The nature of money

published 28 February 2019

936_MW_P03_Ed-Letter — America, at 243, is an older democracy than many European countries

I may have mentioned this here before, but one of the things that often surprises me about America's view of itself is the idea that it is a relatively new nation when it really isn't.

The US declared independence in 1776.That makes it rather older than, say, Germany, which unified in 1871 (and again in 1990) and Italy (declared a nation-state in 1861). You could also argue that, while the US may be younger than many of the other European nations, it's definitely a much older democracy. Spain and Portugal only wrested democracy from the jaws of authoritarianism in the mid-1970s, for example.

I was reminded of this when I interviewed strategist Russell Napier this week (the article and the podcast will both be out next week). There are a million reasons to think that the era of the dollar being the world's reserve currency is closer to its end than its beginning (see our cover story, where John Stepek explains all of them). Yet when I asked Napier which paper currency he would hold if he had to hold one and only one for 20 years, he chose the dollar.

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Why? Because it is based on a strong democracy, strong institutions and a firm attachment to both the rule of law and the protection of private property, all things that have stood the tests of many unpleasant times. If you are investing for the very long term, says Napier, best do so in countries with democratic institutions that history has shown to be stronger than their occasional lousy leaders.

"Today QE is just another tool hanging off the Velcro on every central banker's belt"

Finally, while you have the nature of money on your mind, Ben Judge looks at the emergence of cryptocurrencies linked to the dollar (stablecoins). You might wonder what's going on here. If a cryptocurrency is pegged to the dollar, surely it's not actually a currency (in the sense that gold is), but just another way, albeit a new and maybe more efficient way, to use and to transfer dollars? I'm wondering with you.

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Editor's Letter

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.