Hegemony of $: We are just starting
The Long View of History
Time is relative. In our fast-paced world, we consider a decade long and a century an eternity. But step back and examine the grand tapestry of human civilization. Our perception of "long-term" is shockingly out of sync with historical reality.
Empires and hegemonies that shaped the world order didn't just last for decades or centuries - they often endured for millennia. The ancient Egyptians dominated for over 3,000 years. The Roman Empire's influence spanned more than a millennium. Even the British Empire, closer to our time, held sway over much of the globe for three centuries.
Against this backdrop, our modern notion of long-term planning - often limited to a few years or decades - seems remarkably short-sighted. We're thinking in moments when we should be contemplating eras.
Throughout history, certain civilizations have risen to positions of global dominance, exerting influence across vast regions and shaping the course of human events. This phenomenon, known as hegemony, has been a recurring theme in the story of human civilization. One intriguing aspect of these hegemonies is their tendency to endure for extended periods, often spanning centuries.
Enter the Lindy effect. Named after a New York deli, this concept suggests that the future life expectancy of some non-perishable things, like technologies or ideas, is proportional to their current age. In other words, the longer something has survived, the longer it is likely to continue surviving. When applied to the United States' global dominance, this effect can help explain why its influential status may persist for an extended period.
America's Rise to Power
America's rise to power was swift and decisive. The Spanish-American War of 1898 marked the United States' emergence as a colonial power, extending its influence beyond its continental borders. Economically, this period saw American industrial output surpassing that of long-established European powers, setting the stage for financial dominance. Technological innovations, from the assembly line to the airplane, further cemented America's rising status. The First World War, while devastating for Europe, left the United States in an even stronger position, both economically and geopolitically.
The Lindy Effect and US Dominance
The dollar's enduring reign as the global reserve currency is a prime example of the Lindy effect in action. It creates a self-reinforcing cycle that strengthens over time. The dollar's status attracts global talent and capital to the United States, fueling innovation and economic growth. This, in turn, reinforces the dollar's position and America's global influence. The network effects are powerful and difficult to disrupt. As the saying goes, "The more widely adopted a currency is, the more useful it becomes." This is explained brilliantly by
in his article
From Financial Power to Global Influence
This financial dominance translates into broader geopolitical power. The US's ability to impose economic sanctions, control global financial networks, and influence international monetary policy all stem from the dollar's central role in the global economy. Moreover, as the world becomes increasingly digital, the US's leadership in technology and innovation further cements its economic advantage.
Challenges to Continued Dominance
But challenges loom on the horizon. The rapid pace of technological advancement and globalization may shorten dominance cycles. Increasing economic interdependence could limit the ability of a single nation to maintain unilateral dominance. Unprecedented issues like climate change may alter geopolitical dynamics in ways historical precedents don't account for.
Looking Ahead: The American Millennium?
Can America adapt to these challenges? Will its reign extend for centuries to come? Only time will tell. The American Millennium might just be beginning, but the music of history plays on. America's symphony is still in its opening movement, with many movements yet to be composed.
What Does This Mean for Crypto?
Despite crypto's revolutionary potential, the dollar's influence persists. Most cryptocurrencies are still valued against USD. Stablecoins, meant to reduce volatility, are largely pegged to the dollar. This isn't likely to change soon. For the foreseeable future, USD will likely remain the base against which all assets, including cryptocurrencies, are measured. The crypto ecosystem, innovative as it is, still operates in the shadow of American financial hegemony.