The Golden Age
The fiat currency crisis has begun. So who will be the ultimate winner: gold, digital gold, or other types of precious metals or cryptocurrencies? Time will tell, and different assets have different failure modes, but here are some thoughts.
(1) First: Remember that Bitcoin's value proposition lies in its resistance to censorship. Without the private key, the coin cannot be kept.
(2) To explain this, consider the workings of physical gold. If you can safely buy, transport, store, and sell physical gold, that's great. But if you live in a highly organized country like China, it's much easier. However, once the price of gold rises, such a country can also track you down to your doorstep and confiscate your gold. Roosevelt did this in the 1930s, and China is perfectly capable of doing so in the 2020s:
(3) Therefore, from a game theory perspective, as the price of gold rises, so too will the calls for taxing (or even confiscating!) physical gold. Note: We don't even need to mention paper gold here. In a real crisis, this argument is meaningless. This is why many countries are repatriating their gold. Not your gold bars, but your gold!
(4) Unlike physical gold, digital gold (and cryptocurrencies more broadly) can be securely bought, sold, sent, and received anytime, anywhere, in any amount. It is intangible, international, instantaneous, and internet-native. It is portable, programmable, and easily verifiable, something gold bars cannot do.
(5) Of particular note is the resistance to seizure that physical gold lacks. The same is true for cryptocurrencies as a whole. Back to the fundamentals: resistance to seizure is one of the reasons cryptocurrencies were created; they were designed as an alternative to precious metals.
(6) This doesn't mean physical gold is dead. If you live in a safe small country like the UAE, you might be able to buy gold and eat it. They probably won't confiscate your property there.
(7) Furthermore, many countries (especially in the East) are likely to soon restandardize their currencies to gold, digital gold, or some combination of precious metals and digital assets. As I have pointed out for years, the BRICS countries have been stockpiling gold:
(8) However, don't overreact to gold. The successors to the American empire are China and the internet. You should think of this as the past and future replacing the present. China will replace the dollar with gold and physical goods that can be touched, sensed, and controlled. Meanwhile, the internet will replace the dollar with digital gold and digital assets that can be encrypted, scripted, and verified.
(9) Therefore: you can hedge between the past of physical gold and the future of the digital future, based on your own judgment, but one thing to note: unless you are in a region where financial and personal safety are secure, you probably shouldn't buy physical precious metals. This might mean you're not in North America and Western Europe, as these countries are in the midst of a sovereign debt crisis. As the crisis deepens, these countries and their angry populations will plunder every resource they can.
(10) In other words, geography is more important than asset allocation. Ray Dalio touched on this point subtly in an early interview, stating that "geographical location" itself is a risk:
What Dalio really meant was: if you live in a region heavily reliant on the dollar (including the entire G7), you should leave. Because the potential for widespread abject poverty following a dollar collapse means that angry citizens (or government agents, or both) could break into your home and plunder your assets. They might even tear you to pieces in the process.
This idea is exciting… but history is not without precedent. Eastern Europe and Asia experienced this during the rise of communism in the 20th century. North America and Western Europe could face the same fate after the end of Keynesianism.
Until this happens, you really don't want to buy gold BRICS, because gold BRICS cannot be transported by airport. You should act quickly. You should escape as soon as possible, get out of the predicament. Get as far away from the dollar zone as possible… but first, get away physically, not economically.
After all, "staying to fight" a national debt crisis caused by decades of money printing is like staying to fight a volcanic eruption caused by decades of geological activity. You weren't the instigator, and you can't stop it, but you're easily destroyed by it. So, like early Americans emigrating from Europe, emigrate. Unless you consider Irish Americans leaving Ireland a "betrayal" of Ireland, unless you truly want to spend the rest of your life paying off welfare and war debts you never actually owed, you should withdraw from the G7. Then you can allocate your share as you see fit.
Alternatively, you can ignore this analysis and do what you think is right. Of course, it's entirely up to you. If so, I sincerely hope my "Make America Great Again" (MAGA) friends are right: "America's golden age has begun." Because I also believe we are on the cusp of some kind of golden age.
