This post will revisit my original Gold And The Blockchain post of November 2015 beginning with a detailed history of the last seven millennia of history of both money AND credit, before discussing the original concept of a digital and decentralized gold standard on steroids, and I will then provide updates and comment on the trends I am now starting to see that indicate the beginnings of Bitcoin becoming an exchange standard for gold, and will provide a simple to explain guide for gold buyers and sellers wishing to join this new standard and join what I term the Counter-Reformation and the Technological Rebellion against the last five century old fractional reserve banking and lending model, which at its essence is simply reinventing book-keeping and accounting ledgers...
The History Of Gold As Money – From Decentralized To Centralized
Gold is a commodity that is eternally a part of nature and of the earth, and has been used in some form by humans I would imagine as long as humans have existed and I believe is rooted deep in the human psyche… It has many special and magical intrinsic properties that are unique in nature and especially unique from a monetary perspective as its durability, divisibility, portability and its intrinsic scarcity in the functioning of the three main functions of money, 1) store of value, 2) medium of exchange, and 3) unit of account… As gold exists relatively evenly distributed over the earth then gold begins its monetary story completely decentralized however with the birth of money is the birth of price discovery and catallactics as an universal money starts connecting exchanging cultures in what was previously random and unconnected and isolated barter economies, and as it is universally desired as money by exchanging cultures then money will tend to centralize through trade flows in what we would call civilizations, such as Mesopotamia, Egypt, Athens (Greece), and Rome, with the history of all ending in war, currency debasement and the eventual fall of trade and Empire… History is the inflow of precious metals and the rise of civilization and outflows and debasement of precious metals is the collapse of Empires…
Antiquity
Dark Ages And Renaissance (500-1500 AD)
Following the collapse of Rome (circa 500 AD) the medieval and glorious “Dark Ages” of the maintenance of political decentralization through feudal kingdoms over Western Christendom lasts a thousand years powered by gold and silver coinage and localized crude barter ledgers, until out of fourteenth century Italy comes the Renaissance, the rise of the Black Nobility (Black Guelphs) and modern capitalism which is a derivative of modern banking, as pioneered by the Medici Bank invention of double-entry book-keeping and the beginning of the blurring of lines between money and credit… With the origin of modern banking gold and silver supplies start to centralize in bank vaults while simultaneously becoming interchangeable with substitute credit, or bills of exchange, or paper banknotes sporting the head of the ruling monarch, financier or patron… As money and credit centralizes then so do funding flows as bankers and financiers finance some of the most beautiful art and architecture, while also financing the wars to divide and destroy the feudal social order, from here on in for far more evil than good, banking starts to drive history… During the great schism of Christianity and the Protestant Reformation (1500-1650) instigated by Luther in 1517, the European Wars Of Religion last well over a Century (financed by bankers on both sides naturally) and culminate in the first Total War and catastrophe of the Thirty Years War (1618-1648), killing up to a third of the populations of some European regions, and partitions Nations between Catholic and Protestant, generally with Protestant Monarchs in Northern Europe, Catholic Monarchs in the South… Behind the European “Renaissance” and Reformation in all its components, you find banks and bankers, merchants and accountants, the Black Nobility, the Merchants of Venice, who back both sides of every war…
Reformation (1500-1750 AD)
It is Protestantism that lends full support to the concept of an Absolutist Monarch and the one lasting legacy of the totalitarian cult of the Reformation is the Divine Right of Kings, when a monarch becomes a law unto himself and above the laws of his subjects formalizing and eventually constituting the The Nation State, a centralized colony (or gulag) of legislation and taxation that becomes uniquely vulnerable to capture by the controllers of money, and be granted the ultimate monopoly in any society, that of the central bank monopoly and the licence to print money… Even though Central Banking in Europe begins with Sweden’s Sveriges Riksbank (1668 under a Protestant Monarchy surprise surprise) the future template of modern Central Banking comes from good ole England, following the so-called Glorious Revolution of 1688 when William of Orange brings Protestantism back to Blighty, and only six years later is founded the oldest whore of Threadneedle Street in the heart of the City of London Corporation‘s intensely satanic shithole, The Bank of England (1694)…
Barren Metal: A History of Capitalism As The Conflict Between Labour And Usury – E Michael Jones
Industrial Revolution (1750-1850)
“Organic” Growth – England’s Population explodes from under 10 million to over 30 million in a hundred years
Is it a co-incidence theory that within half a century of England’s central bank (Which is England, Wales and Scotland after 1707) we have the meteoric rise of modern Industrial Capitalism and the mechanization of agriculture and manufacturing that unleashed a population boom unprecedented until then, the rise of banker and capitalist, factory owner and factory worker, a centralization of the means of production and rising societal inequality between rich and poor, those with access to centralized credit flowing out of the City of London, and those who did not? The increasingly destructive business cycle boom and bust and the soaring inequality of the Nineteenth Century, which began in England but that had spread to the European and North American Continents by 1900, was observed by many including Karl Marx who correctly diagnosed the supremacy of credit and capital over labour that is the undeniable by-product of fractional reserve banking and lending and financialization, where an abundance of fraudulent credit creates scarcity and shortages of labour, resources and capital forcing the rise of machines and automation, and the complete opposite to a sound and decentralized monetary system where scarcity of money creates an abundance of labour and resources that severely curtails the need to mechanize, promoting a labour intensive craftwork economy (think luddites)… As the Monarchs of Europe had risen to power and absolutism on the backs of the money lenders during the Eighteenth Century, so Bankers and financiers came to rule the Nineteenth Century as banking diluted monarchical power, and when capitalists became wealthier than kings, and the transition from Monarchy to Democracy that had began in America and France a century earlier, was completed at the beginning of the Twentieth Century, the bloodiest and maddest Century of History…
20th Century – Central Banking And War
The Twentieth Century begins with four major monarchs ruling the European Continent, and within twenty years only the British Saxe-Coburg Goethe Dynasty is left, Austrian Habsburgs deposed, Kaiser abdicated and Czar Nicholas butchered by commies, and in one fell swoop Democracy and the beginning of the end of the Classical Gold Standard become intertwined… With the Federal Reserve Act of 1913, co-incidentally instituted a year before the Great War (as if they knew the US was about to enter a war?) the major world powers were equipped with the Central Bank structure imported from the City of London, and the means of funding a four year long war where under the constraints of the gold standard it could only have lasted until Christmas, left Europe devastated, the lone Germany vanquished and on the brink of Communist revolution, Russia in full blown and Wall Street funded Communist revolution, Italy on the brink of Communist revolution, France and Belgium as the epicenters of genocidal trench warfare spent and squandered, and the mighty British Empire soon to be extinguished… All of this funded by an extension of credit and bankers, lest anyone forget… Western Civilization ends for the educated historian with the First World War…
Roaring Twenties And Great Depression – Credit Engineered Boom And Bust
After the Great War and the epic increase in credit and wealth for financiers, and inflation and rationing for the plebs, there was a predictable contraction in credit and a short term depression (The Depression of 1920/21), however with little in governmental interference to manipulate this contraction in currency and liquidity to match underlying gold reserves as a reflection of goods and services production, money increased in purchasing power enough to stabilize the savings base and economy… However in progressing through the Roaring Twenties, of easy credit and easier consumer credit, inflation and boom in fashion, consumerism and moral debasement and degeneracy, by 1929 with stock markets and main street investors loaded to the gills on debt and leverage, the stock market crash and massive credit contraction that is known to history as The Great Depression was unleashed with market forces desperately seeking the equilibrium of gold and silver, triggering bank runs and the unwinding of the credit extension of the Twenties wiping out the debtors, with the lenders (the banks naturally) hoovering up their collateral, in farms, factories, and other family jewels in the great dispossessing of the American Dream…
Saint Franklin And Executive Order 6102 – From Money To Credit
The pivotal event of the 1930’s that flipped the monkey into the organ grinder and for the Federal Reserve Note to replace the US Treasury Dollar was the Emergency Bank Act, to move from a monetary system to a credit system, was executed by progressive Saint and beloved Jap interner Franklin Delano Roosevelt with Executive Order 6102 that demonetized gold by making it illegal to own and also requesting for the people’s gold to be turned in to the authorities, before at the stroke of a pen devaluing the Federal Reserve Note from $20.67 per golden ounce to $35, a near halving of the purchasing power of the dollar against the goods and services desired… When considering the REAL history of America’s devastating Great Depression, consider that within five years of the 1929 crash, America’s bankrupted debtors had lost their assets and property (to the bankers), and America’s savers had lost their gold and half their saving power (to the bankers)… Great Depression indeed… With the removal of gold from circulation in the 1930’s and the removal of silver from circulation to come in the 1960’s, precious metals were cunningly removed from the circulation and the consciousness of the American Public (which also happened in similar fashion in Western Europe during this time), and again co-incidentally in the years approaching the Second World War which needed a whole lot more paper money printing for the financiers, and more shortages, rationing and rampant inflation for the domestic populations not being shot to pieces on three different continents…
Executive Order 6102 – Notice where the gold is to be turned over, any Federal Reserve Bank or member bank of the Federal Reserve System
Bretton Woods System And America’s Exorbitant Privilege
At the end of the Second World War with most of the rest of the world destroyed, America became the world’s industrial and military power house and hoarding most of the gold (either directly, or indirectly for Western European Nations under Soviet threat), in the last months of the War the Bretton Woods System was hammered out with the dollar to serve as the World’s Reserve Currency and pegged to gold at $35 an ounce and with the rest of the world’s currencies pegged to the dollar at various exchange ratios, this at least served as a highly bastardized paper gold standard that allowed an increased standard of material living (stable and increasing purchasing power) that is remembered as the Post WW2 Boom through the fifties and sixties, however with increasing domestic welfare and foreign warfare programs (LBJ’s Guns and Butter) the peg to gold and the chain on unlimited credit creation would have to be severed, that has unleashed the last half century of monumental insanity that has destroyed the world…
The Nixon Shock – The End of The Gold Standard, The Beginning Of The Gold Futures Standard
Wikileaks 1974 Cable Reveals Purpose of Creation of Gold Futures Market (H/T Smaulgld)
With physical precious metals out of circulation and still illegal for Americans to own, and federal reserve notes with exclusive legality in circulation, the severing of the tenuous Bretton Woods paper gold standard to transition to the oil standard of the Petrodollar, on the 31st December 1974 physical gold ownership was legalized for the first time in forty years reversing the Franklin Crime, although effectively demonetized and outside of Legal Tender Status… The late seventies and the failing belief in the Petrodollar System led to positioning and pressure for re-monetization and a return to metals (Hunt Brothers stitch up and the raging precious metals bull market of the late 1970’s), but with Volcker’s rate hikes and with physical gold and silver only a sliver of the now exponentially increasing fiat credit creation and futures manipulation, and as detailed in leaked cables (above) of the time were explicitly developed in order to manipulate the future price of precious metals, in other words creating paper and derivative futures to drown out and manipulate the physical supply and demand in order to mask the real underlying value and mask the debasement of fiat money measured in physical precious metals…
Having considered and researched the insanity of the five hundred years of pure death and destruction and the amount of debt and leverage that has been loaned into existence by the double-entry bookkeeping ledgers of the world’s banks and banksters, then the manipulation and suppression of real and sound money (gold and silver) has to be self evident and could only laughably be called a “conspiracy theory” by a dribbling imbecile, as the six thousand year monetary bedrock to which every credit bubble (and this last 500 year credit bubble of Banking) will eventually crash back to, so gold and silver are still and always will be the kryptonite and achilles’ heel of fiat money and banking that is a derivative system gone rogue, and it is because of this very necessary truth that the revaluing of gold and the devaluing of fiat cannot happen to today’s banking elites and national governments lest their system and power and extraction racket crash to the ground… The rigged paper futures ponzi scheme that has evolved over the last fifty years to marginalize and demonetize gold from the worldwide fiat credit system is the only arrangement that all of the world’s unhinged and insolvent banks and governments have in common, is never to re-install a gold standard…
Gold Bug Hopium – China’s Gold Backed Yuan! Game Changer!
When the Shanghai Futures Gold Exchange launched in 2016 it gave some semblance of hope to the gold community that the East was constructing its own price discovery system to obsolete the Western rigged system perpetuated by the COMEX in chicago and London’s LBMA, two years later and the price of gold is still being capped at just above its cost of production for both gold and silver with China still seemingly set to pull the trigger, the latest “trigger” being the increasingly tenuous and ludicrous Yuan Oil Futures Contract that was somehow spun by the Nikkei Asian Review into the Gold Oil Yuan Game Changer that has been lapped up and pumped up ever since by the more naive among the precious metals community… The fact that China is sitting on tens of thousands of tonnes of gold as a diversified asset means that they are just looking for the trigger to bring back the Gold Standard? Yeah…
No… The fact that China has tens of thousands of tonnes of gold merely proves that they are not completely clueless and do in fact understand the historical role of gold in the monetary system, and if they understand gold then they understand that their Centrally Planned and quasi communist (but only marginally more so than Western Socialist Democracy) model can only be maintained by the printing of tens of trillions in Yuan liquidity to drive China’s population boom, the monumental mis-allocations of capital within the Chinese economy, from ghost cities, to chronic pollution of a still highly industrialized and commodity dependent economy, employing hundreds of millions of the Chinese proletariat in this chronically wasteful ponzi credit scheme… The more socialistic your economy then by default the more wasteful and more mis-priced the price discovery system, and for the health of the exploding Chinese middle class and the aspiring working class that have been lifted up on a tide of insane credit creation of the last generation unprecedented in human history, Life Emperor Xi Jinping and the Chicoms must continue to spin all the plates and plug all the dykes and quell all the social unrest of a BILLION person economy run by a few thousand bureaucrats in China’s one party oligarchy… China is a basket case, a house of cards and ticking time bomb, as is the rest of the world’s credit dependent economies and governments… The post 1971 unhinged credit ponzi has financialized and bureaucratized and highly centralized the socialistic Western Democracies where over half of Gross Domestic Product of the whole economy is government and finance and the one half who produces is pillaged by the half who lives off the production of others, going back to any semblance of a gold standard would necessarily constrain and cut off the credit spigots that have printed the totalitarian shitholes of the last five decades into existence… You can revalue gold higher to close the gargantuan deficit between gold and fiat credit, but from then on you can only spend what you produce, you cannot run deficits and you most certainly cannot monetize deficits, that would cap finance and government at maybe ten per cent of Gross Domestic Product, with warfare and welfare states virtually eliminated overnight… So to be clear this will not and cannot ever happen as it would destroy the current order and establishment, save on the hyperinflation of the fiat monetary system and when the dollar pricing mechanism that has criminally suppressed gold and sound money the last century is eventually extinguished, but gold has to be the last thing to explode as it is the ultimate canary of the failing of credit…
From Barter To Bitcoin – The Theory Of Credit And Money
In my February 2016 post, From Barter To Bitcoin – The Theory Of Credit And Money, I extensively described the history of both credit and money, as whether hard money gold and silver bugs like it or not, credit and money have co-existed throughout history and in fact for large tracts of history accounting ledgers, credit ledgers and money substitutes have been used instead of money… As exchange will always initially start out local then barter and credit ledgers will scale first as a crude exchange system consisting of those that know each other in a closed loop ecosystem of trust, and where money ain’t required…
As exchange develops outside of familiarity and those who you know, when you start exchanging with people who you don’t know is when faith in credit and ledger systems cannot scale, so then money is invented by humans as a medium of exchange and for bridging this trust deficit (The Origin of Money)… As money develops and refines into a store of value, medium of exchange and unit of account the market will converge by consensus on the most marketable goods and with the best characteristics in longevity, portability, divisibility and fungibility, and marginal scarcity, and that role since early antiquity has universally been gold and silver…
As I explained earlier the last five hundred years since the Reformation has been the Origin of Banking, the Double-Entry Bookkeeping Ledger, fractional reserve banking and the centralization of credit in the hands of secretive and fraudulent counter-parties and how that system five centuries long is now exhausted, increasingly destructive before obsoletion… The five century long trend of the centralization of credit is now increasingly giving way to the decentralization trend that begun with the internet, that morphed into internet trade and exchange of goods and services, and that has one step left in the decentralization (and localization) of the financial and legal systems… So I see the next decade as a transition of credit systems (How Bitcoin Kills Banking) and the increasing redundancy of fiat money and traditional fractional reserve and central banking, transitioning into the world of blockchain and crypto-currencies… Unless there is some catastrophic loss of electricity and internet grid worldwide (which would also extinguish the totalitarian cashless society of our insane elite overlords) and the death of billions of humans, then the future we are going into will be a balance between hard money and electronic credit (and the return of local paper currencies), so I can now start fleshing out the future gold standard…
The Blockchain Versus The Banks – The Technological Rebellion
In my April 2016 post, The Blockchain Versus The Banks – The Technological Rebellion, I extensively compared two ledger and accounting systems, the central banking ledger and accounting system that enriches a fraction of the top one per cent of the population while making everyone else poorer and indebted and increasingly a society of renters (serfs), and the Bitcoin ledger that will over time enrich everyone that invests in it with persistent and chronic (if very volatile) deflation increasing purchasing power and material standards of living now and in the future (hodling)… The epic battle of our time is not between gold and fiat (money and credit), but between Banking and Bitcoin (credit and credit)… Gold is and always has been money but it is not credit and while there exists a digital economy and division of labour there will always exist a need for credit ledgers and digital exchange… The only question left therefore is which type of credit ledger we are to depend upon?
Whereas I argued that banking and later central banking through the double-entry bookkeeping ledger was a technological REVOLUTION and the centralization of credit in the hands of genocidal criminals, that Bitcoin and the Blokchain is a technological REBELLION or COUNTER-REVOLUTION, a reactionary technology that rolls back the diabolical trinity of banking, accounting, governmental growth and parasitism through inflation, taxation and regulation, and replacing it with a deflationary credit system that will be virtually impossible to either tax or regulate in the long term, and why I consider Bitcoin the biggest technological invention in human history and certainly the most important technological invention since the Double-Entry Bookkeeping Ledger… Why?
In my money and credit post I described Bitcoin as a decentralized asset ledger that allows peer to peer exchange on a global and mind bending scale… Bitcoin mirrors local barter ledgers in that it allows people who know each other to exchange in a sophisticated mental barter without money as there is no medium of exchange, but because Bitcoin exists distributed on as many platforms and computers and smartphones as those who use the software and network, is globally scaleable as we are currently seeing with Fiat to Bitcoin exchanges in this first act of currency speculation now operating in the hundreds on four different continents… Bitcoin is different from every other ledger system in human history (at least so far as we know) in that it is decentralized and can be operated and verified without any centralized counter-party or middleman, Bitcoin is a financial ledger without any banks, an accounting ledger without the accountants, and a legal ledger without the lawyers, and so takes us back before the Reformation, indeed Bitcoin is the COUNTER-REFORMATION, and the return (at least in Europe) to a more Feudal social order based on private property and localism, but simultaneously connected globally by digital and distributed technology…
Bitcoin’s credit issue in one chart – quantity in blue, inflation rate in orange
The centre piece of Satoshi’s Nakamoto’s magical distributed ledger is its issuance of credit, without any central issuer and with a predictable rate of issue (currently 12.5 bitcoins every 10 minutes, 75 every hour, 1,800 every day) means that over time Bitcoin liquidity dwindles while adoption increases, thus Bitcoin has an in built deflationary mechanism that increases purchasing power and standards of living over time, and at the polar opposite of the inflationary shitcoins issued by the world’s pillaging and fraudulent central banks… Bitcoin’s intrinsic deflation promotes the hoarding of credit (hodling) over spending and consumption, and so will eliminate the boom and bust credit and business cycles of the last five centuries that have been created locally by fractional reserve banks, but weaponized by central banking into national and international debt based credit and business cycles to rape the world… As the centralization and inflation over the last five centuries has lead to rising inequality in both money and property between those that controlled the credit ledgers and those who did not, so decentralization and deflation and the valuation of credit over property will incentivize the distribution of property to all classes of society from top to bottom, most critically for family formation in the Real Estate sector…
Gold And The Blockchain Revisited – The Digital Gold Standard On Steroids
In my November 2015 post on Gold And The Blockchain I spent 5000 words discussing the concept of a decentralized gold standard and over two years later is still one of my favourite posts and I think has aged rather well, but is still maybe another two or three years before we see anything close to what I described, but what I wrote then is true now, so I will first briefly describe the concept and operation, before providing updates on the last two years between Gold and the Blockchain and what is now a rapidly expanding space…
Micro View – Individual Exchanges
The micro view is at the margin between gold and Bitcoin and this is at the point of exchange which is similar in set up to the fiat money to bitcoin exchanges that are now popping up all over the world as the stampede from inflation into deflation gathers pace, and this gold to Bitcoin exchange can work really on any level, from peer to peer (face to face) exchange, to coin and bullion dealers that accept Bitcoin as method of payment, to specific Bitcoin Gold exchange services such as Vaultoro and Gold Money, in short any interaction between gold and Bitcoin is transacting on a new gold standard, and I only expect this gold standard to expand going forward…
Macro View – The Gold Inter-Exchange Standard
The macro view is merely the micro and individual exchange expanded with Bitcoin acting as the price discovery mechanism for gold exchange, which again mirrors the current dollar pricing mechanism although I cannot over emphasize the difference between both pricing mechanisms in the eternal balance between money and credit… Whereas banking and the fiat money gold standard was invented as a derivative of money (gold and silver) and leveraged and serially abused this derivative status with excess paper and digital substitutes it will therefore always be intertwined with and manipulating and suppressing precious metals, Bitcoin is a sovereign and independent distributed ledger that derives its value not from money, but from the barter transactions of its user base… Bitcoin has no interest in manipulating or suppressing gold and silver, but is simply an accounting standard and price discovery mechanism based on scarce credit for gold and silver to be expressed…
As a simple example of this I used the thought experiment of imagining 21,000,000 ounces of gold held in various exchanges on the Bitcoin blockchain whose maximum cap of credit issue is also 21,000,000, in this instance one bitcoin would exchange at one gold ounce or 1:1, the basic price discovery system… Adding another 21,000,000 ounces of gold to Bitcoin’s Blockchain and one bitcoin would exchange at two gold ounces, and so on… The more gold exchange that is transmitted through Bitcoin the more gold that backs the blockchain, and the more the value of Bitcoin grows… A scarce and fraud proof ledger working with scarce precious metals finally gives us a decentralized and distributed pricing mechanism outside of the rigging of Fiat money… However for now we are still in the world of fiat and fiat price discovery, and so this macro view may take a few more years to really blossom and finally sideline fiat as the precious metals price setter…
Under the current fiat money and futures precious metals a commodity that is mined, refined and coined and barred for the world’s population and central banks and national governments has its price discovery monopolized and “regulated” by three main exchanges and price discovery points, the COMEX out of Chicago, the LBMA out of London, and the game changer that hasn’t changed the game out there in Shanghai (SGE), in short a highly centralized and rigged framework as I have already explained, solely for masking the insolvency of fiat money priced in precious metals… Under the Bitcoin gold standard there are no regulations or licences to rig any price discovery, if you transact gold for Bitcoin or Bitcoin for gold you are indeed utilizing the new and decentralized gold standard and you also become an individual price discovery point, and so the more exchange and exchanges the more individual price discovery points and the more distributed and diverse the price discovery network becomes as a whole… Bitcoin allows gold miners, refiners and bullion dealers in any locality on any continent to connect to a network that cannot be rigged, and so allows an equal platform and true equality for the industry of precious metals and money…
Building Bitcoin’s Gold Standard From The Bottom Up – In Three Steps
Here I will first briefly outline the three steps to a decentralized gold standard, and then describe the steps in further detail…
STEP 1 : Gold Exchanges/Bullion Dealers start accepting Bitcoin as means of payment.
STEP 2 : Gold Exchanges/Bullion Dealers start using (hodling) Bitcoin as store of value as well as means of payment.
STEP 3 : Gold Exchanges/Bullion Dealers start using Bitcoin to pay refiners and miners and when the fiat pricing mechanism for precious metals really starts to fracture…
Step 1 In Detail – Updating The Mirco Level
In my original gold and the blockchain post I identified Vaultoro and BitGold (now of course called GoldMoney) who at the time were the only two gold exchanges and services really working with Bitcoin, two years later and both are still going strong, with Vaultoro now having traded 200 kilograms of gold in February alone, or in other words Bitcoin already being backed by 200kg in gold reserves, just on one exchange! What’s backing Bitcoin you gold bugs ask?
As exciting and pioneering as these online Bitcoin to gold exchanges are, an even more exciting and important trend in my opinion is the Bitcoin to bullion exchanges, and getting precious metals directly into the hands of the people, and in the two years since my original post it is here is where there has been far more progress… In the last few years and especially months we have seen the following online for physical delivery gold dealers start accepting Bitcoin and so the price discovery points are increasing, now nearing single figures…
Amagi Metals – US
Apmex – US
Bullion Star – Singapore
GoldSilver.Com – US
Gold Money – Canada, UK, US
JM Bullion – US
Provident Metals – US
Silver.Com – US
Schiff Gold – US
Sharps Pixley – UK
At the micro level, and first step or phase we can clearly see the beginnings of a gold standard being built from the bottom up, so the foundations are being put in place for step 2, the transitionary period…
Step 2 In Detail – Working On Two Gold Standards
As encouraging as the slew of online bullion dealers accepting Bitcoin as payment for gold and silver bullion is, let us not overly delude ourselves as to the reasons why this is happening… This is not some ideological bent and belief in the future of Bitcoin (see the reductive ramblings of “Austrian” doomer gold bug Peter Schiff) this is simply the realization that crypto-currencies are an emerging asset class and have surged while the rigged precious metals prices have dampened down the Western appetite for physical that counter-intuitively only builds when the price of something is going up, so the decision to accept Bitcoin is nearly entirely economic at this point… Those that have invested in Bitcoin early are now sitting on astronomical gains and any crypto investor with a brain in his nut and even a basic grasp of history or economics, if he hasn’t already invested in precious metals, should certainly convert some digital gains into physical ownership, indeed by the same token if gold bugs would have invested 10% of their disposable cash in Bitcoin (and 90% in gold) at the start of 2017 they would have ended the year with Bitcoin matching the total of their gold investment by year’s end for a ten to one gain over gold, and more importantly could have sucked out 10 times more physical metal out of the system for the same amount of dollars, thus starving the gold riggers of the one thing they cannot print and rig, the underlying commodity… So the bullion dealers are not stupid and recognize that increased purchasing power of Bitcoin should lead to the increased consumption and diversifying of digital credit into a complimentary sound money with a physical dimension, and gold and silver in the hands of more and more people, especially the Millennials who are predominantly the HODLers of bitcoins…
However this is the very early stages of the decentralized gold standard and with Bitcoin I would approximate an adoption rate in the West of maybe 1% of the general population (at present heavily concentrated among Millennials and Generation X as the demographic that will drive Bitcoin adoption mainstream) but at current levels still only fractional, consider further that the percentage of this one percent of the population that would also invest in precious metals will also be small in that precious metals are more associated with Boomers than Millennials currently, so I would expect that even in the last year of Bitcoin price explosion that very little precious metals purchases are being made with Bitcoin (certainly since the bubble popped in December), but as adoption of Bitcoin increases then so will the value of bitcoins, incentivizing HODLERS to consume and diversify in gold and silver, and for those dealers to adopt Bitcoin as part of their business as these bullion dealers have recognized incredibly early actually to their credit, which brings us to the next hurdle that will also be jumped in time, and that is the transition to two gold standards…
The current set of affairs I would imagine for most if not all the current bullion dealers is that what little sales they make in Bitcoin, they immediately convert into fiat as fiat still has legal tender status, is used for making payroll wages and supply chains for refiners, primary dealers etc, and is also stable compared to the crazy volatility of Bitcoin which provides some headwinds to both Bitcoin and the future gold standard at least for now… When the bullion dealer converts into fiat he takes the purchasing power of that bitcoin from the previous owner and spends it into the fiat system, which is inflationary for Bitcoin as these coins will be added into circulation and depressing the price… In the long run this does not matter as the bitcoins will eventually be hoarded by someone else and bitcoin ownership will have become more distributed, but in the short term it’s additional supply to meet the available demand… Now imagine the bullion dealer did not convert his Bitcoin bullion sales into fiat and instead just hoarded the bitcoins, as subtle a difference as this sounds it makes all the difference and is the birth of dual gold standards, a fiat gold standard and a Bitcoin gold standard… The value of Bitcoin for that gold sale is not recycled into fiat depriving the fiat system of capital while increasing the deflationary value and capital of Bitcoin as these coins are taken out of circulation, and the credit system for money becomes a closed loop system outside of banks and governments, and like magic we have two gold ratios, the fiat gold ratio ($1350 per gold ounce) and the Bitcoin gold ratio (0.20 bitcoin or 200,000 bits per gold ounce) and two completely separate price discovery systems and indeed economies for gold, the centralized and rigged legacy system and the decentralized and distributed open source accounting ledger and credit system… Currently it is obvious that the gold bitcoin ratio is only a function and mirror of the fiat gold ratio as the rigged fiat system is still in charge and so the Bitcoin gold ratio currently dances to the tune of the fiat gold ratio, but as the debt based system breaks down and the attractiveness and incentives of Bitcoin’s deflationary credit based system increase public adoption and increase the value of currency and purchasing power of all bitcoin holders equally, then it is logical that bullion dealers will realize sooner and later that it is smarter to hodl at least some of the bitcoin from their bullion sales… Fast forward a few years and lets say Bitcoin adoption has increased to 20% of the population, twenty times higher than the 1% current adoption rate, and when the value of bitcoins are twenty times higher (from around $10k per btc currently) around $200,000 per bitcoin expressed in fiat dollars for context, then it should follow that gold adoption by a small percentage of bitcoiners will have also increased twenty fold, giving bullion dealers a twenty fold increase in trade through Bitcoin and thus a twenty fold increase in hodlings and purchasing power of bullion dealers bitcoins… With an increasing percentage of bullion trade now coming directly from Bitcoin, bullion dealers have an added incentive to start paying wages and running costs in Bitcoin, if their employees were not screaming for it already… This incentive to hyperbitcoinize will lead us to step 3…
Step 3 In Detail – The Bitcoin Gold Standard
The incentive to hodl Bitcoin will eventually lead to the incentive to bitcoinize the whole of the gold industry supply chain, which I’ll simplify into three main divisions, the bullion dealers as the first link, the refiners from which the bullion dealers get the metal, and the gold and silver miners from which the refiners get the raw product… The rise in adoption, currency value and market cap of Bitcoin will incentivize dealers to make payroll and more critically to pay refiners for their coins and bars while the refiners simultaneously are incentivized to accept Bitcoin for their finished product as they will seek to benefit from Bitcoin’s deflationary properties… Once the refiners are using Bitcoin then they have the incentive to start paying the gold and silver miners for their product as the miners have the incentive to accept Bitcoin, and to then pay for machinery, labour etc, in bitcoins… Note that none of these links in the gold supply chain from ground to coin shop exist within a vacuum, they are all inter-connected and subject to the same world and media environment, and all will be aware of the rise of Bitcoin and the waning of fiat, and this could take weeks, months and years, as the rise of the Bitcoin gold standard is dependent upon the speed of the meltdown of the post Reformation fraudulent double-entry bookkeeping ledger…
However fast this transition of credit systems take, the implications of Bitcoin’s standard are profound for gold and silver, in that once the supply chain is pricing their gold production and distribution in bitcoins, then the dollar pricing mechanism is broken as is the price suppression, manipulation and the marginalization of gold of the last century but as I argue really the last five centuries, and gold price discovery is freed…
Freegold – Fulfilling FOFOA’s Concept
This is probably a short section for the real gold purists and those who have spent many hours as I did reading the writings of FOFOA, and by extension Another and Friend of Another… The concept of Freegold as I interpreted it was the importance and the endurance of gold in the human psyche, and for this very reason the rise of banking and credit was the politicization, manipulation and suppression of gold both from the monetary system and the education system at least in the West… As a sovereign and independent accounting and credit ledger completely separate from gold, Bitcoin does not care about gold but facilitates its freedom on a global and mind bending scale… As all price discovery working on Bitcoin’s ledger can only be exchanged within a maximum cap of 21 million coins (accounting units), a deflationary credit system ends money printing, fractional reserve boom and bust credit and business cycles and all the rest of the fraud and destruction and inequality of the centralized, secretive and inherently evil evolution of the fiat credit system… As I extensively described in my Housing Collapse post, when money and credit is deflationary then purchasing power increases against everything else that it is exchanged for and priced in (scarce money and credit are the bubbles that never pop!), and so the physical assets needed for an enriching and productive life (land, home, car, etc) will be perpetually devaluing against money and credit incentivizing the hoarding of currency and dishoarding of property and thus promoting the distribution of property ownership from the top of society to the bottom, strengthening the glue of social order as more of society become property owners and therefore have a bigger stake in the protection and security of private property, deflation providing an in-built free market mechanism for societal stability and a meritocratic social order…
With the end of legal tender laws that the collapse of the fiat system would implicitly mean, then money and credit would be free to find their exchange ratio, and because of Bitcoin’s decentralized and global nature gold price discovery would happen locally and throughout the supply chain, from miners to refiners to dealers… Gold and silver can again be used as local money (in face to face exchange), they can be converted into bitcoins or they can be bought with bitcoins, and with sure to be numerous imbalances in supply and demand of precious metals over regions, Bitcoin’s blockchain allows local price discovery points and exchange and accounting network on a global scale which can be aggregated to provide a spot price, but distributed over thousands or tens of thousands or hundreds of thousands of individual price discovery points, leading to the global gold and silver arbitrage trade, from where precious metals in abundance (and bitcoins scarce) can then flow to where precious metals are scarce (and bitcoins abundant), and so distributing gold and silver more equitably between localities and regions…
Bitcoin Is Far More Than A Gold Standard, Bitcoin Is An Exchange Standard
As much as Bitcoin and gold and credit and money will intertwine and exchange as I have described above, gold is only one commodity, silver is another, diamonds are another, oil is another, steel, etc etc etc, indeed you can find price discovery for any commodity, good, service or labour by simply starting to exchange in bitcoins, and as all this economic production will be competing for only a maximum cap of 21,000,000 units that will not even exist until about the year 2050, it should be self evident that Bitcoin will appreciate over time even against gold… As I made clear in my 2015 post Bitcoin will deflate at a far higher rate than gold, and in November 2015 the Gold/Bitcoin ratio was at 4:1 (4 bitcoins trading at approx $300 for every gold ounce at $1200) whereas today that ratio is 0.2:1 or nearly 6 ounces of gold for every bitcoin, so Bitcoin has appreciated 20x against gold in fiat terms the last two and a half years, and I do not see this changing anytime soon… It is true that the massive volatility of the Bitcoin price in fiat money (as opposed to the rigged “stability” that gold pumpers love to boast) is a major hindrance to mass adoption and therefore Bitcoin adoption tends to happen in waves with more hodlers at the end of every boom bust wave, however Bitcoin’s fiat volatility is really a function of the current mostly unregulated and highly liquid national fiat currency network of centralized exchanges worldwide where low fee and frictionless trading engines allow the instant and seamless exchange in Bitcoin and Shitcoins, but this age of whales and pumps and dumps is now coming to an end as governments seek to regulate and attempt to co-opt and capture the crypto space through these exchanges… There is no doubt that fiat money currently is the most convenient way to get into Bitcoin and that these unregulated and high liquidity volatile exchanges is the most convenient way of trading fiat for Bitcoin, but as we move forward I expect most governments to highly regulate ICO’s and shitcoins as securities or even ban them outright (see China) for the scams they mostly are, and to highly regulate and surveil Bitcoin exchanges (classed by the CFTC as a commodity NOT a security) and this I argue is all for the good of Bitcoin and to the detriment of Shitcoins… Severely regulating and curtailing the convenience of these large Bitcoin exchanges will allow decentralized and more over the counter exchanges to flourish, either through face to face cash transfers or through peer to peer exchanges such as LocalBitcons and Bisq where direct bank transfers cut out any middleman and make regulation and surveillance very difficult if not impossible, as we are also currently seeing in China in the aftermath of shutting down centralized exchanges and the explosion in underground over the counter exchange… So the bigger the banking and governmental crackdown on Bitcoin exchanges the more illiquid and stable the Bitcoin price becomes, putting barriers up to exchange also severely curtails liquid trading (buying and selling) and incentivises buying over selling which in itself stops the selling and actually drives up the price! A highly illiquid and physical (so to speak) market eliminates price fluctuations and the pumps and dumps in value (highly influenced by the clickbait journalism of the dying ad revenue internet model of the legacy mainstream media) that suck the newbies in and spit them out as they get fleeced by the largest whales manipulating the biggest exchanges, and indeed will mirror the gold to bitcoin exchange network, so pray for governmental and banking crackdown on Bitcoin because it drives the decentralization of national currency exchanges and starves tax authorities and regulators of centralized and easy honeypots for shakedowns (as we are seeing with Coinbase)… I am well aware that this more peer to peer exchange from National fiat currencies into Bitcoin will be harder and more inconvenient for newbies and normies to use, but in the coming meltdown of fiat currencies worldwide at the terminal end of a half century credit boom unprecedented in human history, people and especially the digital tech savvy millennials will become increasingly desperate to find whichever way they can to protect purchasing power by exchanging their increasingly worthless fiat for increasingly valuable bitcoins, and lest we forget converting fiat into Bitcoin is only a temporary future, when enough people decide to accept Bitcoin directly for their goods, services and property then fiat money is cut out of exchange completely and its extraction and extortion of resources and labour is over… Happy days…
So this is the price that gold will have to pay for being freed by the blockchain and distributed ledger technology in Bitcoin, it will have to continue its subordination to credit ledgers for the foreseeable future, money (gold and silver) will have to continue playing second fiddle in a globally inter-connected digital world that we live in and that will be driven by tech savvy millennials not gold coin fondling boomers who’ve stood and watched the banksters blow up the world in the last two generations… I will further argue that this is to the benefit of gold in the long run and will elaborate further with this thought experiment before the conclusion of this post…
Bitcoin – From Centralized To Decentralized
I spent the start of this post discussing how gold started off as decentralized money and then how with the rise of civilization and inevitably Empire gold and silver were centralized and subject to manipulation and general debasement wherever possible, either in the coins themselves or in the credit derivative layers of banking, so the game of Empire is the control of money, and banks and bankers historically have held an iron grip on gold reserves, indeed the centralization of gold reserves in banking families such as the notorious Rothschilds evokes the old saying, he who has the gold makes the rules… Money in the hands of psychopathic and genocidal criminals and not in the hands of the people, and while this situation remains they remain in power and free to control, extort, and abuse us…
Bitcoin on the other hand started its history completely centralized, created and released by a shadowy pseudonymous programmer or group of programmers, the first million or two bitcoins (5-10% of total bitcoins) still belongs to Satoshi although never touched… As Bitcoin attracted miners (issuers of bitcoins) and users (consumers of bitcoins) then ownership became more distributed between more users… As exchanges started developing this offered more people a way of buying bitcoins, and so this is the general path that Bitcoin follows… The more fiat exchanges in more countries the more people get to own bitcoins further decentralizing and distributing bitcoin ownership, reducing inequality… Although large individual hodlers and whales still hold vast amounts of the bitcoins issued in the early years, as the ecosystem grows and they start spending some of their astronomical wealth those bitcoins are redistributed to new owners, and so on… So as the trend of banking was to centralize credit and use it hoard all the gold, so the trend of bitcoin ownership is to decentralize and distribute credit, and this will have profound implications for gold and silver ownership if this hasn’t already become clear… It’s not just that Bitcoin facilitates production refining and distribution of precious metals locally, it is that acting as the gold and silver (and everything else) standard (and because gold and silver will be perpetually devaluing against Bitcoin), this incentivizes large and centralized hoarders of gold who used to make the rules to dishoard their gold piles for more valuable credit (bitcoins), balancing their assets between money and credit with the gold being sold into the open market to go into the hands of the people… The more gold devalues against Bitcoin the more the incentive for these insane crime dynasties who have hoarded the gold and made the rules for the last five centuries to divest their enormous hoards of gold and back into public ownership and hands… Take this thought experiment to its logical conclusion and where the power of Bitcoin distributes gold ownership throughout society, and were Bitcoin as credit ledger and system to somehow collapse and we would need to go back to an analogue monetary system then gold ownership would be completely distributed and decentralized again, before new credit ledgers and instruments would be invented and gold would start its long march back toward centralization… Such is the history of credit and money…
Conclusion
I concluded my original gold post with the rallying cry for gold bugs that if they wished to know the real and unmanipulated value of an ounce of gold, they would only find it by using Bitcoin and marking it to market against the blockchain, two and a half years later nothing has changed… The tentative moves we have seen from bullion dealers is the first indication of the new gold standard but adoption and transition from steps one to three as outlined above will largely depend on the meltdown of the central banking networks worldwide as it is the existing, the “traditional” the familiar and the still trusted (for now) accounting system of the people, and for the moment Bitcoin is without doubt the most misunderstood and misrepresented accounting system and technology on earth today, but all of this will become increasingly clear as we move forward… As I have extensively described in my original Bitcoin Kills Banking of December 2015 post, and which I revisited in June last year, the biggest trend of 2017 and 2018 and beyond is the regulation of the crypto sphere, with Bitcoin being regulated as a commodity or currency and hopefully being driven largely underground by stifling governmental and banking regulation, and the rest of the junk in the form of shitcoins and ICO’s being regulated as securities and hopefully (for Bitcoiners at least) being clamped down upon tamping down speculation and stemming the leakage of value out of Bitcoin and into Shitcoins, as I extensively described in my last post on Ethereum and ICO’s… Bitcoin is the most established, has the most liquid exchange, has the best developers, has the best infrastructure and is the only leaderless and antifragile blockchain in a competing space of leadered, centralized and therefore inherently fragile blockchains easy to regulate, censor and shut down if need be... Unless you understand the governance structure of blockchains and how Bitcoin is unique in this regard, then you will be under the illusion that any other blockchain will become the exchange standard of the world, which they won’t…
For the gold bugs who persistently bang on and wet themselves on hearing any mention of gold and of going back to the gold standard, do you really want to maintain the system whereby the world’s central banks hoard and control all the world’s gold reserves, with your paper and derivative currencies subject to overnight devaluations and general manipulation and debasement that will inevitably happen with a trusted and secretive counter-party and middleman, that is the history of banking? Are you a gold bug or are you just a gold pumper looking for the astronomical gains to convert back into fiat that the best and brightest newsletter writers and “experts” are trying to sell you by perpetually shouting wolf every time gold is mentioned in the legacy media? If you really care about gold, and you also know like I know how underowned, undervalued and manipulated it has been not just for the last century, but the last FIVE centuries, then promoting and utilizing a gold standard in the hands of the people, an exchange standard that incentivizes gold in the hands of the people, then start caring about Bitcoin, because Bitcoin will revalue and will be continually revaluing gold and critically importantly breaks the fiat money pricing mechanism for precious metals, and gives us the freegold price mechanism for precious metals…
For the gold bugs and Austrian Economists who maintain that gold and silver have been demonstrated by history to be money, and only gold and silver is money, they often ignore or underplay the simple truth has history has never been about just money, indeed credit and local exchange was invented before money and regional and international exchange… Money has been subordinate to credit for large tracts of history with really only the thousand year glorious medieval and middle ages (500-1500 AD) when money held supremacy over credit, the Reformation re-established the supremacy of credit over money and the five century long credit boom has driven political centralization, monarchy and democracy, industrialism, and unleashed a population boom that I hope you start to appreciate could NOT have happened without the Bank of England, as credit controls capital, and capital is then used to control and exploit labour… The more I research monetary and credit history the more Malthusian I am turning, because if the industrial revolution and industrialism was a fractionally reserved mis-allocation of capital that has to at some point be reversed, then is the population boom that was also the by-product of the industrial revolution a mis-allocation of capital and also unsustainable? A meltdown of the current fiat currency system and loss of energy grid and infrastructure would revert us back to a localized credit barter or physical precious metals economy, but the collapse of the just in time delivery service and centralized industry and agriculture would also kill off maybe nine tenths of the world population and correct the boom with a devastating bust… The only other option is Bitcoin, by transitioning infrastructure and energy providers, agriculture and industrialism to Bitcoin’s accounting standard before the fiat accounting standard collapses world wide, the move from inflationary credit to deflationary credit that will promote labourism and localism and a more gradual and manageable transition from capitalism and industrialism, and will also shift the economy from unsustainable consumerism to sustainable productionism, and perhaps most importantly of all would promoting eugenics over dysgenics, in that the weak and dependent on government welfare (about half the western public in today’s socialist democracies) will be subsidized no more, and the productive, self reliant and strong benefit from the deflationary increases in living standards… This shift of incentivizing production over consumption will reward the strong and self reliant and penalize the weak and dependent (welfare queens at the top and bottom of society), and this is how a free market should work, but hasn’t actually worked for a very long time… I will be discussing and dedicating my next post to elaborate on this last paragraph in much greater detail, that is to be entitled The Economics Of Credit, Capital And Labour – The Rise Of Bitcoin, The Fall Of The Machines…
Addendum – The Bitcoin Silver Standard: Discovering The REAL Gold Siver Ratio
Above: Commercial Gold Silver Ratio Post Reformation (1687-1931)
Below: Comex Gold Silver Ratio (1995-2018)
Another of the recurring themes within the precious metals community is the gold to silver ratio and how “unsustainable” or “sustainable” it is, and I have always taken the view that like everything distorted by this credit boom of the last five centuries, the gold to silver ratio is entirely unsustainable… If we look at the above chart I think it helps demonstrate my point as these monetary metals have historically come out of the ground at a relative scarcity of 15:1 i.e fifteen ounces of silver for every ounce of gold, and this relationship holds for two centuries and only starts to widen at the end of the 1880’s, co-incidentally toward the century of Central Bank “market” rigging… The current ratio of silver to gold as they come out of the ground is between 8:1 and 10:1 and indicates to me that this ratio has been compressed by a far more rigged silver market, possibly as silver is also an industrial commodity and is more economical and therefore suppressed to reflect this, and that the silver market is far less than the gold market and is more easily suppressed and manipulated… Either way we have a chronic mismatch between production ratios (8:1) and dollar price ratio (80:1), that the the silver bugs will tell you is “unsustainable” and that the silver bears will tell you is “sustainable”, and to which I also subscribe… The gold and silver ratio despite this epic mismatch is entirely sustainable on the fiat standard, however I also argue that the fiat standard is entirely unsustainable and will be eventually superseded by the Bitcoin standard, so let us explore the gold silver ratio using this standard…
As Bitcoin embraces labourism and rolls back industrialism then the importance of silver as an industrial commodity will diminish as there will by default be far less industry, the industry that as a reminder has been driven by inflationary credit economics that is now coming to an end, so in my opinion silver will become more of a monetary commodity and store of value going forward… As Bitcoin is a decentralized accounting standard then there are no regulators or riggers to manipulate supply and demand constraints at the marginal edges, the local supply chains of miners, refiners, dealers… Gold and silver can now be exchanged against one another in bitcoins, and so will develop the Bitcoin gold silver ratio, but as I explained above still heavily tied to the fiat gold silver ratio while it survives… When the Bitcoin standard has become dominant and the fiat standard faded, then the gold and silver supply chains of miners, refiners and dealers will be producing precious metals on a completely decentralized price discovery network, that again with local and regional variations in scarcity in both supply and demand will lead to the arbitrage trade between gold and silver worldwide… It is only at this time and when the price discovery mechanism of both metals is freed by distributed ledger technology will we actually find out if the historical ratio remains sustainable at 80:1, or it collapses pretty sharpish to 8:1, and if indeed this leads to increased production of silver relative to gold until the gap has been filled and we are again trading at 15:1, the pre 1880’s ratio and the historical ratio of the last several thousand years… To those that dismiss the relative scarcity of precious metals when factoring in the price ratios, I think you are wrong! The beauty of blockchain technology is, it will prove this one way or another… Gentlemen, place your bets on the future!
Bitcoin Donations Gratefully Received:
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Postscript: Audio podcast for this post.
