Gold vs Bitcoin: Debate Sponsored by the Reason Foundation
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For honest money and social progress
For honest money and social progress
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What “gold bugs” seem to miss is that Bitcoin is not here to defeat gold, it is here it avenge it!
The gold standard had a bug, and the Authorities found an exploit.
It is irrelevant whether or not this was a conscious decision. Most probably it was not. But once people got used to paper claims of gold, which are debt in essence, rather than holding the gold directly, gold was doomed:
Not your Vault not your Gold!
Gold got concentrated in banks, and later on in central banks. It was so easy to confiscate that it had to happen sooner or later. Authorities could not resist such temptation for long. This was possible because people had got used to the paper claims and very rarely, if ever, redeemed the gold itself.
Gold was defeated by Authorities’ Fiat replacement.
For gold to make a comeback, Authorities would have to promise “to be good an behave this time around”, that will not happen. If attempted, it will not last long.
There is a big difference between won’t and can’t: If Authorities can capture and replace gold, it does not matter they say the won’t do it, they eventually will do it.
The next sound money standard needs to make it impossible for Authorities to capture such money standard. Or at least it should take them thousands of years to figure out or implement the exploit, just like it happen with gold.
Bitcoin is an attempt to do just that…
“… While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model….”
We do not know yet if Bitcoin, or this version of Bitcoin will succeed.
But if it does not, at least, it is programmable, unlike gold. We cannot fix the gold vulnerability, but a Bitcoin 2.0 can probably fix any vulnerability in the current Bitcoin, once is well understood what such vulnerability could be, if any.
Gold has served us well for thousands of years and will continue to be useful, even for monetary matters. But it got hacked, and cannot reclaim its old place again. The cat is out of the bag now.
Keith digs too much on the volatility of Bitcoin today, that is missing the point.
Bitcoin is still in the adoption phase. Gold probably took more thousands of years to become money than it has served as such, but we want Bitcoin to do that in less than 15 years?
Then also, gold is volatile as well, as measured in USD terms. And what is worse, it should go up much more over time in fiat terms, at the very least at the same speed the fiat is going to zero. That is not happening, stocks took most of that space since the 80s.
Also gold is NOT used as money today. Only a few use it. And they use it very similarly to Bitcoin, they hoard it and it will not pay dividends (as both are bearer assets). They expect to later exchange for more fiat to spend some, or maybe use it as collateral of a loan.
The 80 years grandma point is also funny for various reasons:
– The current Bitcoin user experience is lacking, kind of what the Internet in the 90s was. Yet today anybody, even grandmas use the Internet.
– Ask any average gen Z to chose between trying to figure out real gold from fake or just download a Bitcoin wallet…
– In the coming years there will be more gen Zs and even newer generations. Those are not going to go for gold, because gold was captured by Authorities and because there are easier alternatives for them to understand and use.
About the point of what will happen when the Dollar collapses. Will Authorties conceded defeat and turn back to the gold standard?
We already know the answer. We already see what Authorities do when than happens: Remove X zeros and rename the currency with some fancy prefix: “the new dollar NUD is exchangeable for 10000 USD”
Again, Bitcoin is not the foe here, Authorities are, and they have defeated gold. They have been trying for centuries, starting with coin debasement, but they finally got the regular people NOT to use gold and replace it with debt-backed paper claims.
An adoption curve, which is what Bitcoin is doing now, is a logistics curve.
Yeah yo do not borrow Bitcoins, that is dumb to do… you have fiat or money substitutes for that.
Bitcoin is not here to replace or ban debts or credit. It is here to make credit optional as opposed as fiat, that makes is compulsory.
It is totally clear that Keith misses the trust issue totally.
Bitcoin transactions trustless globally, gold is only trustless when you use it directly, pay in hand.
Like cash or gold coins, you do not need to trust banks or any other intermediary to make a bitcoin payment.
Unlike cash or gold coins, you can transact across the glove in minutes, or seconds with Lighting.
Also a crypto currency backed by gold misses the point again. You need to trust the entity that guarantees the redimability of the gold.
About the dilema on the Bitcoin learning curve bit:
The internal was slow and very difficult in the 90s.
It was inevitable by the 2000s and today even grandmas use it daily to see pics of their grand children or even chat with the family.
Same goes for Bitcoin, it is being adopted when the entrepreneurs that figure out how to make it easier and more approachable by the masses they are going to get as rich as the “Bezoses” of today.
Trust is key. We are already suffering fiat today, a few people now abuse of an huge amount of our trust. Not to the absolute levels ridiculised in the video by Keith. But just enough not to lose faith in the fiat system while still making most people increasingly poor over time. 2% a year, when we are lucky, or worse most years.
In fact forget that. They steal from us at the rate of money inflation (not CPI).
Inflation definition is the increase of money supply. That is the only scientific definition that you can actually measure on a single number accurately.
CPI is an arbitrary calculation on an arbitrary shopping cart that keeps changing as the Authorities see fit. Price levels are a vector per item or service. You can measure price inflation of oil, gas of petrol, but measuring even “groceries” price inflation is going to be inaccurate and highly prone to manipulation. I think it was Rothbard who said you should be weary of such measures of apples vs oranges by replacing those with their prices.
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On the store of value critique. Right, governments today can make us poor. But why is that?
It is because gold failed us and now we are on a fiat standard where all is debt and you are forced to trust entities that have no real counter balances to keep them honest.
Governments cannot make bad or good harvests directly. They cannot directly force the technology or productivity to improve faster or to go backwards. But instead they can get to do those things by leveraging the fiat monetary system to spend huge amounts of money that disturb the price system and produce misallocation of resources. Again, something very well explained by Austrian Economics.
I would argue that with a monetary system that would make debt ant credit optional, most governments will not be even able to finance wars.
In such a system the major driving force would be technology driving productivity up and prices down maybe by a 3% a year or so. Or maybe even at an accelerating rate.
Not sure if Bitcoin could bring us such monetary system or not, but I am sure gold will not. Because, again, gold has already failed.
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Again on the volatility… Bitcoin is in an adoption phase. It is very early on yet, but we still see that over time volatility spread is reducing little by little.
Once Bitcoin adoption reaches saturation, volatility may still exist, measured in fiat terms. It will probably be as volatile then as gold, or maybe even less. By then, will it be the Bitcoin (or gold) are volatile or that the fiat money is?
And here is my vote…
Will gold continue to be an important form of money? I am not sure, specially on the important bit.
Will gold be completely demonetized? I do not believe so, gold is not going anywhere, it will continue to have demand and plenty of monetary use cases.
Will Authorities concede defeat, dump failed fiat money and turn back to gold? I do not believe so, and even if they do, it will not last long. They know the trick now and soon will fall back to another round fo fiat for all.
Will Bitcoin succeed in the meantime? I do not know, but if it does not, and nothing else similar replaces it, we are in a pretty bad situation. The world becomes an Argentina at a global scale, with CBDCs and things like that all over the place. Not pretty.
https://www.youtube.com/watch?v=-e9rWVINBh0
https://www.youtube.com/watch?v=stN03wk_Wzs