Tag Archives: Gold

The Idea of Bitcoin Needs to Succeed, Even if Bitcoin Fails

Posted on by
2

The Truth heard one time sounds stranger than a lie heard a thousand times. 

The truth is, inflation is caused by the government printing money. There are only so many goods that are possible to be produced by the limited amount of resources in the economy. An infinite amount of dollars cannot create more goods. More money only causes the price of the existing goods to increase as there is more money chasing the same amount of goods. 

This is best described in a short book “Economics in One Lesson -Henry Hazlitt”.

This is what happens every time the government increases the money supply. This happens everyday. 

We have been in this system since everyone alive was born so it seems like it should be the natural system, but it is not. 

Ask a fish to describe air and they’d be confused because they are surrounded by water. We are surrounded by fiat currency so we don’t recognize a good sound money when we are exposed to it. 

We don’t need money distributed by the government. Money is an IOU. Money is a medium of exchange that people accept to pay for goods and services, and to repay loans. It’s a commodity that’s widely accepted, holds its value over time, and can be easily translated into prices. Money is the main measure of wealth, and it circulates between people and countries to facilitate trade.

Many things have been money over history, shells, gold, silver, copper, stones. Many of these have not been issued by governments. Fiat currency, money by decree, is a recent development. It inherently has no value. It only has value due to a fluke of history. Until 1971 USD was technically backed by gold. You were supposed to be able to trade in dollars for Gold. But that link was broken in 1933 by Executive order 6102 for individuals in the USA and in 1971 for any countries that wanted to exchange their USD for gold. Both were only supposed to be for a short time and both ended up being permanent, so far.  

Another truth is the Government takes value that you have accrued by printing new money. This would be much easier to recognize if the world consisted of 3 people and you each had $100 for a total of $300, but then 1 of the 3 people had the ability to create new money. If the 2 people wanted to buy something and they had $100 total each to bid on that thing but the 3rd person was able to create $500 out of thin air and bid against them the 2 people wouldn’t let that happen. They would recognize that the $500 wasn’t really as valuable as the original $100 that each person had because the individual had just written $500 on a piece of paper and said it had value. This is counterfeiting! Creating new money is illegal for individuals, but the government does it everyday. Why is that ok? This is the same for many governments in history. Governments always default to stealing value from the governed by printing new money. 

Why do we put up with this? We all have 1,000 different priorities in our lives. We have to take care of our kids, we have to take care of our parents, we have to take care of ourselves! We want to take a trip. We want to build a house. We want to take a vacation. We want to buy a car. We want to go out to eat or we have some other project we want to dedicate time to. In the USA inflation has been relatively low for many years so while we lose about 3% of the value we create each year, we just deal with it. 

But many places have experienced high inflation both recently and over time. Argentina has recently had 100% inflation for multiple years in a row. There is nothing inherently different from the operation of the Argentina economy and central bank from the USA central bank. Turkey, Germany, Zimbabwe, Sudan, they have all experienced hyperinflation at various times.

Physical money is just a replacement for an IOU. An IOU works between 2 individuals. But when you start accounting for goods and services delivered across continents between Billions of people an IOU doesn’t work. That is why IOU’s have been abstracted to Dollars or other currencies. 

But IOU’s between individuals don’t lose value. If someone does 1 hour of work for you you owe them 1 hour of work back. But if someone does 1 hour of work for you and you pay them $15 and then in a year they want you to do 1 hour of work for them, you will likely charge them $16 due to inflation. Why is this? It is because the accounting system, US Dollars, is broken! They dollars don’t hold value across time. 

This is because the government prints more dollars everyday. Every time the government prints a new dollar, every existing dollar loses value. 

The only way to fix this is an accounting system that has a fixed amount of units. That is what Bitcoin provides. There are only 21 million Bitcoin available. Each bitcoin can be broken down to 100 million satoshis. 

The only reason the price bitcoin is changing today is due to supply and demand for Bitcoin. But you need to look past the present day and envision the future. The future is where bitcoin has been fully adopted by everyone in the world who wants a sound money. In this future the value of all the bitcoin in existence will measure all the goods in the world. As the amount of goods grows with world productivity by about 3% a year the value of bitcoin will continue to grow at the same rate. There won’t be huge swings because there won’t be people speculating on the future price of Bitcoin. It’s price is just a measurement of the good in the world. And since there are 21 million bitcoin, a fixed amount, there is no devaluation of the Bitcoin because more new Bitcoin are not made. 

This is the fundamental idea and reason for Bitcoin. It is not a stock or a company. It is a ledger that measures value of things. It can’t be debased like existing USD ledgers. 

If you understand this problem, the government stealing value from you via money printing, the solution of Bitcoin appears obvious. 

The only question is, does Bitcoin actually solve this problem by being a fixed amount and will the system continue to function as it does today? If it continues to function as it does today, it should continue to gain value. If something comes along and changes how they Bitcoin system works then it’s possible that it could not function as described.
Currently, that would be an “unknown unknown”. There is no obvious thing that would cause Bitcoin to fail. But I always leave a possibility for something to happen that I don’t anticipate in any situation.


Because Bitcoin seems to fix the problems with USD and other fiat currencies (Euros, Yen, Yuan, etc) I believe we should support it’s continued development. That is why I try to educate individuals on the problem that Bitcoin fixes, like with this article. 


If you have any questions I’d be more than happy to discuss Bitcoin with you. Please comment or get in touch!

Monetary Premium

Posted on by
Reply

I keep thinking of new ways to think about what value Bitcoin provides. Below is the way I thought about it today. It started while talking with a friend at a coffee shop about money. We discussed the gold standard and he asked how it would be possible to go to a gold standard today. The market capitalization of all the gold in the world today is only about $13.7 trillion and the value of all the money in the world is around $450 trillion. Gold currently costs about $2,000/oz. To fully back the $450 trillion of money with gold the gold would have to significantly appreciate. It would increase it’s monetary premium. In fact some central banks have explicitly said they are buying more gold in case this happens!

In a recent interview the Dutch central bank (DNB) shares it has equalized its gold reserves, relative to GDP, to other countries in the eurozone and outside of Europe. This has been a political decision. If there is a financial crisis the gold price will skyrocket,

This website, gold survival guide, did a calculation of what you’d have to reprice gold to, in US dollars, to get only a 26% backing. They determined that you’d need gold to be worth $33,690/oz. This would be a significant monetary premium on gold over what it is worth today. 

To reach a 26% gold backing, the price of gold would need to increase 17.31 times. ($8.76 trillion or $8,760 billion divided by $506 billion = 17.31).

That is a gold price of $33,690 per troy ounce.

Conclusion: To match the 1934 and 1980 “reset” prices and back US debt by the same percentage of 26%, gold would need to be priced at just under US$33,700 per troy ounce!

Many things that are semi-scarce have a monetary premium. A monetary premium is the premium that the market gives a good that has the ability to perform the functions of a money. Money’s primary function is to serve as a medium of exchange. However, before society will use something as a medium of exchange, the good must first be able to function as a store of value. Therefore, one of the functions of a money is to store value.

Gold is the most commonly thought of thing that has a monetary premium. Houses are a good example of something that people don’t often think of that has a monetary premium. Many houses are bought by speculators to store value. For example:

Chinese homebuyers accounted for nearly one-third of Vancouver’s real estate market during 2015, spending approximately $9.6 billion of the $29 billion of total real estate sales, according to a new study by the National Bank of Canada.

Rich Chinese buyers are willing to use houses, which are not very liquid, to store value outside of China. It is a lot simpler way to get value out of the country. It would look a lot more suspicious if they just shipped hundreds of thousands of dollars out of China and parked it in a bank. But to buy a property is an “acceptable” reason to take money out of the country. People are resourceful and will find ways to store value. 

People want assets that will rise with inflation. They can be willing to pay more than the utility value of the asset to acquire it. Unfortunately, it’s never explicitly stated or even talked about that some things have a monetary premium on top of their utility value. Commodities like corn or oil have very little or usually no monetary premium.Their only value is from the things they can be used to do. They don’t store well. To have a monetary premium a good has to have a long life, like gold or houses. Stocks are another thing that has a monetary premium.


One thing that also has a monetary premium that is not often talked about is money! People like to talk about the fact that Bitcoin has no “intrinsic value”. Do you know what is another thing that has no intrinsic value? US dollars. Think about it. What gives a dollar its value? It is it’s network effects. It is accepted as valuable by others. Gold has a utility value as well as a monetary premium. Some people get confused by gold having a utility value and they think that any money has to have a utility value. But that is not true, as evidenced by the US dollar, the primary money in the world, having no intrinsic value! In fact there is really only 1 major difference between US dollars and bitcoin. US dollars can be created at will by the US government, and are everyday. This reduces the purchasing power of every existing dollar, including the ones you own and worked to earn. 

Bitcoin has a fixed supply. Once you own a fraction of a bitcoin, you own that much of the total bitcoin network. There is no  way for anyone to steal your percentage of the network by creating more bitcoin

I often say, if the government quit printing dollars, we wouldn’t need bitcoin. Every government that has had their own currency in history has always printed and debased that currency until it has lost all value. See the Romans. They literally has physical silver coins. They would periodically recall them, melt them down, dilute the silver percentage and reissue them. Initially they would act like they were the same value of coin, but as people came to realize that new coins had less silver they would require more coins for the same goods. 
So back to the monetary premium. US dollars have no inherent value. Neither does bitcoin. But US dollars have a created monetary premium from their acceptance as a means of payment. There is no reason that bitcoin, or anything else that a group of individuals choose to use as a store of value and means of payment could become that and gain some of the monetary premium that dollars have. In essence we can transfer the monetary premium from dollars to bitcoin, if we choose to. In El Salvador bitcoin is already accepted as a means of payment. Many individuals and businesses around the world have already individually chosen to accept bitcoin as a means of payment.
SInce dollars don’t reliably store value, due to the ability of the government to print more, why wouldn’t people choose to store value in a tool that it is impossible to make more of? That is why I choose to store some of my value in bitcoin. If you are interested in talking about the idea of monetary premium more, or the idea of transferring monetary premium from one good to another, get in touch!

Why Bitcoin Makes The World Better – The Bitcoin Layer and “How My Co-worker Identified the Issues Without Identifying The Causes”

Posted on by
Reply

F.A. Hayek in 1984: “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

First 15 minutes of the podcast “Why Bitcoin Makes The World Better – The Bitcoin Layer”- I think this is a great 15 minute video to learn about “why Bitcoin” if you aren’t sure what “problem Bitcoin is trying to solve”.

Full episode – Why Bitcoin Makes The World Better – The Bitcoin Layer

Inflation/money printing by the government is a hidden tax, or more nefariously, theft of your savings.

I received the below email from a coworker related to this home for sale.

https://www.homesofiowa.com/idx/listing/IA-WCFMLS/20233854/4426-Granite-Ridge-Road-Cedar-Falls-IA-50613

I was walking the dog tonight and there are several new houses down the street. I looked up what they go for. There is a video of it on the page, it’s a just a house.  Nothing huge, with some basement finished. – coworker

I shared the below picture with this coworker. If you are measuring the world in USD then things are getting more expensive. But if you are measuring in Bitcoin, things are getting cheaper, as Jeff Booth explains in the initial Youtube video I shared above. 

Below is the rest of my reply to this coworker. 

You could always try to put multiple families together in one house, as times will get desperate. That would be the historic solution. And as you said, as people are poorer, they will just have to do it again.

There are plenty of very poor both in the USA and abroad already living this way.

As referenced from the trip I just got back from India from.

Most of the world is ALREADY poor. The USA has benefited from being able to export inflation to the rest of the world for the last 50 years.

We do this by everyone having to buy USD to buy oil. Then every country has a huge pile of US treasuries/dollars. Then we print more.
Printing money is effectively stealing value from people who hold dollars.
That is why NO ONE ever wants to have cash for longer than they have to.

Don’t you think that’s kind of crazy that no one actually wants US dollars “money”?

We buy bonds, gold, real estate, stocks, anything to store the value because we know that dollars lose value over time. It’s wild!

It’s even more obvious in countries like Argentina or Turkey where they have REALLY awful money. But our money also sucks for preserving value over time.

It all started with 1971 and removing the gold backing of the USD. Well really that started in 1930 with executive order 6102 which the government confiscated people’s gold. Paid them $20.67/oz of gold. Then repriced the dollar to $35/oz! they literally stole $15 worth for every oz of gold they took. It is crazy!

$15 was real money back then!

Gold, Silver, Debt To GDP, Wealth Preservation

So I’m just saying you are noticing the results, extremely high home prices. Things getting more expensive. I am telling you there is a clear history to how we got here. And there is literally 1 solution to this problem. Well 2 but 1 will never happen.

If the US government quit over spending and printing new dollars that would fix it. But that will NEVER happen.
So the alternate solution is to save in a currency that has a maximum limit, 21 million bitcoin.

If we DON’T support the bitcoin network we will continue down this path of everything getting more expensive.
I have read so many books about the history of money and governments messing with money. It always happens this way.

The Romans debased their money, see below.


See quote below.

I really encourage you to learn more about bitcoin. It is our only hope.

Super short book, 2 hours on audible, but it’s really great.

The Bullish Case for Bitcoin Paperback – May 8, 2021

by Vijay Boyapati (Author)

F.A. Hayek in 1984: “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

Bitcoin Market Cap, How Much Could 1 Bitcoin Be Worth?

Posted on by
Reply

Much of this post was taken from this tweet from  MD₿TC@MDBitcoin. I felt this information was very helpful so I wanted to share and expand on it.


Original tweet below

The Inevitable Path of #BTC 

I. Global wealth = between $400-$900T

II. Let’s say 10% of Bitcoins are lost.

III. Let’s do a conservative estimate that #BTC captures  ONLY 1% of global wealth, the value of one #Bitcoin would be? 

then imagine 5%?, 10%? 20%? 50%?  

There is no other path, accumulate as if your life depended on it. 🟠

Complete Calculations:

Available Bitcoins:

Total Bitcoin Supply: 21,000,000

Lost Bitcoins: 10% of 21,000,000 = 2,100,000

Available Bitcoins: 21,000,000 – 2,100,000 = 18,900,000

1% of Global Wealth:

Lower Bound:

1% of $400T = $4T

Value of one Bitcoin = $4T / 18,900,000 ≈ $211,640.21

Upper Bound:

1% of $900T = $9T

Value of one Bitcoin = $9T / 18,900,000 ≈ $476,190.48

5% of Global Wealth:

Lower Bound:

5% of $400T = $20T

Value of one Bitcoin = $20T / 18,900,000 ≈ $1,058,201.06

Upper Bound:

5% of $900T = $45T

Value of one Bitcoin = $45T / 18,900,000 ≈ $2,380,952.38

10% of Global Wealth:

Lower Bound:

10% of $400T = $40T

Value of one Bitcoin = $40T / 18,900,000 ≈ $2,116,402.12

Upper Bound:

10% of $900T = $90T

Value of one Bitcoin = $90T / 18,900,000 ≈ $4,761,904.76

20% of Global Wealth:

Lower Bound:

20% of $400T = $80T

Value of one Bitcoin = $80T / 18,900,000 ≈ $4,232,804.23

Upper Bound:

20% of $900T = $180T

Value of one Bitcoin = $180T / 18,900,000 ≈ $9,523,809.52

50% of Global Wealth:

Lower Bound:

50% of $400T = $200T

Value of one Bitcoin = $200T / 18,900,000 ≈ $10,582,010.58

Upper Bound:

50% of $900T = $450T

Value of one Bitcoin = $450T / 18,900,000 ≈ $23,809,523.81

Buy the quantity that you can and put it in cold storage, wait a decade and watch the inevitable path.

-End original tweet. 


There is a lot to unpack there. 

Let’s start with the basics. 

There is between $400T and $900T of wealth in the world. 

For reference at bitcoin’s current price of $26,000 and total coin maximum number of bitcoin ever of 21 million coins, bitcoin’s current market capitalization is $546 billion. This is between 0.067% and 0.13% of all the value in the world. That’s pretty small currently!

Gold has a current market capitalization of $12 trillion. 

That comes to between 1.3% -3% of all the value in the world. 

As noted above, if bitcoin was to capture 1% of the world value  it would be worth between $211k and $476k per coin. This doesn’t even get it to the same market capitalization as gold!

Lower Bound:

1% of $400T = $4T

Value of one Bitcoin = $4T / 18,900,000 ≈ $211,640.21

Upper Bound:

1% of $900T = $9T

Value of one Bitcoin = $9T / 18,900,000 ≈ $476,190.48

Since bitcoin has many features that make it more useful than gold it has a good chance of at least gaining the adoption of 1% of the store of world value. Bitcoin doesn’t have to be used for every daily transaction for it to be useful or valuable. Gold has value and it is not very useful at all for daily transactions. 

Bitcoin has multiple benefits over gold, it can be sent around the world nearly instantly, it can be broken down into very small units (1 satoshi = 0.00000001 bitcoin  which at $26k/bitcoin = $0.01 is equal to 37 satoshis) and various other benefits that bitcoin has). 

These are just a few of the reasons that I think Bitcoin will likely continue to stay around as a store of value and continue to gain adoption and grow in price and value.

What is Counterfeit money?

Posted on by
Reply

Former Chairman of the Federal Reserve Alan Greenspan explains how the United States can pay down the debt. By printing money. Transcript:

David Gregory, moderator of “Meet The Press” on NBC: “Are U.S. treasury bonds still safe to invest in?”

Alan Greenspan, Former Chairman of the Federal Reserve: “Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default.”

If I were to print new money it would be counterfeiting, which is illegal in the USA, and every other country in the world. When the US government creates new money it is not counterfeiting. The action and result is exactly the same, there are more dollars in circulation, except in magnitude. If I were to print new money it’d be maybe $1 million? When the government creates new money it is $1 trillion! Every year! What’s the difference? Every new dollar decreases the purchasing power of every dollar that currently exists. Why do we put up with this?

Silver – Buying and Premiums

Posted on by
Reply

I bought my first silver 1 oz coin just over a year ago. I ended up paying $24.25 from a local coin shop. At the time the silver spot price was $19.43. This means I paid a premium of $4.82 or 24.81%. This was actually the lowest premium I paid for quite a while until November 2022 when I found some sales on www.SDBullion.com. 

By that time the silver spot price had risen to $21.43 and I paid $25.97 or $4.54 premium which was a 21% premium. The high premiums were partially because these were on sale. I was paying these 20%+ premiums because the stock market was doing poorly and people were selling out of stocks and buying into precious metals because they were seen as safe. 

Today, the stock market has been roaring, most of the year. The S&P 500 is up 17% this year as I am writing this. When the stock market is going up, people often sell gold and silver, and bonds, and buy into the stock market. 


When people aren’t interested in something is when you should consider buying it, if you are going to. 

The best deal I found was these 1 oz Golden State mint generic silver coins. The silver spot price was 22.84 and they were selling for a $2 premium, $24.84! Or 8.7% premium. This is just a little more than the first silver I bought over 1 year ago when the spot price was $19.43 or $3.41 lower than it is today. $24.84 is also lower than I paid in November 2022!

This is a trend I’ve watched over the last year. The spot price for gold and silver has risen but the premiums have actually fallen more! This makes it possible for you to buy the same amount of silver or gold for less than was possible a year ago, despite the higher spot price. 

The 2 websites I check frequently are https://sdbullion.com/deals . Specifically their “Doc’s deals” page which is linked here. The 2nd is https://monumentmetals.com/deals.html?page=1 Monument Metals – Deals page also. Basically every metals dealer has a “deals” page. And when you are looking for the cheapest premium that is often where it is. 
Other good sites are JM bullion (although usually more expensive) or as mentioned at the start Golden State Mint. 


The deals change weekly. It’s even possible that premiums or spot price continue to go down in the future! Buyer beware!


Read this before considering metals and know why you are buying physical metals, similar to any purchase or investment.

Microstrategy $750 Million to Buy MORE Bitcoin!

Posted on by
2

Microstrategy is a large software analytics company. It is also the company which holds the most Bitcoin. Microstrategy currently holds 152,800 bitcoins.

This is 0.73% of all Bitcoin that will ever be created! There will be only 21 million Bitcoin ever.

It’s also estimated that perhaps 4 million bitcoin have been “lost” with old computers that people have lost so that means 152,800/17 million = 0.9% of all Bitcoin that will ever be available! Only 19 million bitcoin have been issued. The final 2 million will be issued over the next 120 years, so that means there are only about 21-2-4 = 15 million bitcoin available for purchase today. So Microstrategy owns over 1% of all Bitcoin available today!

And they are buying more!

MicroStrategy is planning to raise up to $750 million via a stock sale and says it may use the proceeds to buy more Bitcoin- Cointelegraph

The reason Microstrategy is buying more bitcoin is because they see it as the supreme ownership asset. In a world where more fiat currency (USD, Euros, Yen) are created everyday something that is ultimately scarce is valuable!

You can watch the Chairman of Microstrategy, Michael Saylor, discuss bitcoin here, for 1 hour, or if you are really interested he discusses history, energy and bitcoin here for many hours. I watched the hours and hours podcast as it’s fascinating!
This development, Microstrategy, buying more and more bitcoin, is a signal in the noise of everyday life where people are talking about if you should buy bitcoin, or gold, or stocks. There are things that are signals and things that are noise. This is a signal. KPMG putting out a paper about bitcoin being ESG friendly is also a signal. 

You should watch for signals and act accordingly!

Remember! Don’t FOMO buy thousands and thousands of dollars of Bitcoin unless you are ready to temporarily lose 50% or more.

Don’t invest any more into Bitcoin than you are willing to lose. While I think it will be fine, it’s always possible something wild could happen and it could go to $0 (I doubt this but keeping all possibilities open). 

What Problem Does Bitcoin Solve?

Posted on by
8

To understand the reason behind why some people (like me) buy bitcoin you need to think about the problem we think bitcoin is trying to solve.  When you use a government currency, like USD, the Government can effectively steal value from your bank account via money printing. How does this work?

To understand that you need to understand what the point of money is. Money is just a measurement of the value of something.  We have all been trained that the value of things goes up over time because the price goes up over time. But just because a house rises in value by $100k over 5 years,  does not mean its intrinsic value has risen. It’s the same house providing the same amount of shelter.  It really shouldn’t gain value. What has really happened is the money,  used to measure the value of the house, has lost value! It’d be like if you used a tape measure with 12 inches to 1 foot  to measure a board and then you changed the tape measure to use 13 inches to 1 foot,  where the foot is still the same length but each inch is smaller so you have “more inches”. But is the 1 foot board actually any more useful or longer if you use 13 shorter inches or 12 inches to 1 foot? No.  This is how the government confuses us. They print more money and then our houses “go up” in value,  but it’s because the measuring stick is changing.  Why does the government do this though? They do it because that’s how they pay for the $1 trillion to $4 trillion budget deficit the Government has each year. 

In WW1, while we were on the gold standard (every dollar was supposedly able to be converted back to gold at a bank), the government had to sell “war bonds” to pay for the war.  This at least provided a little link between Americans turning over money for what they thought was a just cause. If people didn’t buy the bonds the government couldn’t pay for the war. 

Since the US dollar was removed from the gold standard in 1971, the Government has had no restrictions on how much money they can print. The US government is able to fund any war ad infinitum via money printing. When this new money is printed the government uses it to buy good (ships,  tanks,  steel, sometimes roads,  etc). Since they have unlimited purchasing power they can keep printing money until they can pay for what they need.  Meanwhile,  the average person might be unable to buy a new truck because the price of steel was pushed up by the government demanding 200 billion tons of steel for planes and warships.

When thinking about if you should buy bitcoin this is the fundamental issue you need to consider, how is my purchasing power being diluted via inflation? 

Since bitcoin has a limited supply (21 million) as more US dollars are printed a single bitcoin’s value, measured in USD, or any other currency, will continue to go up. 

In fact bitcoin recently hit all time highs, when measured in Argentine pesos,  Lebanese pounds and Venezuelan bolivars

This is due to those countries experiencing extremely high levels of inflation 50%-100% a year.  I can’t even imagine what that would be like to live in. At 100% inflation,  or even 50% you need a raise every paycheck! Your money would lose 1% of its value every week at 50% inflation.

While it seems like high inflation only happens in “far away” places with bad Governments that’s not the case. It has happened thousands of times in history

We, every person in the world, is in a fight with their own government to keep as much of the value they create as they can.  The government explicitly taxes you, which we can debate but at least it is obvious.  But the government also stealthy steals value from your bank account or savings via inflation and money printing that you have no control over. 

Because in the USA inflation has been a relatively small issue (1%-3%) for most of the last 25 years most people in the USA haven’t thought about wealth preservation much.  Now that we’ve seen 10% inflation it’s new to people and they aren’t sure how to protect their purchasing power! A bond paying 5% is really losing 5% a year to inflation if inflation is 10%.

I know bitcoin is volatile but the inherent properties of it (ultimate scarcity, 21 million total coins ever), make it the best chance we have ever had to get out of the system and protect our wealth. If bitcoin doesn’t succeed then we will have lost every opportunity to preserve value!

 I think that is a cause worth supporting, by buying and holding Bitcoin. And you’re not just supporting it, but you’re protecting your wealth! 

I have written politicians and blog posts trying to encourage people to understand this while bitcoin is relatively cheap ($30k). I know once it is $50k or $100k more people will have Fear Of Missing Out and will buy in which could happen in the next year or 2. It’s best to learn about bitcoin when it’s price isn’t rising like crazy and you aren’t having FOMO. 

If you’ve wondered this last year or 2 how to avoid losing value to inflation I’d enjoy talking to you more about bitcoin. I only recommend 1% of your net worth in it to start.  So if you have $100,000 of net worth you can just buy $1,000 worth of bitcoin. That’s a small risk to be part of a monetary revolution that just might pay off. 

Gold, Silver, Debt To GDP, Wealth Preservation

Posted on by
3

“I think if everyone was to hold a little gold and silver (say 1%) it would send a message to the government that we are tired of inflation. Part of the goal of the FED raising interest rates is to get people to stop spending money and to invest it in bonds. I propose that instead of putting all your cash in bonds, what if many people considered buying just a $100 or $1,000 or $5,000 of physical gold or silver?”

The USA has ever increasing national debt. You’ve probably heard about it recently due to the silliness around raising the debt ceiling. Republicans always make a huge stink about it when they are in control of either the House or the Senate and there is a Democratic president but make no mention of deficits when a Republican is president. Anyway.

Regardless of which side of the aisle you sit on, every increasing debt is an issue because it is related to inflation. The government continually funding operations with printed money leads to inflation which reduces your purchasing power. In extreme cases this can lead to currency collapse as we have seen in Argentina, Sri Lanka and Lebanon recently. 

When this happens, locals basically lose all savings they have in cash. 

There are a few things to do to maintain purchasing power. One is to invest in the stock market. This has historically been a good place to hold money to maintain purchasing power over the long term. Holding German stocks after WWII, in Germany, even kept you mostly ahead of inflation!

Historically, gold and silver have been money. But in the Roman empire silver coins were subject to debasement as emperors melted down existing coins and made 2 coins with the silver previously used for 1 coin and continued for 200 years until they completely destroyed the value of their currency. 

The United States did this in 3 steps. In 1930 there was Executive Order 6102 which essentially forced Americans and “gold hoarders” to turn in their gold to the US government for a set price, $20.67 (equivalent to $433 in 2021) per troy ounce. The order also permitted any person to hold up to $100 in gold coins, a face value equivalent to 5 troy ounces (160 g) of gold valued at approximately $10,000 in 2020. The 1934 Gold Reserve Act subsequently changed the statutory gold content of the U.S. Dollar from $20.67 to $35 an ounce.

So, the Government basically paid people $20.67 for their gold, then said, you can’t buy it back, but if you could it would cost you $35/oz. Seems pretty crazy!

Step 2 of United States Currency debasement happened in 1964. Up to this time half dollars, quarters and dimes were made of 90% silver. After 1964 they were made mostly of cheaper copper. 

The final straw that broke the dollar’s link with gold was in August 1971 Nixon ended the convertibility of US dollars to gold on the international market. Up until this time, while much of international trade was done in US dollars, technically, anytime any nation holding US dollars could ask the USA for the equivalent value of gold. Because the USA had been printing money for years it would have been impossible to redeem all the US dollars that existed for gold, so we basically said, “you can’t”. It was technically a type of default on the US dollar!


All the above context is just for historic purposes to get around to the point below and to mention why gold and silver are not used as money today. Governments always print more money than they can pay back. It happened in Rome, it happened in America, and it will likely happen again hundreds of years in the future (unless Bitcoin takes over as hard money, but that is a topic for a different post!)

Back to government debt, “Since 1800, 51 out of 52 countries with gross government debt greater than 130% have defaulted, either through restructuring, devaluation, high inflation or outright default. The IMF expects US government (USG) debt to GDP to be a record

141% by year-end 2020.” – Hirschmann Capital 

This was partially due to the reduced GDP from Covid but also due to increased gov spending. In 2023 you can see Debt to GDP is “down” to only 120%. 

So, what is the average person to do? As mentioned above, holding stocks is a good option. I personally do hold most of my wealth in stocks. Real Estate is another option that many people use. Bitcoin is also something I personally hold. I think Bitcoin has many long term benefits for wealth preservation. You can also hold bonds. But if you are holding a bond paying 5% and inflation continues up to 10% or 100%, like Argeintia, that won’t preserve your wealth. But this post is about physical Gold and Silver. I think holding physical gold and silver probably provides a little of a long term hedge against long term inflation. In the short term it certainly can be very volatile. But holding cash is always destined to go down over time. While over time, gold and silver are destined to go up, especially gold. 

You can see the declining value of the dollar here. 

While you can see the value of gold rising over time below. 

Silver chart, can be toggled to be inflation adjusted

https://www.macrotrends.net/1470/historical-silver-prices-100-year-chart

Gold chart, can be toggled to be inflation adjusted

https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

If you want to learn some more about the history of gold as currency this was a great video I watched/listened to. 

If you want to learn about buying physical gold and silver there are plenty of great youtube videos. Here is a video about buying silver I listened to recently. 

Here is another good channel – SpegTacular

I am only allocating a small percentage of my net worth towards physical gold and silver about 1% of total net worth, for now. In the grand scheme of things, I think this might not be very impactful. Some data says that “12% Of All Americans Own Gold, 14.7% Own Silver” .

I think if everyone was to hold a little gold and silver (say 1%) it would send a message to the government that we are tired of inflation. Part of the goal of the FED raising interest rates is to get people to stop spending money and to invest it in bonds. I propose that instead of putting all your cash in bonds, what if many people considered buying just $100 or $1,000 or $5,000 of physical gold or silver? Buying gold and silver would achieve the same end goal the government wants of removing money from the system, but then people would end up holding something of value, physical gold and silver, instead of bonds, which are currently returning 5% while inflation is at 7% or more yet. You are losing money holding bonds.

To be absolutely clear, I don’t think everyone should go sell all their stocks and put 100% into physical gold. But I think allocating 1% smartly for the reasons above is a pretty good idea. 

I don’t have time here to review why I have been specifically saying “physical gold and silver” so many times. But this has been reviewed in many places.

Here is a good video and here is a good article about why physical gold or silver over paper gold and silver. 

Personally I have used https://sdbullion.com/ to buy gold and silver online and always check their deals page. https://sdbullion.com/deals  I get no commission off this, just sharing my experience.
This guy also made a ranking of many of the online bullion dealers. 

Bitcoin For Beginners

Posted on by
Reply

I have been looking for a great video/podcast to share with people who are newer to bitcoin. I believe I have found one that, while long, is very good! 

 BTC001: Bitcoin Common Misconceptions w/ Robert Breedlove

I don’t have much to comment about for the start of the video. It is just a very informative video and I recommend you listen.

There are 2 time stamps I wanted to highlight towards the end of the video where Robert Breedlove is discussing challenges, risks or arguments against bitcoin.

The first one starts at ~1:39:01. Here he is discussing a common argument against bitcoin that it has “no intrinsic value”. An article from Bitcoin Magazine – DOES BITCOIN HAVE INTRINSIC VALUE -( discusses the thought of if anything has intrinsic value, it doesn’t. Value is only defined when some outside entity is able to use any resource. For example, an ocean world would not have intrinsic value to humans as we are land dwelling, but it would have more value to fish. 

Robert Breedlove makes a distinction between intrinsic value vs. industrial value. When many people make the argument that Bitcoin has no intrinsic value they are comparing it against gold, which has an industrial value in that it can be used in many production processes or to make many useful things. It also has value as art or jewelry. Gold actually has no intrinsic value since as noted before, nothing has intrinsic value. Approximately half of new yearly gold mined is used for jewelry and industrial use and half is used for store of value or “monetary premium” by individuals or central banks. This is in comparison to bitcoin which as people have noted, has no industrial use, it ONLY has monetary premium. The benefit of bitcoin’s preservation of value vs say US dollars is that bitcoin has a capped supply of 21 million coins. Once you buy some bitcoin, you are sure of how much you own relative to the total pie. With USD or any other fiat currency (government issued currency) you don’t know how much more will be issued and will erode your value via inflation. 

The other good discussion comes at 2:00. The free market of history had chosen Gold as the benchmark for measuring value. This is because it was the “hardest” money. It had the least inflation. Gold’s inflation was relative to how much gold was mined each year, which is ~2%/year relative to the current total world gold supply. When you take the inverse of that and compare  the “stock” total existing gold (in tons) divided by the new production each year (flow) you get a number, for example 100 tons existing/2 tons new production = 50 stock to flow number (S2F). 

The “flow” of new material creation compared to the existing “stock”. Commodities like oil and corn have very high flows relative to the current stock which produces a small stock to flow number. Learn more about Stock to flow here. 

There is not a lot of existing corn or oil carryover each year, relative to the new production. Because of this these things usually have relatively cheap prices since there is so much new creation. Things that have low flows relative to the existing stock have higher values as it’s harder to get the new stuff. In the past gold and silver have both been used as money. But gold eventually won out as the “harder” money to produce. There is more silver produced relative to the current stock of world wide silver, compared to gold. 

Silver has a stock to flow number of 22.

 Gold and bitcoin both have stock to flow numbers of approximately 50-60. But in 2024 (during the next bitcoin halving) bitcoin’s stock to flow number will increase to 120. This is because the issuance of new bitcoin will decrease in half.
This stock to flow of 120 will be the highest Stock to flow number of any asset ever, and it’s only going higher as the issuance of new bitcoin continues to be cut in half every 4 years, due to the technical nature of bitcoin. To learn more about the halving read here. 

Coming back to the conversation, in the past the world wide free market had selected gold as the preferred store of value due to its “hard” nature and high stock to flow number. With bitcoin having a higher stock to flow going forward, along with all the other benefits it has over gold doesn’t it make sense for bitcoin to be the preferred store of value?

I leave you with a final very short 2 minute video related to discussing what is money and value? Money is best thought of as a tool to compare the value of different things or services. You can measure the value of a house, and apple and a massage in the same currency and compare their value. If the money is inflating then the price becomes confusing for measuring things. It’d be like if a ruler was changing as you were trying to measure a table. Inflation is not good or needed for an economy to work. 

If you want to talk about bitcoin you know where to find me!