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Cryptocurrencies vs. Bullion - Jeff Nielson

Cryptocurrencies vs. Bullion - Jeff Nielson
By Jeff Nielson 15 days ago 7388 Views 3 comments

July 11, 2017

Bitcoin and ethereum. By now, at least one of these names will be familiar to readers. These are “crypto-currencies”.

What is a crypto-currency? In general terms, a crypto-currency is a digital currency where the value/exchange rate of that currency is the product of a complex mathematical formula.

Proponents of these crypto-currencies are adamant that these formulae are valid and therefore this ensures the integrity of these new currencies. That point will be briefly addressed later in this article. For now the focus will be not on what crypto-currencies are, but rather what they are not.

This brings us to precious metals. One of the main reasons for the invention of crypto-currencies is the realization (by smart people) of the need to have a medium of exchange outside of our fraudulent, corrupted monetary system.

The perversion of our once-legitimate monetary system has been the topic of many previous commentaries . However, perhaps no one has expressed that corruption more succinctly than one of the principal architects of this fraud.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.

- Alan Greenspan ( 1966)

Even back in 1966, Greenspan spoke euphemistically. When Greenspan used the phrase “confiscation through inflation”, what he really meant was theft-by-money-printing.

A gold standard limits the creation of new currency (by central banks) to what can be officially backed by existing gold reserves. The infamous economic charlatan, John Maynard Keynes, referred to the gold standard as “the Golden Handcuffs” largely for this reason.

Keynes despised those Handcuffs. What happens when the Handcuffs are removed? There is no longer any limit on how much new currency can be conjured into existence by corrupt central banks: theft-by-money-printing. The concept is monstrously simple – dilution.

What happens when a corporation prints up a significant quantity of new shares? This dilutes the existing share structure and the value of the shares falls. The drop in value of these shares represents the “confiscation” of the wealth of existing shareholders: their shares are now worth less.

To where did that wealth disappear? Who confiscated that wealth? The recipients of the new shares.

The concept is identical with respect to our fraudulent “fiat currency” monetary system. The central bank conjures new currency into existence. The value of all existing currency declines. The central bank calls this decline in wealth (i.e. theft of wealth) “inflation”, and the criminal central bankers feign almost complete ignorance as to the source of this “inflation” – for obvious reasons.

Who effectively steals our wealth as the central banks create more of their funny-money? The recipients of this new funny-money: the Big Banks. The more funny-money the central banks create, the faster the Big Banks steal all of the wealth of existing currency holders. It is literally the world’s largest organized crime.

Why is a gold standard different? A gold standard is an Honest Money system. As previously noted, the fact that all currency must be backed by gold precludes the central banks from engaging in their theft-by-money-printing crime of dilution.

Another way of describing the gold standard is to refer to it as a real money system. Having a paper currency backed directly by gold is little different from simply using gold coins as currency directly. And gold itself is real money.

This brings us to an elementary definition of which many readers will not be familiar. What is money? While the expression of this definition varies slightly from source to source, the elements of the definition of good money are consistent.

1) It must be uniform

2) It must be evenly divisible

3) It must be rare or precious

4) It must be a store of value

Good money must be uniform: each unit of currency must be identical to all other units. It must be evenly divisible. We must be able to create various denominations.

It must be rare or precious. If money literally grew on trees (like our paper fiat currencies), then it would have no value – like our fiat currencies. This is why every fiat currency ever created has gone to zero, or been removed from circulation before this could occur.

This brings us to the last and most important quality of real money: it must be a store of value (over time). This is what separates money from mere currency. Real money has intrinsic value.

Such money is a “store of value” because the intrinsic value of the money itself preserves and protects the wealth of the money-holder. Gold has intrinsic value. It has numerous, potent metallurgical properties for industrial use.

However, gold is rarely used industrially because it is valued even more greatly due to its aesthetic appeal. It is this universal aesthetic appeal which has led to the widespread use of gold as jewelry, in the fabrication of our most-treasured religious artifacts, and (of course) as money.

“Good as gold.” That three-word cliché speaks volumes. Despite the best efforts of the bankers and their media mouthpieces, gold retains its universal appeal (and respect) as a valuable asset.

Silver is also money, for precisely the same reasons. In fact, as the more brilliant metal it arguably has even more aesthetic appeal than gold. However, silver is less-precious than gold (by a ratio of 17:1) and so most of the world’s silver is currently utilized (consumed) in industry because silver is even more valuable industrially than gold.

In contrast, mere currencies (such as all of our paper currencies) are not “money”. They are not a store of value. They are not rare or precious. They have no intrinsic value. Their utility is purely as a medium of exchange.

Crypto-currencies, as the name directly implies, are not money. They are not a store of value. They are mere currency.

They can still be distinguished from our fraudulent (central bank-created) fiat currencies. As was previously discussed, many credible sources will attest to the fact that crypto-currencies are not fraudulent.

This leads to the central point of this article. Are crypto-currencies “as good as gold” (or silver)? In a word: no.

Gold and silver are money. Crypto-currencies are mere currency. They are inferior by definition. Real money must protect our wealth (for the reasons previously given).

Two thousand years ago in ancient Rome, a one ounce gold coin could be used to purchase the finest suit of clothing of that era: a high-quality toga, along with accessories (i.e. a belt and sandals). Five hundred years ago, a one ounce gold coin could be used to obtain a tailor-made suit of that era. Perfect wealth preservation over time.

Today, as readers know, the price of gold (and silver) is heavily suppressed. What does this mean for the holder of a one ounce gold coin today? It means that – temporarily – we would have to buy our suit off the rack rather than having it tailor-made.

Cyrpto-currencies might preserve the wealth of the currency-holder, at least over the short term. But they have no intrinsic value. They are not mere paper (like our corrupt fiat currencies). They have even less substance: they are purely virtual.

How do they acquire their exchange rate at any moment in time? Via a mathematical formula – a computer algorithm which is 100% a function of supply and demand. When there is net, new demand for a crypto-currency, its value rises. When there is a net decline in demand (i.e. net selling), the exchange rate falls.

Crypto-currencies are direct competition to our corrupted fiat currencies. Crypto-currencies are a direct threat to the theft-by-money-printing organized crime of the Big Banks and (Western) central banks. So what entities are now poised to move into crypto-currencies? The Big Banks and central banks .

What is the apparent strategy of the banking crime syndicate (i.e. the One Bank ) to confront this threat to its single, most-lucrative form of organized crime?

1) Create its own (corrupted) “crypto-currencies”, promote them heavily, and lure as many Chumps as possible into this new form of banker organized crime.

2) Infiltrate the existing crypto-currencies (by surreptitiously acquiring a massive supply) so that these crypto-currencies can be collectively “crashed”, and confidence in them shattered.

Both bitcoin and ethereum have experienced fantastic spirals in their exchange rate. Someone has been accumulating vast amounts. Certainly, some of this demand comes from legitimate buyers looking for shelter from the fraud-ridden paper currencies.

However, the banking crime syndicate has an enormous profit motive to become the dominant holders of these crypto-currencies. As regular readers are well aware, the One Bank has the capacity to (literally and legally) counterfeit infinite quantities of our paper funny-money. It thus has infinite resources to take control of these competing crypto-currencies.

Means. Motive. Opportunity. All that we need to wait for is the crime: the take-down of bit coin et al as the banking crime syndicate liquidates its crypto-currency holdings (which are likely controlled by third party shells).

How do we compare crypto-currencies to gold and silver?

Gold and silver are real money. As such, they provide guaranteed protection for our wealth, over the long term. Their exchange rate can be suppressed (as we see regularly), but the value of these hard assets can never be driven to zero – or anywhere close to zero.

Crypto-currencies are not money. As such, there is no express or implied guarantee of wealth preservation. As with gold and silver, there is a strong motive (by the bankers) to attack these currencies. Unlike gold and silver, because these virtual currencies have no intrinsic value, they can be driven to zero.

Is there a role for crypto-currencies in the portfolio of the Rational Investor? Yes. Even before their creation, precious metals bulls did not channel 100% of their liquid wealth into gold and silver. Investors have always maintained some reasonable “cash component” in their asset mix, to allow them to easily meet day-to-day expenses and short-term emergencies – without the need to liquidate bullion.

With the creation of crypto-currencies, this cash component no longer needs to be in the fraudulent paper currencies owned-and-operated by the One Bank. People can use bitcoin and/or ethereum as their “cash” (currency), while continuing to utilize gold and silver for what they do best: protecting our wealth.

Bitcoin versus gold? It’s a matter of apples and oranges. They represent two separate tools, for two separate uses.

Full Disclosure: I hold gold and silver physical bullion.

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

David Watters 14 days ago at 3:57 PM
Crypto-currency vs. Bullion - Jeff Nielson, that's the kind of writing we all need to be reading. And if I could allow myself to add a couple of points to it with this; When for example we Europeans changed over to the Euro all the said National Currencies in Europe were taken out of circulation and replaced by the hence; the Euro.

When people change their currency be it Euro or dollars for Crypto-Currency, the Euro and the Dollar stay in circulation with the Crypto-Currency. So in the short-term we inevitably have more currency units chasing the same amount of Goods & Services, €2,047 euro for a Bit-Coin as I write (€2,047 X 2 = €4,094). Isn't this in itself Hyper-Inflation.

On a separate topic I'd be interested to hear your opinion as to why there is so much gold & silver & the colour blue in all of the recent marketing be it television, magazines, products for sale, company logo's, the colour gold/silver/and blue is being used everywhere. You can guess my opinion but for what it's worth; because we have reached "limits to Economic Growth", we have reached limits to issuing debt based currency and that a return to using gold & silver as money is work-in-progress and they the Powers-That-Be are maybe intent on linking gold/silver-to-water as apposed to Fiat-Currency-to-fossil fuel. This might be a reason why water is being heavily privatized by Corporations and the reason the Bush Family in 2005 bought up a major water resource in Paraguay i.e. The Guarani Aquifer, a major fresh water resource (The Saudi Arabia of water). All just opinion.

P.S. My comments are merely how I would converse, had I the good fortune to be in your company, Keep up the excellent good work _ David W...
Jeff Nielson 14 days ago at 11:34 AM
Thanks for the support and the interesting feedback David!

I would argue that your observation of increased gold/silver symbolism is coincidence. Our governments SHOULD be moving back toward an Honest Money system. However, when was the last time any of these corrupt regimes did what they should do?

I'm afraid we're heading toward an even more ephemeral (i.e. fraudulent) monetary system: official "crypto-currencies", and/or we can't forget about the bankers "SDR's" (lol).
Mike Mouse 13 days ago at 9:06 PM
What great insights! Write more David Watters.

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