A Use Case for the Modern Era (Part I) – OpEd – Eurasia Review

For decades, physical investors in gold have had to contend with superficial, naïve and totally ahistorical “arguments” from the mainstream financial press, economists and pundits of all persuasions that gold is not nothing but a barbaric relic. For them, the yellow metal is like an investment superstition. It has no return, it serves no practical purpose, and the only attraction they could conceive of is merely symbolic, or perhaps political. So who in their right mind would “imprison” their perfectly good, working fiat currency in a gold bar, then let it sit in a safe deposit box for a decade or two? Well, it may have taken a little longer than expected, but now we have an answer that even the most ignorant and unread mainstream gamer can understand.

The inflationary pressures that have gripped most advanced economies are new to most investors, as well as ordinary citizens. We haven’t seen price increases at this rate in a very long time and the magnitude and speed of the phenomenon has caused everyone to reconsider what they thought they knew about money, budgeting and saving. . And while there is a lot of talk, “theory” and attempts to divert public attention from the real causes of this problem, the fact remains that it is there and it is there. to stay. Especially for the average worker and saver who doesn’t know and doesn’t care about the academic explanation of why his salary is no longer enough to cover his basic expenses, a practical solution to his situation is much more important. than intellectual debates about whose fault it is. And this is precisely where gold comes into play.

As noted in a rarely and surprisingly accurate and honest Reuters article, “Americans are increasingly turning to gold as an alternative currency as unprecedented government spending and Federal Reserve easing threaten to erode more the value of the greenback”. The article goes on to point out that “the dollar has lost 86% of its purchasing power since 1971, according to US government data, when President Richard Nixon ended the dollar’s fixed convertibility into gold. Gold prices rose from around $40 an ounce to $1,900 during this period. The use of gold as currency began to gain traction after the 2007-2009 financial crisis and accelerated during the pandemic since 2020 as the government spent trillions and the Federal Reserve purchased unprecedented amounts bonds with the aim of reviving the economy.

The answer to his challenge came in the form of private initiatives and new kinds of voluntary exchanges, as they always do, after all. One such example is “Goldback” currency which is infused with small amounts of gold, and with denominations ranging from 1, which is 1/1,000th of an ounce of gold, to 50, which contains 1/20th of an ounce. ‘ounce. The company behind them, Goldback Inc, has already sold around $30 million in the United States and its chairman, Jeremy Cordon, predicts that could reach around $1 billion over the next few years, the only constraint being speed at which the company can produce the new currency. Many small business owners and everyday consumers have already realized and taken full advantage of this solution to their explosive expense problem.

Even if one has no idea of ​​the basic economic principles or the monetary history of the dollar or the gold standard, the concept of a stable medium of exchange is now an absolute necessity if one wants to plan ahead or run a successful business. And there’s another layer that’s particularly interesting about this growing use of gold as money: those who embrace solutions like Goldback are also quick to connect the dots to the real problem. It’s not “capitalist greed” and it’s not “supply chain breakdowns” that make their weekly grocery shopping a much more expensive pursuit. It is the rapidly decreasing value of their fiat currency. Or, as Ludwig von Mises put it, they come to understand that “the most important thing to remember is that inflation is not an act of God, that inflation is not a disaster of elements or a disease that strikes like the plague.Inflation is a policy.

As we move deeper and deeper into this new era of inflation, new applications of this millennial use of gold as money are emerging, aided by technology and our modern connected world. For example, gold trading and investment mobile apps are seeing an explosion in demand for features that allow users to use their holdings for payments. Peer-to-peer (P2P) physical gold transactions are also growing. As more and more people are willing to accept payment in gold, an increasing variety of transactions are taking place on this basis.

Comments are closed.