By Brett Munster
The transition to a new monetary era has begun
Over the history of this newsletter, we’ve tracked a number of developments that point to growing stress within the global financial system. The national debt spiral, sovereign credit downgrades, and weakening bond auctions driven by eroding trust in U.S. Treasuries are not isolated incidents; they are signposts of a deeper systemic shift. Add to that the increasing weaponization of the dollar through sanctions and the global race among nation-states to acquire bitcoin, and the picture becomes clear: we are witnessing the slow disintegration of the old monetary order and the emergence of a new financial era—one potentially centered around digital, politically-neutral reserve assets like bitcoin.
To understand where we might be headed, it’s essential to first understand how we got here. The current global financial architecture did not arise by accident—it is the result of deliberate choices made by the United States during key geopolitical inflection points over the past 80 years.
Our journey begins in the aftermath of World War II. In 1945, much of the industrialized world lay in ruins—Europe was decimated, Japan was bombed out, and the Soviet Union had endured staggering human and material losses. In contrast, the United States emerged as the sole unscathed superpower. It accounted for more than half of global GDP, held roughly 70% of the world’s gold reserves, dominated the seas with its navy, and was the only nation with nuclear capabilities. This unmatched position allowed the U.S. to shape the post-war global economic order.
In July 1944, 44 allied nations met in Bretton Woods, New Hampshire, to design a new international monetary system. The resulting Bretton Woods Agreement created a gold-backed U.S. dollar as the world reserve currency. Other countries pegged their currencies to the dollar, while the U.S. pledged to convert those dollars into gold upon demand. To help the world recover, the U.S. offered open access to its domestic markets, guaranteed maritime security, and promoted free trade—all underpinned by American military might.
This was not solely motivated by altruism on the part of the United States. The U.S., uniquely self-sufficient with its own consumer base and natural resources, didn’t need international trade to survive at the time. Instead, it used global trade strategically—to build alliances, spread influence, and entrench its economic dominance. Former enemies and allies alike—Germany, Japan, France, South Korea—were rebuilt under the protection of the American security umbrella. By policing trade routes and providing a market for exports, the U.S. enabled these nations to rebuild their economies with minimal defense spending.
While the system was initially effective, it contained inherent flaws that grew increasingly problematic over time. Throughout the 1940s and 1950s, the Bretton Woods system largely functioned as intended: global trade expanded, countries accumulated U.S. dollars through exports and then exchanged those dollars for gold. However, this dynamic gradually created a dangerous imbalance. As foreign claims on U.S. gold reserves swelled, America’s gold holdings were steadily depleted. By the 1960s, cracks in the system became more evident, and doubts emerged about the U.S. government’s willingness or ability to honor its gold commitments. In 1971, France famously sent a warship to the U.S. to collect its gold, a symbolic challenge that inspired others to also demand gold in exchange for dollars. That same year, U.S. gold reserves had fallen to $10 billion, while outstanding foreign claims had ballooned to over $60 billion. The system had become unsustainable.
In August 1971, President Richard Nixon suspended the dollar’s convertibility into gold, delivering what became known as the “Nixon Shock.” This decisive move halted the outflow of gold, effectively dissolving the Bretton Woods system and ushering in the era of fiat currency. Freed from the discipline of gold backing, the U.S. government gained the ability to expand the money supply, accumulate debt, and erode liabilities through inflation. In effect, by closing the gold window, the United States defaulted on its international financial obligations. Around the world, countries that had accumulated dollars on the assumption they were as good as gold suddenly found themselves holding paper backed only by the faith in U.S. credit. Although no single nation was ready to take over as the global reserve currency, the emergence of a potential multipolar financial system — in which several currencies might share that role — began to challenge the dollar’s dominance.
To stabilize the system, the U.S. forged a new geopolitical-economic deal. In 1974, it reached an agreement with Saudi Arabia—the world’s largest oil exporter—to price its oil exclusively in U.S. dollars and reinvest surplus revenues into U.S. Treasuries. In return, the U.S. provided military aid. This arrangement gave birth to the Petrodollar System.
The implications were profound. With oil priced solely in dollars, every nation required U.S. currency to purchase energy, creating a built-in, persistent global demand for dollars. The dollar, no longer backed by gold but effectively supported by oil and American military might, solidified its status as the world’s dominant reserve currency. Simultaneously, U.S. Treasuries emerged as the new global safe-haven asset, functioning as a de facto replacement for gold. Under the Petrodollar system, the U.S. successfully shifted the foundation of global finance from gold-backed reserves to debt-backed instruments, granting it the “exorbitant privilege” of financing deficits at low cost and borrowing on exceptionally favorable terms—further entrenching its geopolitical and financial dominance.
However, the system came with long-term costs that still shape the U.S. economy today. In the 1960s, economist Robert Triffin identified a fundamental contradiction in global reserve currency regimes—later dubbed the Triffin Dilemma. As the world’s reserve currency, the dollar is essential for global trade, creating sustained and outsized demand far beyond what would occur under purely domestic economic conditions. This persistent demand keeps the dollar artificially strong, making imported goods cheaper while rendering U.S. exports less competitive. In essence, there is an inherent conflict between supplying the world with enough dollars to fuel global commerce and preserving the competitiveness of American industries and jobs at home.
While a strong dollar benefits U.S. consumers—allowing them to purchase cheaper imported goods and enjoy favorable exchange rates when traveling abroad—it forces the U.S. economy into chronic trade deficits. As American-made goods become relatively more expensive, both foreign and domestic consumers increasingly turn to cheaper alternatives produced overseas. Simultaneously, U.S. businesses are incentivized to source materials and products abroad to take advantage of lower costs, further reducing demand for domestic production.
On one hand, this dynamic has elevated living standards for many Americans by providing access to an abundance of inexpensive goods. Yet, over time, it has also hollowed out U.S. manufacturing and accelerated offshoring, as producing domestically became less economically viable. The American economy gradually shifted away from industrial production and toward services, technology, and finance. While these sectors have flourished, the middle class—once anchored by stable, well-paying manufacturing jobs—weakened considerably, leaving lasting structural challenges that continue to reverberate through the U.S. economy.
This tradeoff—between global monetary leadership and domestic economic resilience—played out over decades. While Wall Street and Silicon Valley boomed, industrial towns and blue-collar jobs withered. COVID exposed just how fragile this model had become: a nation once renowned for its industrial strength struggled to produce basic goods when global supply chains broke down. The very system that elevated the U.S. to economic dominance had begun to undermine its internal stability.
Meanwhile, China played the opposite game. Over the past five decades, it transformed itself into the world’s manufacturing powerhouse capitalizing on cheap labor to flood global markets with affordable goods. In return, it accumulated U.S. dollars, which it then recycled into U.S. Treasuries. Between 2000 and 2011, as American demand for inexpensive Chinese-made goods soared, China’s holdings of U.S. debt surged from $73 billion to over $1.3 trillion. This strategy kept the yuan weak, making Chinese exports even more competitive, and fueled a powerful cycle of trade surpluses, industrial expansion, and growing financial influence over U.S. debt markets.
Fast forward to today, the Petrodollar system is unraveling. Wealth concentration in the U.S.—and globally—is at historic highs, driven not merely by corporate greed or individual excess, but by the very structural design of the global economic order. The U.S. is entering the early stages of a sovereign debt spiral, with the government increasingly borrowing just to cover existing debt payments, while interest expenses take up an ever-growing portion of the federal budget. Meanwhile, foreign buyers—once eager purchasers of U.S. debt, including China and Japan—are steadily reducing their Treasury holdings. Recent Treasury auctions have seen weakening demand, and major credit agencies such as Fitch, Moody’s, and S&P have downgraded U.S. credit ratings, signaling mounting concerns over fiscal sustainability.
At the same time, the use of the dollar as a geopolitical weapon—most notably in freezing Russia’s foreign reserves after its invasion of Ukraine—has sent a chilling message to other nations. Holding dollar-denominated assets now carries political risk. The result? A growing demand for neutral reserve assets—ones not subject to the policies or sanctions of any single country.
In this context, it becomes increasingly clear why bitcoin is beginning to play a more significant role in the evolving global financial order. Following World War II, the U.S. dollar was backed by gold; for the past half-century, it has been underpinned by oil. Today, in the digital age, a new system is emerging—one in which bitcoin may serve as a next-generation reserve asset.
Nation-states are already moving in this direction. The U.S. now has a formal strategic bitcoin reserve. Binance has advised multiple governments and sovereign wealth funds on bitcoin accumulation strategies. Abu Dhabi’s sovereign wealth fund purchased $500 million worth of bitcoin. Russia is actively exploring a strategic reserve. Brazil has introduced a bill mandating the central bank hold 5% of its reserves in bitcoin. Japan, the Netherlands, Poland, and other countries are considering similar moves. Discussions are underway in over 20 nations, including China, Canada, Turkey, Nigeria, and Singapore.
Why this sudden urgency?
Because bitcoin is the first digitally native, politically neutral, censorship-resistant, and verifiably scarce monetary asset in history. It combines gold’s finality with the speed and portability of modern communication. In a world trending toward multipolarity and mistrust, bitcoin offers a reserve asset no single nation can manipulate, confiscate, or inflate.
To be clear, the dollar isn’t disappearing anytime soon. It remains the most liquid and widely used fiat currency on Earth. In times of crisis, dollar demand still surges. But what’s changing is what countries save in. In the Bretton Woods era, nations saved in gold. In the Petrodollar era, they saved in Treasuries. In the era ahead, they may still transact in fiat—but increasingly, they’ll save in bitcoin.
Bitcoin is not yet a replacement for the dollar as the world’s primary medium of exchange. Perhaps one day it might, but for now, it is rapidly emerging as a global store of value—particularly as traditional “safe” assets come under pressure.
From the gold-backed dollar of Bretton Woods to the oil-backed Petrodollar system, and now to the emergence of bitcoin, every major shift in the global financial order has been driven by a combination of geopolitical dynamics, technological evolution, and decisive U.S. policy action. Today’s transition follows that same pattern. With Treasury markets under strain, national debt reaching historic highs, and geopolitical fragmentation accelerating, a new digital monetary standard is rapidly gaining traction among nations. The recent establishment of a U.S. strategic bitcoin reserve is not a coincidence, but a calculated move—positioning the United States once again at the center of defining the next global economic architecture.
Bitcoin is no longer a fringe rebellion. It is becoming state-sanctioned collateral.
The transformation won’t happen overnight. Monetary regimes evolve over decades. But the foundations are being laid right now—and those who recognize the shift early will be best positioned to navigate the changes ahead.
History shows that monetary systems don’t last forever. They adapt to new realities. And we are now living through one of the most significant monetary transformations in modern history—one that will reshape the definitions of wealth, sovereignty, and financial power in the digital age.
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Bipartisan majorities in two House Committees vote to advance the Digital Asset Market CLARITY Act of 2025.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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