If there really existed a lost city of gold, then the abundance of gold there would have no more value than concrete or red bricks. What makes gold valuable? Gold’s inherent value is based on three characteristics, namely: a) scarcity, b) the increasing difficulty to obtain new gold through mining operations, and c) the high cost to forge gold in meaningful quantities.
Successful tungsten forgeries may threaten gold’s unique status. Enter Bitcoin, the inherently scarce (limited to 21 million), hard to obtain, and cryptographically secured electronic bits of money. Can Bitcoin be used as a global gold standard?
The Gold Standard
According to Wikipedia, the gold standard is “a monetary system in which the standard economic unit of account is based on a fixed quantity of gold.” Such a standard makes sense because the total supply of gold can, in theory, be inspected by the people to assure bankers are not cheating by creating money from thin air.
But the United States of America abandoned the gold standard in 1933 and officially severed the tie between gold and the dollar in 1971. Having a gold standard as a reference value for the monetary base of a nation’s wealth is, in a sense, a security measure to safeguard the people from being robbed by bankers. Why was the gold standard abandoned?
Fiat Money and Inflation
Although gold could hardly be forged in meaningful quantities, at least until recently, fiat money or unbacked money allows banks to print as much of it as they like. In our electronic Information age, fiat money represents nothing more than bits and bytes, numbers in a database.
The money people work for was turned into a scam by those in power in order to rob the people of their productivity. Fiat money is like coal miners of yesteryear who were paid in company credits and were forced to spend their credits at the overpriced company store.
The Credit Creation Theory of Banking
Who has the power to create money from nothing? Officially, central banks like the U.S. Federal Reserve. But recent studies show that even local commercial banks are actively creating money from nothing:
It paints a picture of individual commercial banks pushing forward, while the central banks that are officially supposed to regulate the supply of money are lagging behind. In other words, the democratic peoples have lost control over their economies.
Towards a Bitcoin Standard
The current fiat system of money is not transparent and allows for banks to create money from nothing. Counterarguments that banks must have checks and balances in place fail to take into account human nature. Power corrupts and absolute power corrupts absolutely. If individual and central bankers have the power to create money, they will use that power in their own best interests. Interests that do not serve the interests of the people.
But rather than returning to the financial stone age, i.e. to go back to a primitive, prehistoric gold standard, we can choose to fast forward to the age of cryptocurrency. Bitcoin meets the same characteristics that make gold valuable. Introducing the Bitcoin standard will restore global accountability and protect the interests of democratic peoples.