Published on March 21, 2015 at 4:02 pm CET
I’ll trust that you as the reader is educated enough to know the U.S. Dollar is on it’s last legs as the Global Reserve Currency. I’ve certainly written about the shaky financial situation of the U.S.enough, and there is no shortage of information online about the subject. The U.S. Government has started selling MRAPs to every backwoods county in the U.S. for pennies on the dollar, just because. They know what’s going on, and when the Dollar falls, the stuff will definitely hit the fan nationwide, and those machines will be used.
The Police State is being bred to be bigger, stronger, and more authoritarian. Unethical, immoral laws are being written and passed under the cover of hundreds of pages of legalese to take citizen’s rights and reverse the covenant the once great nation aspired to live up to. If you don’t see what’s happening, it’s on you, at this point. The future is not being hidden from you. 90% of the puzzle has been completed. If you don’t know, its only because you really just don’t want to know.
Policy, hubris, and ambition are changing everything
Eastern Superpowers China and Russia are Burning The Midnight Oil to accelerate the U.S. Dollar’s demise. Not that American economic policy and hubris isn’t the main factor in it. The smart eastern leadership have had enough of this economic tyranny and are moving to not only end it, but take advantage of it. Massive purchases in Gold bullion and natural resources, bilateral trade agreements, and new economic partnerships that 5-10 years ago would’ve been unthinkable, and new financial infrastructures are now a daily occurrence.
The latest nail in the Dollar’s coffin is China’s successfully realease of the Asian International Investment Bank (AIIB) to help fund international infrastructure projects. Besides being another Chinese-backed international banking power, following their BRICS Development Bank initiative of last year, it has also attracted longtime American-“BFF” Great Britain as a founding member, along with over 20 other countries. Italy, Germany, France, and other heavyweights stand with China’s AIIB venture, and take a step back from the U.S.-run IMF/World Bank monopoly. It’s a wise move to strengthen financial relationships with a country many are already doing bilateral trades with. It’s also evidence that few want to be left holding the U.S. Dollar’s bag when the global power officially shifts, so it’s a good time to score brownie points with the next global economic leader. This was also despite pressures from the U.S. to avoid partaking in this alliance. Suffice to say the U.S. was not invited to this global block party. Oooh, burn!
The only questions remaining are when does this Dollar collapse take effect, and what comes next as the world’s proceeding mediums of economic exchange. Critics, or what the kids today would call “haters,” have wished Bitcoin into the graveyard for years. Yet, the combination of market demand, superior protocol engineering, growing venture capital, impressive corporate votes of confidence, and “The Network Effect” have led Bitcoin to be somewhat unstoppable as an independent, non-centralized currency. Think of it as a snowball at the top of a mountain. You can barely see it from the valley, but in due time, that avalanche is coming. Bitcoin isn’t going anywhere, in fact, it will only adapt and come faster as more venture capital, app builders, programmers and users come on board.
Gold has been the de facto economic standard since Adam met Eve. It’s as old as the hills, and to many just as valuable. Economic indexes are commonly built on a value relative to gold, and, of course, the U.S. Dollar last had real intrinsic value in 1971 when you could still trade dollars for Gold.
That’s not just the U.S. Dollar, but the entire world has gone the tragic route of a global fiat currency, the economic prognosis is not good. No. We live in a global economy, and the more your economy depends of a fiat-based currency, the more it will suffer once all this fiat nonsense sorts itself out. Base currency amounts (the amount of circulating paper currency in an economy) is booming in nations worldwide. It’s not just an American phenomenon. Every government is debasing their currency because the fiat currency, Keynesian economic model is a total failure. Printing more money to buy their way out of a self-inflicted economic prison. Strangely, every country plays the same game, and they’re playing it to lose.
For you and I., this is not good since the economic aftereffects will be almost nuclear. Every nation will suffer significant economic damage in the not-too-distant future. Tax increases on citizens (“Obamacare” brought over twenty different tax increases alone) is a sign of economic desperation. And you can go back to the infamous Gold Confiscation Act of 1933 for more proof. The country was in the middle of The Great Recession, and when a government has to take all the Gold from their citizenry to function, it’s a sign of desperation, not inspiration.
Here, let’s review what money is, and how money is looking to change in the future. Granted, the Chinese Yuan, or some gold-backed currency, will replace the U.S. Dollar as the world’s currency soon enough. What will this mean for those who won’t be using the Yuan on a daily basis? What will The West do with whatever is left of their wealth after the Dollar’s day in the sun is finally over? How do alternatives like Gold and Bitcoin compare? Which should you have? Gold or Bitcoin? Let’s review what we know.
Gold or Bitcoin? Decisions… decisions…
China and Russia aren’t buying Gold every chance they get because it’s not valuable enough now. It may be the engine that powers the world’s economies for the rest of the 21st century, but what does that mean to us, the common man? Gold may power governments, but when is the last time you bought a week’s worth of groceries with Gold? A man’s gotta eat, no? We are talking about physical Gold, not any writs, proxies, shares, or representations thereof.
Let’s take for granted that Gold is the most valuable substance in the world, just based on cache and global acceptance alone. People love it; governments love it. If you travel at all, you’ll notice that the local coinage in any country in the world either resembles gold, silver or a combination of the two. These precious metals represent value to all societies, and that has been ingrained in all of us. We have been conditioned, like dogs, to believe in these substances as being of high value. And it is true. Gold will become much, much more valuable ten years from now than it is today. Can you take advantage of that? Would you know how to buy gold bullion? Would you know a fake Gold coin from “The Real McCoy”?
The news has had no problem pointing out the foibles of Bitcoin, and the last year has been a year of some serious teething and growing pains, as the Bitcoin market matures. Is Gold that much better? If you look back over the last five years, Gold has seen plenty of market volatility, even more so than Bitcoin. Bitcoin had the Mt. Gox/China/”Willy Bot” price explosion in Q4 of 2013, and 2014 was spent doing market correction. In five years, that’s not that bad for a brand new global currency. One major economic bubble and market correction. And when all the dust settled, Bitcoin was still worth more than twice what it was before this all started sixteen months ago (nobody in mainstream media likes to bring that up.)
Gold, on the other hand, has seen many more peaks and drops in this decade than Bitcoin has. Gold has gone from anywhere between $1900 USD to $1100 in price and has been dropping steadily for over two years, and the scuttlebutt now is will Gold fall below $1000 USD? Is the media banging the drum on that? Most of you have heard that before. Gold has dropped a couple of hundred dollars in a month several times. It is widely held by investors, economists, and market insiders that the Gold and Comex markets are largely controlled by “The banksters”, your JP Morgan’s and Goldman Sachs of the world.
How many times have you heard over the past 2-3 years to “Buy Gold”? So why is the price down 40% since 2012? A clear sign of market manipulation on Wall Street (The hell you say!). It is also widely held that the “real value” of Gold is many times it’s current traded price. The point is Gold has not proven to be a model of economic stability. If anything it is quite the opposite, but in these very uncertain economic times, no commodity is going to be ultra-stable or free from rampant speculation or market manipulation. There are a lot of hands in this cookie jar, suffice to say.
So let’s assume Gold is a great investment at a “Buy” price because it is severely undervalued at market rates. How does this help you? If you wanted to go and buy some gold, just how savvy would you need to be? The media loves to talk about Bitcoin scams and Bitcoin exchanges going under, and that’s all true. How many Gold scams are there? How many Gold coins have been sold on TV that turned out to be totally fake and worthless? Would you fall for the current scams of the EFT or the “Gold Certificate” going on right now? When the global fiat economy breaks down, do you really think anyone is going to honor a “Gold certificate”? You really think a broker, who himself has little or no gold, is going to make get your physical gold and hand it over to you? When an ounce is worth $10k? If you did get something physical, what are the chances it is the purity of Gold that you thought you bought? Could you tell?
Let’s say you are the savviest new Gold investor in the world. Let’s say you did all your online research and met a guy who knew a friend what has a broker who has a vault with the purest Gold Bullion you ever saw. And he’d sell it to you for market price, and you wouldn’t get some worthless IOU, but you could buy a couple of pounds of pure Gold. Now you have 32 Gold coins. Now, what?
It’s five years later, and you have no job, dollars are worthless, and all you have are these 32 coins which are worth a fortune. What can you do with them? You need food. Are you trading one coin worth thousands of dollars for food for the next week? These coins are not divisible, not widely accepted as cash value. Can you buy gas, electricity, oil? How would you go about it? Are you safe with these super valuable coins? Word won’t get out that you have these coins? Walking around with them is like walking around with a million dollars in a briefcase today. You think the Police State is going to let you travel out of the country with this Gold on you? Really? And who says there won’t be more Gold confiscation going forward? Some say it’s secretly happening right now, as we speak. If that card were played before, it could be played again. The reasons are immaterial. The result is the same. It’s a transfer of wealth from you to the banks. With a stroke of a pen, that can become the law of your land.
What’s my point? That Gold is a bad investment? No. The point is unless you are a central bank; Gold is terrible as money. It is not built to be a global currency at the present time. It is not very divisible in practical terms. It is volatile in price. It is not safe to move as a physical asset, and is not widely accepted in the real world. It is more of a liability than an asset, as a form of currency. Great investment, but not great as money.
Now let’s look at Bitcoin
Bitcoin has a lot of downsides to it. You can’t hold it, so you are trained, like a dog, or like Warren Buffet, to think it is not real. Or that it has no value because you cannot see it or hold it in your hands. Aren’t the moist valuable things in life free, intangible, or without physical properties? Love, willpower, faith, health, innovative ideas that have shaped the future of man, like The Internet? Bitcoin enters the stage here.
It is not easily obtained in any real quantity, but this it shares with Gold in that it is precious and is not available on every street corner, like a fiat currency. What it does not share with Gold is that it is highly, highly divisible, down to the Satoshi (a millionth of a Bitcoin or BTC). As far as security, Bitcoins are as secure as you make them. If you use fairly basic multi-sig security methods, you’ll grow old with your Bitcoins. A thief in the street would never know if you have no bitcoins or one thousand. An online hacker may need to not just beat your security measures, but another person may have to sign onto a new transaction. How will he beat that?
It can be moved anywhere in the world with just your mind. Set up a brain wallet, and a nasty Gestapo agent won’t be any the wiser of your intrepid wealth in the digital realm, as you enjoy what’s left of your freedom abroad. Try sending your bitcoin to a remote location in an Indonesian forest, which would take seconds, then try the same thing with your 32 Gold coins. You might notice an inherent value proposition there.
Also unlike Gold, the Bitcoin supply is, in fact, limited and finite. It is set to reap immediate benefits going forward when it comes to supply and demand, the most basic sound money concept. No worries about mere fiat currency principles like inflation or deflation. You can chart the amount of digital currency in circulation at any time in the future. No bearded elite men who are totally unaccountable to the public or even their government because they are private subcontractors who operate above the law are manipulating your Bitcoin value and supply. Everything is left up to the market. Miners win when they play by the rules of the protocol, and don’t try to corrupt it. That’s a train to nowhere. The system works, and has many, many more practical applications as money that we haven’t even tapped into yet.
Also, a little bit of economic history is in order. Argentina has had issues with capital controls, and the Argentinian Peso has been under siege for the last few years. Has this helped Gold reigns some of it’s lost value? No, Gold has continued it’s almost 3-year slide unabated. Bitcoin business, job growth, and ownership has exploded in the region, and it certainly hasn’t hurt Bitcoin’s overall value. March 25th of 2013. Cyprus’s endures its economic failure as uninsured deposits are taken in a central bank “Bail-in”. Look up the values of Gold or Bitcoin in that 2-3 week period. Gold saw little movement while Bitcoin saw it’s first real spike in value, doubling in price, and passing $100 USD in value for the first time. You really think that was just a coincidence? The common man has proven in most recent history that they don’t run to Gold when times get tough. They head somewhere else for real economic value they can use.
Is Bitcoin better than Gold? As an investment, no, but with a caveat. There is so much we don’t about Bitcoin yet. What technology and applications that are yet undiscovered. Just how far will its economic impact be felt? How many of the world’s 5-6 billion unbanked population will Bitcoin affect, either directly or indirectly? Bitcoin can be sent by SMS text message, so you don’t even need an Internet connection, computer, or smartphone. They just make the task much easier.
Bitcoin could evolve into Bitcoin 2.0 or 9.0 like a Windows program. The chances of it’s named changing are slim, as slim as the chances of a competing currency passing it in the open market. It has established itself as a solid brand, protocol, and technology. It has established itself as something governments, and the media can’t wish away through propaganda. And it has established itself as a medium of exchange of unlimited potential, unlike the exchange of the elite, Gold.
Bitcoin is far from perfect. We haven’t really figured out how to protect things we can’t hold in our hands. We haven’t evolved to that point. Is that Bitcoin’s fault? It looks Bitcoin is going to spur on our digital security capabilities, making for many high paying jobs worldwide in the process. Does your government like job and economic growth in emerging technologies? Pass regulations that support the Bitcoin technology, not showing fear of it. That’s a great first step.
Gold will always be Gold
Gold does what Gold does, and nothing does that better. It represents value and cachet. That alone can power a global economy, directly. And your government and your girlfriend love it for that. Bitcoin, over the next decade, will probably end up doing everything else you’ll need. From sharing your wealth anytime, anywhere, to taking your wealth with you with peace of mind, to buying your daily necessities. One is valuable for all times, and one adds value at all times.
If you can get both, it would be wise to do so. In the pursuit to find a superior form of money, this is not much of a contest. Gold isn’t going to outsmart anybody. It doesn’t learn new tricks or become more versatile with a new app. Bitcoin has talents no precious metal or fiat currency can every dream of having on their own.
In this economic war of attrition, where economies like Greece, Cyprus, Argentina, Venezuela and Zimbabwe collapse into ruin, expect Gold and Bitcoin to stand tall. To not only survive, as the ashes of these ancient economic models come crashing down around them, but they will thrive. Many more nations are set to join them.
Maybe the world can learn from Iceland how to forge national sound money principles that will benefit them for many years. They have suffered economic turmoil almost to the scale of those above, but have rebounded incredibly well due to superior policy and leadership. Don’t count on the world learning from their success, but they should be commended for their wise investments. Nations-states really don’t like playing fiscal copycat, unless forced to do so at the barrel of a gun. Iceland is a great story and should be scaled up to larger economies, but that not how the era of central banking works. It makes too much sense.
In closing, both Gold or Bitcoin will be great long-term investments. Gold because of it’s cachet and brand name as valuable commodity. Bitcoin because of it’s finite supply and ability to increase it’s own value within it’s own technological advances. Many thousands of jobs and businesses will be made directly and indirectly based on Bitcoin technology over the next several years worldwide. Still, you give the incumbent Gold an advantage with it’s established infrastructure and market recognition, which spans thousands of years.
Which one wins as a money or currency substitute however, after the Dollar exits the global economy, is as easy as pie to recognize. Bitcoin wins by a very technical knockout.
Images provided by Shutterstock, Wikimedia and GoldPrice.org
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