‍OPINION

By Cody Ellingham

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On Wednesday this week at the Foreign Correspondents’ Club of Japan three economic heavyweights, Dr. Paul Sheard, Hung Tran, and Richard Katz spoke to a morning session: Deep Dive: Trade Wars, the Dollar’s Decline & What Comes Next.

The conversation was moderated by veteran journalist Anthony Rowley to the day’s backdrop of those infamous T words: Trump & Tariffs which seem to be across every headline right now.

Sheard believed that Trump is using tariffs to lure people to the negotiation table, aiming for small wins before moving on. Katz, on the other hand, seemed to think that tariffs will persist and that Trump genuinely believes they will have the desired impact, with no one in place to stop him from self-destructing.

But just one day later there has been a change of tack with the White House edging away from the trade war.

It has been interesting to see the media world respond to the spasms of the Trump Machine but I think this reveals a bias from commentators who expect that things ought to make sense. 

I have a much simpler outlook. What is happening with tariffs does not make sense and it does not need to make sense. Whether it comes from simple incentives or a big-brain executive strategy is irrelevant: The machine of Trump is simply pushing buttons to see what happens when it comes to the dollar.

The US Dollar is more important than any nuclear stockpile or carrier fleet. But it comes with its own fiat alchemy and impossible logic that people have had to bend their reality to for half a century. Many a gold bug has gone gray waiting for the US dollar’s contradictions to catch up and for it to finally become hard money again but that day never seems to arrive.

The echoes of the 1980s trade wars loomed over the discussion and Sheard wondered if a “Plaza Accord 2.0” was coming, in reference to the 1985 agreement that weakened the dollar to address U.S. trade imbalances. But while the old playbook may still sit on the shelf, has the game changed?

Despite attempts to Make America Great Again, the world has changed and the nature of the global financial order has changed with it. It ain’t morning in America anymore.

Hung Tran of the Atlantic Council Geoeconomics Centre offered some thoughts on what this means for the dollar:

“The main challenge to the dollar is not another currency,” he said, “but technology, in particular CBDCs and stablecoins.” 

Tran cited a significant drop in global U.S. dollar reserves from 71% to 58% over the past two decades and an uptick in allocations to gold, Canadian dollars, Japanese Yen, Nordic currencies, and others. He stressed that while the dollar’s status as a reserve currency may be fading, its role in payments still anchors global trade. But even that, he warned, is vulnerable.

“If we put all of these things together, the discussion of the dollar’s future needs to take into account technology’s outlook,” Tran said. 

Enter Bitcoin

I asked the panel about Bitcoin specifically referencing that it has no issuing government, no counterparty risk, and a fixed and fully auditable supply schedule.

If politics is downstream of technology, then what does a global digital money that is outside of state control mean for the world? 

Katz was unequivocal: “Bitcoin is a scam and a huge waste of energy.”

This quick dismissal though stands in contrast to his otherwise sharp critique of what is happening. He aptly described the irrationality of Trump as “A delusional ideologue who thinks he can defy the market and bully other countries ... whose goal is the impossible one of eliminating America’s trade deficit with every single country.”

Katz seemed well aware that the rules-based order is breaking down and that what is happening is illogical. But what more decorum could we expect this late in the game? We have not been in a “normal world” for a long time and it seems that the Bitcoiners are some of the few who are looking at the unfolding events not for a political solution but simply as further markers of decline.

The schemings of Trump and his association with the Bitcoin Strategic Reserve and his namesake memecoins have become an easy excuse for short-circuiting any intellectually honest engagement with the topic of Bitcoin. Trump’s crypto dabbling and executive orders are immaterial in the face of the prospect that Bitcoin is a paradigm-breaking money technology.

The nature of a monetary system has a profound effect on all that is downstream from it. The money has been broken for a long time but because this monetary has lasted for so (several generations now) all the systems built upon it have inherited a false logic like a house with foundations that were never level to begin with.

But the foundations keep sinking deeper into the mud and at a certain point you cannot hide the fact that the plates are sliding off the dining table.

Regardless of how anyone feels about the individual actions of politicians and business leaders, the game theory of Bitcoin is playing out as predicted. Bitcoin is antifragile as it grows and permeates through the legacy financial world and becomes anchored in portfolios everywhere. Some may assume Bitcoin is now simply tracking the SPY but this is a momentary correlation I think. At a high level Bitcoin represents a new cryptographic rules-based order to replace the political one that is collapsing before our eyes.

Dr. Paul Sheard, author of The Power of Money and former vice chairman of S&P Global, struck a more nuanced tone. “I am very negative in the way in which the dollar has been weaponised,” he said, noting that this trend predates Trump. He also challenged the need for any single global reserve currency at all, calling it “quaintly anachronistic,” suggesting that modern technology should render that concept obsolete.

I wonder if the historical point of no return for the dollar and the move to a neutral Bitcoin standard has already happened with the shutdown of SWIFT to Russian banks in 2022? Nobody can weaponise Bitcoin like the US has done with the dollar system and nobody can set its monetary policy arbitrarily.

Bitcoin emerged from the ashes of the 2008 Global Financial Crisis as a decentralised monetary system structurally immune to whims of political ideology, trade policy, or electoral chaos.

Perhaps the ideals that Katz seems to lament of democracy, rule of law and of civil society, can be found in something like Bitcoin that is outside the bounds of politics in an increasingly fragmenting and chaotic world.

What if the future that awaits after the dollar’s decline is a global move towards a politically-neutral hard money such as Bitcoin?