- Joined
- Nov 12, 2018
- Messages
- 1,124
- Reaction score
- 1,636
I think BTC and precious metals serve essentially the same function. They’re both scarce resources that are designed to hold value rather than be inflationary like every currency that currently circulates the globe. I am more on precious metals solely because it has been sound money for the last 4,000 years. The decoupling of gold against the dollar has only been a recent initiative in 1971 by Nixon. I mean really think about that…. It has only been a little over 50 years.
I think that there will come a time when individuals lose trust in the dollar because the government can no longer hold its value. I mean it’s happened time and time and time again throughout history. A government resorts to a paper currency rather than gold/silver, prints too much it, and then hyper inflates their society to the point where there is an economic meltdown. History repeats itself and this time will be no different, especially when you look at the how rapidly the U.S. debt has changed recently. I mean solely from an intellectual point of view, it makes no sense to give that much power to a government. Allowing them to manipulate currency to their liking ultimately affecting the purchasing power of the dollars we all hold.
So yes, I think BTC is also a good investment although much more speculative than precious metals. But in essence, it sounds like we came to our conclusions from the same rational.
If anyone is interested in just what I am referring to I have included a passage from a great book called "The Money Bubble". History truly does repeat itself, and as philosopher George Santayana once said, "We are condemned to repeat the past simply because we don't remember it."
History of failed experiments with unsound money:
1.) Romans flood the empire with copper:
The roman empire, which two millennia ago ruled its world in much the same way that the US recently rules this one, used three metals as money: Copper for small change, and relatively-scarce gold and silver for larger denominations. The denarius, the most commonly used coin of the time, was pure silver in the first century AD. But the pressures of running a far-flung empire while placating “the people” led to steadily-rising government spending. Successive emperors addressed this mounting budgetary pressure the dishonest way - by mixing cheap, plentiful copper into their silver coins. By around AD100, the denarius contained 85% silver. By 218 the figure was 43 percent and by 244 only 0.05%. As its character changed, the denarius lost its ability to communicate ideas of value and preserve the purchasing power of savings. Romans, as their money became increasingly impaired, found it harder to figure out what things should cost and began to doubt the future value of their savings. They began to convert their coins into tangible goods, whatever the cost. Emperor diocletian (284-305) responded to the resulting price instability with one of the earliest attempts at price control, mandating not only that merchants charge the same amount for goods as in previous years, but that sons of merchants, on pain of death, stay in the business even if inflation had made it unprofitable. The empire collapsed not long after.
2.) China invents paper currency
In the 11th century China experienced a copper shortage, replaced that metal in its coins with iron, and then began over-issuing those coins, causing them to plunge in value. It then switched to paper notes which were initially exchangeable for gold, silver, or silk. This went well for a while. When Marco Polo visited China in 1269, he wrote: “you might say that [Kublai Khan, china's emperor] has the secret of alchemy in perfection…the Khan causes every year to be made such a vast quantity of money, which costs him nothing, that it must equal in amount all the treasure in the world.” Soon, alas, the supply of paper became unmanageable and the currency collapsed, wiping out the savings of a whole generation and leading to a period of chaos before a return to sound money could be achieved in 1445 - under a different dynasty.
3.). France Makes the same Mistake Twice
1716. Its treasury was stained by a series of wars and spendthrift monarch, France turned its finances over to a Scottish adventurer named John Law, who proceeded to introduce paper currency and to print a lot of it. At first, this rising currency supply made everyone feel richer, and Law was hailed as a hero. But as more and more paper notes were printed, bubbled formed in France’s real estate and stock markets (look up the Mississippi bubble for reference), while prices of most other things began to rise at an accelerating rate. Instability ensued, followed by a widespread collapse in asset prices. By 1721 the country was devastated, and Law was an outcast. In 1789, soon after the french revolution, the new government began issuing paper notes, called assignats. These assignats were supposedly backed by lands then confiscated from the catholic church. But paper issuance quickly outstripped land seizures and inflation soared. A notably bloody period of chaos ensued, followed by the rise of Napoleon and nearly twenty years of pan-european war.
4.). The American colonies try paper - and get hyperinflation
During the American War of Independence, the colonies needed equipment and supplies to defend themselves against the British empire. The continental congress responded by creating a new paper currency with the promise that after the war the notes would be paid off with tax revenues. The war lasted longer than expected, far too many “continental” notes were created, and the currency’s value evaporated. In 1779 100 dollars worth of gold or silver coins would buy 2,600 face value of continentals. Two years later the same coins bought 16,800 continentals. Within another two years continentals had become worthless, wiping out many of the soldiers and other patriots who believed their government’s promises. For decades thereafter Americans referred to items of little value as “not worth a continental”.
5.). Weimar Germany Defines Modern Inflation
After World War I the winners, led by France and Great Britain, imposed onerous reparations payments on the loser, Germany. Overwhelmed by what was in effect a massive national debt, the government (known as “Weimar” for the city in which it was constituted) began printing ever-greater quantities of paper marks in the hopes of generating growth and trade and thus much-needed tax revenues. Instead it got hyperinflation, and the world got compelling images of Germans carrying wheelbarrows full of cash to the grocery store and burning stacks of bills to keep warm. In 1919, 12 German marks were worth one dollar. By 1921 the dollar bought 57 german marks and by October 1931 one dollar bought 170 billion german marks.
Last edited:
