Article by Colonel Nogov on Mar. 11, 2015
I know half the anarchists and libertarians are going to disagree with me when it comes to bitcoin. Let me preface it by saying, I may be wrong about bitcoin. If you buy into bitcoin, you’re gambling. It could be the next monetary system. It could also go to zero if confidence is lost. It could also just meander along as an alternative. There really is no way to tell about bitcoin. Only time will tell.
I think it will go to zero or meander along. I have no confidence in it being a dominant monetary system. I see bitcoin as a fiat money. I know it’s not purely fiat because it’s limited in production. I don’t see bitcoin having any value other than being used as a medium of exchange. This is pure confidence on the part of the bitcoin users. If, tomorrow, confidence is lost it goes to zero as a medium of exchange. All you’d have left is a digital screen that says you have ‘x’ amount of bitcoin. Just like if confidence is lost in government fiat paper money. Once it goes to zero all you have left is paper.
I believe gold will once again be the dominant monetary system within a few years. All mediums of exchange require confidence so it’s not guaranteed, but gold does have thousands of years of history. It’s always held its value, give or take. It has never gone to zero. Gold has many uses other than being just a medium of exchange. It’s one of the most versatile metals there is. I would much rather have 1000 ounces of physical gold in my possession than 1000 bitcoins.
The new gold standard; gold holding clearing houses
This is how I imagine the world will look a few years from now. People will lose faith in all government fiat currencies. The global economy is going to collapse. It will be worse in some places. Some places will adjust quickly. Gold will once again assert itself as the world currency.
Gold holding clearing houses. It’s just a name I’ve given. Here’s how they will work. You deposit your gold into a gold holding clearing house just liked you’d put your dollars into a bank today. The GHCH issues you an account with the amount of gold you have on deposit. You would then use your phone, tablet, etc., or a debit card to make transfers/purchases just like you do today except everything would be priced in gold over the entire world.
Example. You have 20 ounces of gold on deposit at West Coast Gold Clearing. Let’s say you go to starbucks for coffee and a bagel in the morning. They have the price listed as .027 ounces of gold. You would pay them electronically. .027 ounces would be deducted from your account and transferred to Starbucks. You check your balance and you now have 19.973 ounces remaining in your account.
Modern technology allows for very small divisions. If you had to make the above purchase with physical gold, it would be a tiny fleck of gold. With electronic transfers, it’s easily done. They’re obviously not cutting up gold at the GHCH whenever someone makes a tiny purchase. It’s just reflected fractionally on people’s accounts.
At any time, you could retrieve your physical gold. The GHCH would probably have to make you retrieve it in round lots. Maybe to the half ounce. So if you had 19.973 ounces in your account and wanted to retrieve it, you could probably get 19.5 ounces and have to leave the remaining .473 ounces in the account and use your electronic transfer method to use it.
The GHCH wouldn’t have to be where you live. You could Fedex your gold to them. Just like an online account. There would be many competing GHCHs just like banks today. If there are no governments in the future (as I hope), GHCHs would live and die by their reputations. People could spread their gold around to different GHCHs to minimize risk.
It also solves the problem of fake gold. The GHCH would test all gold being put on deposit. The rest is all electronic transfers. People could still use gold coins and not use GHCHs at all, if they wanted. If there’s no government spying on people, most people would use the GHCHs.
People would quickly learn to value things in gold just like people value things in dollars today. A days wage might be .25 ounces. A nice steak dinner with a bottle of wine might be .05 ounces. An xbox .5 ounces. A car 10 ounces. You get the point. People adjust to the new system quickly. It would also be worldwide, so no currency conversions.
Silver could be used as well. Especially for very inexpensive items.
This system doesn’t require any government. It’s actually preferable not to have governments, because governments are the biggest abusers of monetary systems.
Some people might be worried. What if a rich guy or guys hoard their gold and don’t spend it or lend it? Great! It makes everybody else’s gold go up in value. This would be deflation of the money supply. Just like inflation of the money supply causes prices to rise, deflation causes prices to fall. Only Keynesians and governments worry about deflation. And they have ulterior motives.
Some people worry that there’s not enough gold in the world for this to work. There’s plenty of gold. Silver too. The price of gold is just ridiculously cheap today relative to dollars and other currencies. Prices of goods will be reflected in the amount of gold there is in the world.
Prices in a gold standard mostly remain stable or fall over time. Your savings would not get eaten away by inflation. You wouldn’t have to gamble your saving in the stock market just to keep up. Your purchasing power would remain constant or even improve over time. You could still, of course, lend out your gold or otherwise invest it.
This isn’t a pipe dream. This is how economics works when governments don’t manipulate markets. Modern technology makes the gold standard efficient. More efficient than the current fiat money systems. We would have a growing standard of living again instead of being constantly robbed by central banks and governments.