snoqueen wrote:Bitcoin may be flawed, faddish, taxable, and manipulable, but the idea of an international currency (or many currencies) not issued by any one country is not about to go away. I believe this is the beginning of the end of the age of the US dollar, though I probably will not be alive to see how it all shakes out.
One solution that has some popularity in East Asia, including China, is not to replace the dollar with another single currency, but to take a "market basket" approach, something like what is already done when doing international economic comparisons. Details differ depending on who's proposing the scheme, but the basic idea is to have a core of currencies that are pegged to each other (let's say, the dollar, the euro, and the yuan), so that converting from baht to any of the pegged currencies yields the same result.
I'm not sure this approach would really work. One reason that currencies become international standards (the $US is only the most recent, after all) is the perception that the economy supporting the currency is somehow immune, or at least resistant, to inflation and deflation. The $US, and before that, the Pound Sterling, achieved that reputation through the sheer size, reach, and stability of the US and UK economies, respectively. The failure of the Euro to seriously challenge the primacy of the dollar suggests that even an economy the size of the EC fails to meet those requirements. The PRC has a huge economy that is spreading rapidly around the world, but the jury is still out on the stability question. No matter how common the yuan becomes worldwide, if there is any question it might not retain its value because of, oh, a collapsing real estate bubble at home, it won't be trusted as much as the dollar. This is particularly true of the PRC because the government is so deeply involved in fundamental ways in the civilian economy--for example, all land is still officially owned by the government, and the largest companies all enjoy government agencies (typically the PLA) as the majority shareholder. If things go south, then the government is left holding the bag. And, since the government back the yuan, the yuan follows the economy south.
This is fundamentally different from the US system, in which (like it or not) the government guarantees major players in the economy, but is not directly exposed, and could cut failing companies loose (see Lehman Bros.). True, that has not been the case in the recent banking scandals here, but it is possible. It is not possible in the PRC.
In short, I don't expect the $US to be dropped as the international currency anytime soon. Certainly I don't think it will be replaced by something like bitcoins, which are more of a commodity than a currency. Really, given the ability to digitally transfer and convert currencies in a fraction of a second, I don't see the need for a currency unlinked to a given economy. It would have been a good idea prior to WWII, but what is the point now?