The way I see it, Gold has essentially failed as hard money, and it's being held by central banks as a vague defense mechanism to prop up their fiat currencies in the (likely) event of an eventual "run on the bank".
Bitcoin could play a much different "reserve role".
A 🧵 1/N
Bitcoin could play a much different "reserve role".
A 🧵 1/N
First, let's be clear: Gold has not been used as actual "money" for "transactions" in over 300 years.
- Certainly in the time of the Medici's (starting 1252) the gold florin was actually the main unit of exchange for large transactions.
- this got copied and pasted into the Ducat (1254), the British Noble (1344), the French Ecu (1377), The Spanish Escudo (1535), The French Louis d'Or (1640), The British Guinea (1663), the US Gold Eagle (1795) and finally the French Napolean (1803).
But starting in the min 1800s, banknotes replaced actual Gold coins.
These banknotes were initially Bank of England Pounds, US State Chartered Dollar bills, US Greenbacks starting in 1860, and then Federal Reserved backed dollars starting in 1913.
For almost 200 years we have used "gold backed paper" and not actual gold as money. And it has failed repeatedly
- Greenbacks were issued in 1860 as legal tender with no official backing
- The US officialy went on the Gold Standard in 1900, but off it in 1933 with EO 6102. The International redeemabilityy ended in 1971.
- Britain when on it in 1816, off of it during the Napoleanic wars (1797-1821), off during WW1, and finally off in 1831.
Similar patterns exist for France, Germany etc. The problem is the idea of "paper backed by gold" sounds good, but the reality is, it always fails. 2/N
- Certainly in the time of the Medici's (starting 1252) the gold florin was actually the main unit of exchange for large transactions.
- this got copied and pasted into the Ducat (1254), the British Noble (1344), the French Ecu (1377), The Spanish Escudo (1535), The French Louis d'Or (1640), The British Guinea (1663), the US Gold Eagle (1795) and finally the French Napolean (1803).
But starting in the min 1800s, banknotes replaced actual Gold coins.
These banknotes were initially Bank of England Pounds, US State Chartered Dollar bills, US Greenbacks starting in 1860, and then Federal Reserved backed dollars starting in 1913.
For almost 200 years we have used "gold backed paper" and not actual gold as money. And it has failed repeatedly
- Greenbacks were issued in 1860 as legal tender with no official backing
- The US officialy went on the Gold Standard in 1900, but off it in 1933 with EO 6102. The International redeemabilityy ended in 1971.
- Britain when on it in 1816, off of it during the Napoleanic wars (1797-1821), off during WW1, and finally off in 1831.
Similar patterns exist for France, Germany etc. The problem is the idea of "paper backed by gold" sounds good, but the reality is, it always fails. 2/N
So, if Gold has failed as hard money, why are there still so many "gold bugs"?
Clearly because people like the "idea of hard money". The "idea of gold", not actual gold.
And to be fair, as a pure investment, Gold has done quite well, starting back to 1971. Gold was $35 an ounce in 1971, its now $2600. Up 75x. The SP500 was $100, now it is $6,000 up 60x. With dividends, about the same.
So "hard assets" do well over time. But its not accurate to call it "money" 3/N
Clearly because people like the "idea of hard money". The "idea of gold", not actual gold.
And to be fair, as a pure investment, Gold has done quite well, starting back to 1971. Gold was $35 an ounce in 1971, its now $2600. Up 75x. The SP500 was $100, now it is $6,000 up 60x. With dividends, about the same.
So "hard assets" do well over time. But its not accurate to call it "money" 3/N
Which brings us to the role as a reserve.
The rough justification for a reserve is to use it as "dry powder" to sell to prop up the currency (dollar, euro etc..)
But while the $200 Billion of Gold we hold might seem a lot, its nothing relative to the size of our deficit. You don't prop up 36 Trillion with $200 billion worth of anything.
So as @tadtweets noted recently, you could argue the entire concept of the "gold reserve" is outdated and pointless.
But Bitcoin is different 4/N
The rough justification for a reserve is to use it as "dry powder" to sell to prop up the currency (dollar, euro etc..)
But while the $200 Billion of Gold we hold might seem a lot, its nothing relative to the size of our deficit. You don't prop up 36 Trillion with $200 billion worth of anything.
So as @tadtweets noted recently, you could argue the entire concept of the "gold reserve" is outdated and pointless.
But Bitcoin is different 4/N
Bitcoin actually has the properties needed to fufill the qualities of a unit of exchange.
It can be moved from A to B essentially instantly, with final confirmation within 30min-1 hour.
Various Layer 2s (including lightning) could scale it for mass transactions (think Visa level).
So stockpiling Bitcoin might make actual sense as a hedge against what i would say is innevitable: hyperbitcoinization. 5/N
It can be moved from A to B essentially instantly, with final confirmation within 30min-1 hour.
Various Layer 2s (including lightning) could scale it for mass transactions (think Visa level).
So stockpiling Bitcoin might make actual sense as a hedge against what i would say is innevitable: hyperbitcoinization. 5/N
If this scenario comes to pass, and I think it will, Bitcoin will become the only global unit of exchange.
Owning Bitcoin as a country will be a strategic imperative -- and the only way to marshall funds in case of an emergency.
So the world governments should start stacking today.
6/6
Owning Bitcoin as a country will be a strategic imperative -- and the only way to marshall funds in case of an emergency.
So the world governments should start stacking today.
6/6
sorry: this was a typo: i meant 200 years.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
