The end of Pax Americana is near.

Let’s analyze the pattern of events that have unfolded recently:

The US economy was in a weird position before it all happened, with record-low interest rates that resulted in fake economic growth and a period of excesses.

Then COVID hit, basically pausing the economy. Inflation got out of hand “temporarily” as they said. Then inflation didn’t get back to normal, so they raised interest rates. But by raising interest rates so quickly, banks started going poof. SVB, Credit Suisse, etc.

To “stabilize” the situation, central banks announced measures to bail the “faulty” banks out and provide added liquidity to their fiat currencies. But where does that money come from, if the central banks themselves have gone poof? They don’t have that money in their balance sheets. The Fed is bankrupt.

They will print it. Thus they will fail to stop inflation, further needing to increase interest rates, breaking even more things within their already broken financial system.

Eventually, this ends only with one thing: the dollar loses hegemony as the reserve currency.

You might believe in chance, but when it comes to macropolitics, I don’t. It’s all elaborate chess games played over decades and decades.

The New Axis (mainly China and Russia) have played their cards well during these last decades. They slowly permeated the key institutions and decision makers, destabilizing the West.

Examples are Russia interfering US elections and the German chancellor working for Gazprom while Germany (the EU’s economic engine) shut down its nuclear plants.

What now

A tale of two tweets:

It’s obvious now that some nation states will ban crypto.

Their mismanagement has put their currencies in jeopardy, and savvy investors will realize and buy crypto en masse. That exit from the fiat market will create bank runs and chaos, exposing the pitfalls of the fiat system even more. Which in turn will lead to more demand for crypto.

At some point governments will realize that and twist the narrative as follows:

People buying crypto are terrorists and enemies of the state, they are the ones breaking apart our currencies and banking system. They will be prosecuted.

The crypto fiat onramps and offramps will be illegalized. The central banks will issue CBDCs — selling it to the public as “all the benefits of blockchain, without the terrorists and volatility”.

Of course this will be a massive red flag for savvy investors, who will move en masse to crypto-friendly jurisdictions.

Ultimately, people pay the bill through inflation and “investor protections” to “help people not lose money on speculative investments” — aka crypto.

Such actions will impoverish entire countries, and the world order will shift. First world countries that depend on the dollar’s hegemony will become third world countries, as they become the passengers of a sinking ship.

The West is in ruins | Luis Cuende

Humankind is long-term default dead, and not default alive.

https://luisc.xyz/posts/ruins

Emerging countries will be able to make bets that will benefit entire generations — such as distancing from the US and making Bitcoin legal tender. They will become the new first world.

That doesn’t mean we won’t see crypto crashing before it recovers. When systems collapse, things get messy. Sometimes predicting the short-term is harder than predicting the long-term.

We live in those times.

Long-term, the future is optimistic, as human ingenuity keeps creating better systems: crypto, AI, better nuclear, etc.

Short-term, getting from a crooked system to a new one is messy.

For example, what will happen if the dollar hyperinflates? Pax Americana has kept the world relatively peaceful. But the US cannot fund its military operations if the dollar becomes worthless.

Will China invade Taiwan then? Will the US withdraw from NATO? Will that enable Russia to take back the Baltics? It is all highly likely.

I wouldn’t be surprised to see this timeline:

I would rather not see this happen. I would rather see the West’s leaders make a smart move, for once. I’d rather see them acknowledge their mistakes and amend them.

For example, can you imagine what would happen if the US decided to move back to the gold standard? But instead of backing the dollar with physical gold, backing it with digital gold — Bitcoin. That would be a bold move, but one that would secure the dollar’s dominance for a while.

But the gerontocracy will not allow that. They would rather see it all burn than acknowledge they were wrong all along.

Which is why, unfortunately, often systems need to die for new ones to emerge.

I just hope that the new system is one of freedom, and not one of oppression — as upheld by China’s and Russia’s current political regimes.