THE CURRENCY COLD WAR

Cash and Cryptography, Hash Rates and Hegemony

 

The Currency Cold War by David Birch is a special volume in London Publishing Partnership’s Perspectives series, edited by Diane Coyle.

Money is changing and this may mean a new world order. In this new book, The Currency Cold War (published in 2020), David Birch sets out the economic and technological imperatives concerning digital money, discussing the potential impact of it and the tensions involved — between public and private and between East and West — to contribute to the debate that we must have to begin to shape the International Monetary and Financial System of the near future.

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About The Currency Cold War

The war for virtual money is real. The way that money works now is, essentially, a blip. It’s a temporary institutional arrangement agreed in response to specific political, technological and economic circumstances.

As these circumstances change, so money must change. Many people think that it is about to undergo a pretty significant change in the very near future as we come to the end of what economists call the current “Bretton Woods II” era of international monetary arrangements.

This is not the opinion of wide-eyed technologists obsessed with Bitcoin, by the way. Mark Carney gave a 2019 speech as governor of the Bank of England in which he said that a form of global digital currency could be

“the answer to the destabilising dominance of the US dollar in today’s global monetary system”.

But which digital currency? Will we really be choosing between the Federal Reserve and Microsoft (between dollar bills and Bill’s dollars)? Or between Facebook’s Libra and the Chinese Digital Currency/Electronic Payment system “DC/EP”? Between spendable SDRs or Kardashian Kash?

As David describes in The Currency Cold War, he thinks that the answer is yes, so we need to start planning for this coming era of digital currency. The historian Niall Ferguson has written that

“if America is smart, it will wake up and start competing for dominance in digital payments”

and David is sure that he is right.

In fact, he’d go further and say that we could see a new currency cold war in cyberspace with, to choose some obvious examples, Facebook’s private currency facing off against China’s public currency facing off against a digital euro. Would a digital dollar win this new space race?

It would be a mistake to see this as a technical debate about cryptocurrencies and blockchains, about hash rates and key lengths. It matters far outside the virtual boundaries of the new age.

The Dollar’s dominance gives America the ability to exert soft power through the International Monetary and Financial System (IMFS). A serious implication of replacing existing monetary arrangements with new infrastructure based on digital currency is that this power might be constrained.

Whether you think it might be a good thing or not, you need to think about what it means for you, your business and your country. After all, some observers are labelling the competition to provide the digital currencies of the future a new Space Race, and I think they may be right.

It seems to David that now that the technologists, the business strategists, the economists and both national and international regulators are beginning to glance in the direction of those alternatives, the whole topic of digital currency needs to be explored.

In this book, The Currency Cold War, David will try to set out the economic and technological imperatives, discuss the potential impact on the IMFS and highlight a series of tensions—between public and private, and (most importantly) between East and West—to contribute to the necessary high-level debate that we must have to begin to shape the IMFS of the near-future. And he tries to make a few positive suggestions about a national digital currency strategy.

BUY THE BOOK HERE

Click below to go to our publishing house where you can purchase The Currency Cold War