.cnbc.com/id/101581641
Click to expand...

phrenzy · Dec 27, 2014

The 500 is starting to take over because of its convenience volume and weight wise. 10 500 notes does the same job as 61 $100 bills. That sort of thing is important when your strapping piles of notes to your person to smuggle them through an airport or trying to pay for a cocaine submarine with one suitcase full of currency instead of a car boot full.

A few European countries are actually trying to take the 500/200 euro notes out of circulation for that very reason. They apparently don't get much use in legitimate circles. Of course when the EU prints money and it dissappears into a black cynical hole they pick up a tidy profit (500 minus the cost of printing and circulating the note, maybe 1 or 2) do they have plenty of reasons to keep them in print.

OgNasty · Dec 31, 2014

The $100 bill is not at all like Bitcoin. Bitcoin is decentralized, $100 is not. Bitcoin has a maximum limit that can be produced, $100 does not. Bitcoin can be instantly transferred to anyone in the world for next to no fees, $100 bill can not. $100 bill can be taken from you by force, Bitcoin can not.

JulieW · Dec 31, 2014

A very dodgy character once told me that he loved Australian notes because they were made out of plastic and they'll survive at least 10 years in a leaky package in a dam, just need a rinse and a bit of drying out.

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