Deutsche Bank’s German: 2030 could be the end of fiat money, cryptocurrency will fully benefit
German bank Deutsche Bank revealed that in this new decade, it is highly likely the end of fiat. Jim Reid, global head of credit strategy at Deutsche Bank, has analyzed for many reasons and draws such conclusions. People will gradually lose faith in the standard monetary system – which is tied to government control – and instead, use cryptocurrency or gold.
The first chapter in Deutsche Bank’s “Imagine 2030 — the decade ahead” report is called “The end of fiat money?” https://t.co/7XzrDP9Q00 pic.twitter.com/2jJWCTPO1G
— Tuur Demeester (@TuurDemeester) December 6, 2019
The common currency is the cause of inflation
The German bank (Deutsche Bank) stated:
“The big problem with conventional currencies today is that the groups that control the conventional currencies have become weaker over the past decade. And in the next decade, those power groups will eventually collapse.”
An excerpt from the Deutsche Bank report | Source: Deutsche Bank Report
The first link we need to admit is that conventional currency is the cause of inflation. A stable monetary system must be a value-backed system from valuable assets, such as gold or silver. However, after the 1970s, there was a universal financial system that separated the value of the conventional currency from gold. And when one currency is not guaranteed with the value of other assets, inflation is easy to emerge. For example, The government prints money at will because government money doesn’t need gold support. The result is a lot of money in the market and eventually leading to inflation.
After the world monetary value was separated from gold, plus oil prices, inflation soared. However, in the late 1970s, inflation began to drop unexpectedly. Today, everyone has forgotten that the conventional monetary system causes inflation. And almost no one talks about the dangers of conventional currency anymore.
China causes the inflation rate in the world market to drop significantly
Meanwhile, the ability to maintain a stable monetary system today must rely on many factors, including central banks or governments around the world. China is entering the world economy and causing the inflation rate in the world market to drop significantly. China brought a tremendous amount of labor into the market, leading to a change in wages at that time, from higher to lower. This phenomenon has affected the world since it became a globalized world. Worldwide production costs from developing countries to developed countries follow.
However, Reid has updated the age chart of the working-age of developed countries, including China. The graph shows that the labor supply is decreasing. As a result, in the 2020s, wages for workers will increase.
Source: Deutsche Bank Report
The solution to this problem is to bring the market of a country other than China to the world market. This is a tough thing because China is a country many times larger than in other countries. Having a large labor force like China is not an easy matter.
In history, if China and other developing countries did not enter the world market, the inflation rate of the world would not decrease, and it would cause the standard currency system to face a dead end.
Today, the global debt ratio is increasing every year. Debt in the United States is up to 2,000% higher than GDP. This phenomenon can lead to central banks to have policies to control inflation at 2%.
Inflation will continue to rise if no other factors support it. As a result, the demand for alternative currencies will increase. People will lose faith in their government.
The government will face a double dilemma in issuing policies to regulate cash flow. So, can conventional currencies exist until 2030?
When fiat dies, cryptocurrency will benefit
Cryptocurrencies will benefit entirely from such phenomena. Because everyone wants to save their money from future inflation. Moreover, people are starting to trust the code for politicians.
Besides, Deutsche Bank points out that the number of users of cryptocurrency wallets will also increase to 200 million by 2030.
Jim Reid, global head of credit strategy at Deutsche Bank
Deutsche Bank and Jim Reid are very interested in cryptocurrency. Previously, Reid has written several articles analyzing the state of Bitcoin, and he has talked about this latest issue since 2017. In 2017, Reid said the possibility of cryptocurrency or other currencies used for exchange would replace fiat.
The report stated:
“However, cryptocurrencies may eventually become more popular and be competitors to conventional currencies.”
If one of the companies in the GAFA group (Google, Apple, Facebook, and Amazon) or companies from China like BATX (Baidu, Alibaba, Tencent, and Xiaomi]) can overcome legal obstacles. That will make cryptocurrency more accessible, more widely used, and will eventually allow it to replace cash.
Moreover, cryptocurrencies have advantages such as security, speed, low fees, and secure storage in the digital age. It will promote more adaptation in the future. The era of the monetary system, in general, may be coming to an end. And the period of cryptocurrency is about to begin.
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