Thread by @Willem_VdBergh

1/ Impossible Trinity in the Post-war world (1944-today), some thoughts:

IT is the theoretical and empirical reality that dictates that Nation-states can only enjoy 2 of 3 economic privileges listed below;

-Sovereign monetary policy
-Free Capital flow
-Fixed exchange rate

2/ During the Bretton Woods convention of 1944 the majority of western powers came together to lay the groundwork of a new global monetary system. The USD was to be pegged to gold, other countries pegged their currency to the USD, making the dollar the world reserve currency.

3/ This era (1945-1971) is one of the three possible IT combinations:

Fixed exchange rate + Sovereign monetary policy

During this post-war period, Capital controls were not the taboo they are today, and it was frequently employed to keep the Fixed exchange rate alive.

4/ This all changed in 1971 when the Bretton Woods agreement was unilaterally abandoned by the US (see Triffin dilemma), ending the "gold standard". As a consequence, most nations decided to allow their currency to free float against the USD.

5/ This marks the beginning of the second IT combination (1971-present):

Sovereign monetary policy + Free capital flow

In order to keep the Capital control to a minimum (and maintain export), Nations allowed their currencies to devalue against to USD (instant or over time).

6/ That leaves us with one combination untested, which in my opinion, is the only one that has some merit.

Thats no coincidence though. "If people can print money, they will print money" @bitstein.

Because of this international monetary reality, were at a permanent standstill.

7/ This is were Bitcoin comes in:

Because of its a non-sovereign nature, it has, by some sly way, completely circumvented the incapability of Nation-states to test out combination 3:

Free capital flow + Fixed exchange rate (1 BTC = 1 BTC)

I think combination 3 will win!!