Do you take Amazon or Walmart dollars? In the question it’s easy to see the problem with bitcoin, and other well-known speculations. People aren’t prone to storing their wealth meant for essentials in speculative instruments.
Which is why bitcoin will never be broadly circulated as money. See its well-documented turbulence.
Really, who would speculate on bitcoin while also using it as money? The question vivifies the problem. Money is a medium of exchange that makes it possible for products to be exchanged for products. But since Bitcoin’s biggest proponents make the rather unlikely claim that it's only going up, who would exchange it for market goods? To buy with bitcoin wouldn’t just be to suffer depreciation related to a new good morphing into a used good, it would also occur parallel to the so-called currency exchanged with appreciating in value. That’s why it’s increasingly evident that companies like Amazon and Walmart will write the future of cryptocurrency far more than bitcoin, and other market speculations.
It brings us back to the question at the beginning of this opinion piece. A front page Wall Street Journal article from last week lends some heft to the question. The Journal indicated that Walmart and Amazon are contemplating the issue of stablecoins. Stop and think about the possibilities here.
Walmart and Amazon are global brands, and as global brands they have lots of brand to protect. Which means producers would be much more willing to store their wealth in money issued by either.
Throw J.P. Morgan, Wells Fargo, or Bank of America into the mix given the prominence of the three in banking. The more competition in the money space, the greater the competition. And the competition will involve issuers of exchange media striving to maintain the value of the currency concepts issued. The emphasis at the end of the sentence is mine.
While the Journal reports that Walmart and Amazon are presently looking into the possibility of stablecoins in their own names, it’s no revelation that stablecoins derive their stability from their peg to the U.S. dollar. That’s not exactly a bad thing as evidenced by the dollar’s use around the world as the primary exchange medium, but at the same time a dollar isn’t always a dollar.
As evidenced by how often dollar quantities from transactions in the past are “adjusted for inflation,” the dollar’s value has long been a moving target. Particularly since 1971 when President Nixon severed the dollar’s link to gold.
Which is cause for even greater optimism about what Amazon, Walmart and hopefully a few prominent financial institutions will do. Quite unlike the U.S. Treasury, it’s no reach to speculate that it won’t be enough for exchange media associated with Amazon, Walmart and other major brands to merely track the dollar. Again, while its value over time has been stable enough for it to exist as the world’s currency, the dollar clearly hasn’t been stable enough. See trillions worth of daily currency trading if you’re confused.
From this confusion, or a lack of it, exists a major opportunity for some of the world’s greatest corporations to transform money as we know it. By improving on the dollar with cryptocurrencies of their own, Amazon and others would force Treasury’s hand when it comes to maintaining dollar-price stability too.
As argued in my 2022 book The Money Confusion, the world desires money that has measuring-stick qualities. The problem has always been that governments eventually devalue a little or a lot. Businesses can’t devalue. See above. They have brands to protect. Walmart and Amazon exploring stablecoins is a big deal exactly because it likely signals something better than a mere stablecoin.
