Gresham’s Warning
Bad Money, Historical Debasements, and Modern Showdowns
Perspective: The Scale of US National Debt
To grasp just how vast the US national debt is—now totaling more than $38 trillion as of October 28, 2025—consider this: if every dollar were represented by a single $1 bill, each about 0.0043 inches thick, the resulting stack would soar to approximately 2.58 million miles in height. That’s enough distance to travel between the Earth and the Moon and back about 5.4 times, given the average round-trip distance of 477,710 miles. This astronomical visualization puts the magnitude of America’s fiscal obligations into stark perspective.
Triffin’s Dilemma and the Reserve Currency Paradox
First described by economist Robert Triffin in the 1960s, Triffin’s Dilemma refers to the conflict faced by countries whose currency serves as the global reserve. To supply the world with liquidity, these nations must run ongoing current account deficits, but this risks eroding trust in their currency and may lead to devaluation or financial crises. The dilemma highlights the tension between national economic goals and international responsibilities—a challenge that influenced the end of the gold-dollar standard in 1971 and remains relevant in discussions about dollar dominance and global financial stability today.
Fiat Currency System: Flexibility and Risks
Fiat currencies—such as the US dollar, euro, and yen—do not derive their value from physical commodities like gold or silver, but from government edict and public confidence. Declared legal tender, they must be accepted for payment of debts within their jurisdictions. This system grants central banks significant leeway in monetary policy, allowing measures like quantitative easing and interest rate adjustments to help stabilize economies and promote growth. The broad shift to fiat money accelerated after the United States abandoned the gold standard in 1971.
However, these systems bring risks: if governments overextend and print too much money or if political instability arises, public confidence can erode quickly, triggering hyperinflation or loss of legitimacy. Ultimately, the entire fiat structure depends on enduring trust in the issuing authority.
Federal Reserve, Gold Policy, and Bretton Woods
The Federal Reserve was founded in 1913 to stabilize the US banking system. Initially, its focus wasn't currency devaluation, but events like the Great Depression shifted policies: in 1933, President Roosevelt banned private gold ownership and raised its official price, devaluing the dollar and expanding US gold reserves. This helped fund New Deal programs and curb deflation, as prices rose significantly through the mid-1930s.
World War II kept the dollar pegged to gold at $35 per ounce, with inflation managed via bonds and taxes. The Bretton Woods Agreement in 1944 made the dollar the global reserve, anchored to gold, supporting postwar stability and US leadership. By the 1950s, gold reserves peaked, though economic imbalances started to emerge.
End of Bretton Woods and Shift to Fiat Money
By 1971, declining US gold reserves prompted President Nixon to end dollar-gold convertibility, impose wage and price controls, and introduce an import tariff. This terminated Bretton Woods, led to fiat currency, and triggered high inflation. Floating exchange rates became standard, causing volatility and speculation as US debt soared.
The dollar has remained the main reserve currency, though alternatives like the euro and cryptocurrencies challenge its dominance. While this system offers policy flexibility and growth, it also brings inequality and geopolitical tensions, particularly over the petrodollar.
Zero Interest-Rate Policy (ZIRP)
ZIRP sets central bank rates near zero to boost borrowing and spending, discouraging saving. Japan used ZIRP in the 1990s for deflation, with the US, Eurozone, and UK following from 2008–2021 during crises. As inflation rose by 2022, central banks reversed course, and by 2025, the US began "policy normalization" amid major refinancing.
ZIRP aided recovery and innovation but also kept inefficient companies operating, inflated asset prices, widened inequality, and penalized savers. Higher rates later triggered market volatility and job cuts, especially in tech, highlighting the risks of extended ZIRP use.
Quantitative Easing (QE)
QE is used when rate cuts are ineffective, typically during ZIRP. Central banks buy long-term assets to inject liquidity, lower yields, and spur lending, aiming to boost economic growth. Quantitative tightening does the opposite by reducing money supply.
Pioneered by Japan and widely adopted after 2008, QE has expanded central bank balance sheets globally. While QE supported recoveries and employment, it also raised concerns about asset bubbles, inequality, market distortions, and volatility.
Criticisms of ZIRP and QE
These unconventional policies have been criticized for worsening wealth inequality by raising asset values mostly benefiting the wealthy, while low rates hurt savers and push them toward riskier investments. ZIRP and QE can also keep unproductive companies afloat, inhibit innovation, inflate bubbles, and increase the risk of financial crises.
Additionally, such measures may weaken currencies, fuel inflation, elevate living costs without wage growth, and destabilize emerging markets via volatile capital flows. Long-term use can create dependence on easy money and complicate economic normalization, as seen in recent market disruptions.
Empires, Reserve Currencies, and Cyclical Patterns
Historians Arnold Toynbee and Sir John Glubb have explored the cyclical rise and fall of great powers. Glubb’s seven-stage model describes empires progressing from pioneering exploration, to conquest, commerce, affluence, intellectual achievement, decadence, and finally collapse—typically over 250 years.
Reserve currency status has often mirrored these cycles: it amplifies a nation’s rise but can hasten its decline through overextension and financial excess. Throughout history, this has played out repeatedly.
The Roman Empire’s silver denarius lost value through debasement, sparking inflation and decline;
The Byzantine Empire’s solidus, initially trusted for its gold content, later fell victim to dilution and collapse;
Spain’s piece of eight funded expansion, only to trigger inflation and deficits;
The Dutch guilder, once a trade innovation, lost ground to speculation and war, ceding to the British pound, which itself was eroded by war, debt, and colonial losses as the US dollar took the mantle.
Today, the dollar faces parallel challenges.
Gresham’s Law: “Bad Money Drives Out Good”
Gresham’s Law, a foundational monetary principle, posits that when currencies of equal face value but differing intrinsic worth circulate together, people spend the “bad” (less valuable) money and hoard the “good” (more valuable) money. Over time, the superior currency disappears from circulation.
Classic examples include the prevalence of silver coins in daily commerce while gold coins are hoarded, rendering gold scarce in the market.
Geopolitical Currency Showdown: BRICS Gold vs. US Bitcoin
BRICS Gold Strategy
In recent years, BRICS nations have increased their gold purchases as an alternative to the use of the US dollar. In the second quarter of 2025, BRICS central banks purchased 166 tonnes of gold, which is 41% higher than their average, bringing their combined reserves to over 6,000 tons, representing approximately 20–21% of global holdings. China resumed monthly acquisitions, while India, Turkey, and Russia maintained substantial buying activity, contributing to high gold prices during 2023 and 2024.
The group is developing a “Gold Corridor,” including significant vault infrastructure in Riyadh, Hong Kong, Dubai, Singapore, and Malaysia, with possible future expansions in Brazil and India. This initiative aims to support dollar-free settlements, reduce reliance on the dollar in trade, hedge against inflation, and potentially serve as a foundation for a new international currency.
US Bitcoin and Crypto Strategy
The United States is advancing dollar-pegged stablecoin legislation and expanding global dollar access to boost demand for U.S. Treasuries and reinforce dollar dominance. It has also established a Strategic Bitcoin Reserve, holding seized Bitcoin as a digital hedge against strategies like BRICS gold.
These moves aim to modernize reserve management, attract foreign investment, and address national debt while maintaining the dollar’s global role. New regulations ensure stablecoins are backed and overseen for reliability, while Bitcoin is treated as a key reserve asset, diversifying U.S. reserves and strengthening leadership in digital finance.
Parallel Bets Coexisting—Until One Emerges Victorious
These two systems can run side by side for an extended period because they serve overlapping but distinct needs in a multipolar world. BRICS' gold network enables intra-bloc trade (for example, oil from Saudi Arabia settled in gold via Hong Kong vaults), while US crypto innovations expand dollar usage in emerging markets through stablecoins, without immediate conflict.
Hybrid arrangements, like gold-backed stablecoins or Bitcoin-gold swaps, could even bridge them temporarily. However, per the Gresham’s Law analogy, prolonged competition may lead to a winner-take-most outcome.
If gold proves "stronger" amid inflation or sanctions, nations and individuals might hoard it and spend dollars or Bitcoin. Conversely, if Bitcoin's scarcity and stablecoins' efficiency dominate—fueled by US tech advantages—driving savings toward crypto.
A catalyst such as a global crisis, debt default, or tech breakthrough could tip the scales, forcing convergence where the "weaker" system is spent away, and the "stronger" becomes the de facto reserve. In the end, as history shows with past currency wars, market dynamics ensure only one paradigm prevails.
Conclusion: Lessons from History and Today’s Financial Crossroads
Across the centuries, the arc of global finance has echoed familiar patterns—reserve currencies ascend through innovation and stability but falter when excess and mismanagement take hold.
The unfolding contest between BRICS’ gold infrastructure and America’s crypto pivot represents a pivotal test of economic leadership and security in an increasingly complex monetary landscape.
Going forward, the keys to enduring prosperity will be adaptability, sound stewardship, and the maintenance of public trust and resilience. Policymakers, investors, and observers must heed the lessons of history, fostering prudent innovation and robust economic foundations.
Decisions made at this juncture—at the intersection of tradition and technological change—will shape the fortunes of generations to come.
