I think this is going to serve as a valuable lesson for many bureaucrats in these countries, teaching them about monetary economics. What we’re seeing is what I would call “de-dollarization by press release.” You read some of these press releases, and it sounds like the foreign ministers of these countries have agreed to stop using the dollar for trade. They say they’re going to trade using their own currencies, but that raises an important question: which currency?

Take, for example, India and Saudi Arabia. What use does Saudi Arabia have for Indian rupees? And what would India do with Saudi riyals? Sure, they trade with each other, but at the end of the day, what matters is the cash balance they keep. Neither country has any reason to hold each other’s currency because no other country accepts it. Saudi riyals and Indian rupees aren’t useful for trading with Russia, Brazil, Iran, or the U.S. No one wants them. So, even if they say they’ll trade in their own currencies, in reality, they’re still holding dollars, because the dollar is the most liquid and widely accepted currency. It’s easy to buy and sell dollars, and if you have a lot of money, you want to be able to get in and out of the market without affecting the price.

It’s easy for governments to talk about this, but there’s no practical solution. As long as they stick to their own currencies, it’s unworkable. The only real solution is to use gold. That’s the second lesson. The first lesson is that their own currencies won’t work. Once they learn that, hopefully, it won’t take five years for them to figure it out. Then, the second lesson will be why they should use gold. But when they try to use gold, they’ll realize that it’s not so simple. If they’re trading with gold, they are essentially adopting a gold standard. To make this work, they would need an exchange rate between their currencies and gold, and both governments would have to back their currencies with gold. They can’t just give a bunch of gold at the end of the year and call it a solution. They’d need to redeem their currency for gold on a regular basis, which is a huge commitment.

Now, I don’t think that the Chinese, Russian, Iranian, or Indian governments are going to go on a gold standard. It’s just wishful thinking for people who don’t like the dollar. There are a lot of good reasons to dislike the dollar, but if you’ve been paying attention, you’ll see that none of these countries are building the infrastructure needed to settle trade in physical gold. Show me one country that is setting up a facility to trade gold, where gold is physically moved from one country to another. When they start talking logistics about moving gold, then I’ll take them seriously. But until then, it’s all talk.

If they do start moving towards a gold standard, that will be the third lesson: why Bitcoin is better than gold. Once they realize how expensive and complicated it is to safely move gold internationally, they’ll understand the advantages of Bitcoin. Moving physical gold is costly because it’s heavy, and it’s even more expensive to verify if a gold bar is real. You can’t just look at it; you have to melt it down and recast it to check. There’s a lot of room for fraud, and it’s a very inefficient system. Once they see this, they’ll understand why Bitcoin is the better option. It’s cheaper, faster, and much easier to verify. That’s when I believe they’ll learn the real lesson: Bitcoin is the future.

Saifedean Ammous