GOLD, THE DOLLAR, STABLE COIN and QUANTUM COMPUTING

 

There is a debate in progress between those who are convinced that China is leading a dedollarization campaign that is bound to succeed, and those that believe that stable coins are going to make the dedollarization process impossible, or at least very difficult.

It should be noted that proponents of both theories think the primary winner of either scenario will be gold.  

Alaisdair McCLeod makes a convincing case that China has the ability and a coalition to bring about a gold linked (though not, at first, directly convertible) settlement currency that will make the dollar far less attractive in the the global commodity trade.  He thinks that this will bring about a great drop in the value of the dollar and a commenserate rise in the value of gold.

Brent Johnson of the dollar milkshake theory thinks that though there is a global desire to dedollarize, it will be nearly impossible to do so because the proliferation of dollar denominated stable coins will sweep the world and make the value of the dollar rise.  Ironically he feels that this rise in dollar value will cause a credit crisis that will make the value of gold soar.

Though both theories favor gold, the time frame suggested by both theories for the rise in the value of gold are very different.

I would say that those who are pounding the table for stable coin are missing two extremely important problems.

First, as delineated compellingly by Jim Rickards, the fact that there is no oversight for stable coin will necessarily lead to abuse.  And it only takes one bad actor to destroy the faith in the entire system.  Each stable coin is theoretically backed by a dollar of treasuries.  But without enforcement, oversight, or even transparant  accounting, anyone can cheat, and nobody would know until a problem arose in redemption.  At that point, a problem could lead to mass redemptions and a collapse of the entire system.

Second, the block chain technology upon which all crypto is dependent will be hackable by Quantum computing by as early as 2029.  It is already hackable right now, but there is not yet a computer with sufficient power to generate the hack.  That, right now, is three years away.  But it could come sooner.

That it will come is not in question.  Why this doesn't make the crypto community more nervous is a complete mystery.  Maybe they think if they ignore this problem it will just evaporate. But when it happens it will make gold, the barberous relic, all the more attractive. 

And a gold linked Chinese currency will then also be all the more attractive.