Change My Mind - Currency tethering.

[TeeDee]

( More Saturday randomness from me ( sorry )

But as there is a wealth of mixed minds and intellects here on the forum and I think some variety to forum life is healthy - here is another random question for the Hivemind collective. )


In the present days of Fiat currency - where money is untethered from an actual resource and based upon faith within the confidence & governance behind it - if a Financial reset was to occur would it be better for a New Currency to be returned to some fractional tethering to Precious metals.

This used to be the case with The British Pound, US dollar and Swiss Franc among many others before FIAT became the norm.

The rising/risen popularity of Cryptocurrency such as Bitcoin - which has been described as perfected digital Gold is I believe down to a few elements but mainly that the end amount of how many Bitcoin will exist is already known which somewhat drives its popularity and perceived value.

Most western countries are now looking to introduce a form of FIAT digital currency - the difference between Bitcoin and these Central bank produced clones will be that one will finite and the latter will not.


So the question is - if a financial reset amongst the western worlds countries were to occur would it be better to have it linked to a physical resource ( fractional gold as an example ) or to have some Finite limit on the amount of currency that could be ultimately created?

Or is pure unrestrained FIAT ( as currently exists ) better?

 

[Robbi]

 

[British Red]

Ultimately, gold may be pretty, but it isn't that useful. What it does do is limit unrestrained " money printing". In many ways linking finance to a useful commodity makes more sense ( a pound of wheat?) , but the trouble is the availability of commodities vary, causing rampant inflation in a good harvest year. Ultimately all currency has risk but arguably the "gold standard" has benefits. Hard, useful goods are always preferable to either in troubled times - but lack portability and fixed value.

 

[TeeDee]

Ultimately, gold may be pretty, but it isn't that useful. What it does do is limit unrestrained " money printing". In many ways linking finance to a useful commodity makes more sense ( a pound of wheat?) , but the trouble is the availability of commodities vary, causing rampant inflation in a good harvest year. Ultimately all currency has risk but arguably the "gold standard" has benefits. Hard, useful goods are always preferable to either in troubled times - but lack portability and fixed value.

I agree that Gold has in effect limited real world value - its main strength is that it IS limited - its rarity is what predefines something as credible to be considered an underpinning element. Its value beyond that is almost a secondary consideration..


Which is probably why ( an I have arrived to the party too late ) that Bitcoins blockchain and preset limited amount makes good sense.

After all 21 million Bitcoins are Mined there is no point in mining for anymore - there simply won't be any more produced.

Gold is still within the Earth in many forms and it is its rarity and labour involved in procuring it that seems to denotes its value.


It would seem with an expanding population the monetary supply also needs to expand to allow for enough tokens to be supplied to everyone. - Positive Inflation.

If monetary supply was preset and population growth increases that would ( from what I understand ) the monetary system gaining value ( as opposed to losing it ) and a situation of Deflation would occur.


Inflation is good for eroding Debts , Deflation is good for holding wealth.

One seems to reward the saver and penalise the spender and vice versa.

 

[Bongonaut]

All fiat based wealth can be cancelled at the flick of a switch…(ask a Russian oligarch) physical gold/silver can be stored but can be debased in value overnight also (see WW2) or confiscated.
All assets can be confiscated …if your a naughty boy and don’t comply you go to jail. This is how the masses are enslaved. For me physical gold would be the choice still and a currency backed by it is better than endless printing. The system is so corrupt I’d not trust the fact they physically had the gold to back it though.
Countries are seeing that you can be sanctioned/cancelled and wealth disappears. Russia and China have been stockpiling physical gold for a long while..says something.

 

[Robbi]

Didn't we sell all ours ?

 

[MartinK9]

Didn't we sell all ours ?

Gold: Gordon Brown's sale remains controversial 20 years on

Two decades after the UK chancellor sold huge gold reserves, people still can't decide if it was a good idea.

www.bbc.co.uk

 

[TeeDee]

All fiat based wealth can be cancelled at the flick of a switch…(ask a Russian oligarch) physical gold/silver can be stored but can be debased in value overnight also (see WW2) or confiscated.
All assets can be confiscated …if your a naughty boy and don’t comply you go to jail. This is how the masses are enslaved. For me physical gold would be the choice still and a currency backed by it is better than endless printing. The system is so corrupt I’d not trust the fact they physically had the gold to back it though.
Countries are seeing that you can be sanctioned/cancelled and wealth disappears. Russia and China have been stockpiling physical gold for a long while..says something.

I think Russia had 230 Tonnes at the last public count.

China - Who knows.

But that is the thing - nearly ALL central banks seem to have been quietly buying Gold up to store for themselves over the last few decades.

Its a strange thing for financial institutions to do as they preference is for more easy to control / easy to create FIAT currency.


'Don't do what I say, Watch what I do''

 

[TeeDee]

Didn't we sell all ours ?

Yes - at a point where Gold was valued at an all time low.

 

[TeeDee]

All fiat based wealth can be cancelled at the flick of a switch…(ask a Russian oligarch) physical gold/silver can be stored but can be debased in value overnight also (see WW2) or confiscated.
All assets can be confiscated …if your a naughty boy and don’t comply you go to jail. This is how the masses are enslaved. For me physical gold would be the choice still and a currency backed by it is better than endless printing. The system is so corrupt I’d not trust the fact they physically had the gold to back it though.
Countries are seeing that you can be sanctioned/cancelled and wealth disappears. Russia and China have been stockpiling physical gold for a long while..says something.

I'm thinking that bit isn't true to Bitcoin ?? which probably helps in its allure. Its out of ANY governmental control.

 

[Great egret]

I am in IT as my profession and have some knowledge if this so maybe i can explain some things. I will try to keep it simple
There are dozens of cryptocurrencies right now and their value is going up and down. The last few months mainly down btw, so if you bought Bitcoin in december 2021 you would have half the value of your FIAT money
Cryptocurrencies make use of a system called "Blockchain". Blockchain is the technical system what makes it "government prove". Right now there is not a single approved blockchain system but there are more that are being developed. Bitcoin is one of those. The blockchain system(s) that will become mainstream has a future and can/will be used for more then cryptocurrency. (Banks can/will accept it on their terms for example)
This blockchain technique may have the advantage of being "government proof" but there are downsides too.
Crypto can be placed on a usb stick, but when the stick breaks down or goes up in flames your crypto is gone forever. You can place it on an account at a broker. (right now not a bank yet) If that broker is hacked or burns down, your crypto is gone forever. There already has been a hack of crypto worth billions of pounds and they were gone forever and untraceable to the thief. The hacker eventually returned the crypto but he made a clear point.
Which broker can you trust on a long term? A broker in a western European country, the USA, or a broker in China or Russia, (a nice example right now.)
Or trust a system that is also blockchained, but approved by the bank, (and thus the governement. )
Usually when thing go bad, gold (and copper for other reasons) go up and the rest goes down. When things are right, we trust in new techniques.
My guess is that the 2 systems, FIAT and blockchain will be mixed somehow.

 

[TeeDee]

I am in IT as my profession and have some knowledge if this so maybe i can explain some things. I will try to keep it simple
There are dozens of cryptocurrencies right now and their value is going up and down. The last few months mainly down btw, so if you bought Bitcoin in december 2021 you would have half the value of your FIAT money
Cryptocurrencies make use of a system called "Blockchain". Blockchain is the technical system what makes it "government prove". Right now there is not a single approved blockchain system but there are more that are being developed. Bitcoin is one of those. The blockchain system(s) that will become mainstream has a future and can/will be used for more then cryptocurrency. (Banks can/will accept it on their terms for example)
This blockchain technique may have the advantage of being "government proof" but there are downsides too.
Crypto can be placed on a usb stick, but when the stick breaks down or goes up in flames your crypto is gone forever. You can place it on an account at a broker. (right now not a bank yet) If that broker is hacked or burns down, your crypto is gone forever. There already has been a hack of crypto worth billions of pounds and they were gone forever and untraceable to the thief. The hacker eventually returned the crypto but he made a clear point.
Which broker can you trust on a long term? A broker in a western European country, the USA, or a broker in China or Russia, (a nice example right now.)
Or trust a system that is also blockchained, but approved by the bank, (and thus the governement. )
Usually when thing go bad, gold (and copper for other reasons) go up and the rest goes down. When things are right, we trust in new techniques.
My guess is that the 2 systems, FIAT and blockchain will be mixed somehow.

An interesting insight - thank you. You've certainly raised my attention to a few things there. I previously thought only the owner could access the Crypto via a password system.


The last point of FIAT and Blockchain being amalgamated is probably where the Central banks are going just because they then get to trace where every piece of digital currency is - and whom it has been paid too and for what services.

Certainly makes checking up on peoples TAX responsibilities a lot easier to audit.


There is also a lot of concern that once you have a fully integrated currency system and some element of social control Governments can then decide of what you can and cannot purchase. This is already happening elsewhere.

"Fancy that donut Fatty? - I don't think so... "

 

[billycoen]

Lego...rises in value by 11%,more than gold stocks or wine.

 

[TeeDee]

Lego...rises in value by 11%,more than gold stocks or wine.

Potentially missing the point of the original question although interesting to hear how various commodities rise in value compared to others.

 

[grizzlyj]

I would like to put a small amount in crypto only when I have a few hundred quid I wouldn't miss! Only Bitcoin though.
The loss in value of £ or $ in my lifetime to inflation is depressing. I believe allowing for that UK housing prices have dropped in that time. You may lose on Bitcoin too but the loss everyone has every day in £$ just seems to get overlooked.
Once the Bitcoin code is on a memory stick in your house I think no-one can touch it. You can copy it to store it in a few places. Paying someone else to hold it for you is perhaps unnecessary? Like using paypal to buy some in a UK Post Office, easy but then within the system.
Mark Moss on YT is a big fan of it and he has a lovely TV display thing he uses in his uploads (!) No idea who he is but can be interesting. He's pointed out that in developing nations just having a bank account can cost 50% of someones monthly income, for the majority of the worlds population, Bitcoin has pretty much no cost, no middle man to cream off and control what you do with it. His small business actual example is lending a smart phone to someone with an app on it which gets the person to check the translation of script into their language. He pays them directly but has no need of knowing anything about them other than account details. No intermediary.
If all those people who have no access to "normal" banking start using Bitcoin then the noise from the Wests banking system will not count for much. Will that mean a massive increase in value or a crash?????
The issue for those in the West may be can you be stopped from using it?
A Moss example

 

[grizzlyj]

And

 

[Great egret]

If all those people who have no access to "normal" banking start using Bitcoin then the noise from the Wests banking system will not count for much. Will that mean a massive increase in value or a crash?????
The issue for those in the West may be can you be stopped from using it?
A Moss example

For us in the western world it's a dillema, when your bitcoins reaches a value of a million pounds. Are you confident enough to not exchange those bitcoins for Pounds or Euro's? I can tell you, if that would happen to me, the first thing i'd do on this moment is exchange for FIAT money and buy a nice piece of land with a lot of trees on it

 

[TeeDee]

For us in the western world it's a dillema, when your bitcoins reaches a value of a million pounds. Are you confident enough to not exchange those bitcoins for Pounds or Euro's? I can tell you, if that would happen to me, the first thing i'd do on this moment is exchange for FIAT money and buy a nice piece of land with a lot of trees on it

So going back to the Original question should a new currency system ( if one was going to be created ) be fractionally tethered to something finite?

 

[Great egret]

So going back to the Original question should a new currency system ( if one was going to be created ) be fractionally tethered to something finite?

We will keep having the number of people going up. So if a bread would cost 1 bitcoin always and the amount of bitcoin is amount X, i guess we need negative inflation then?

 

[swyn]

For us in the western world it's a dillema, when your bitcoins reaches a value of a million pounds. Are you confident enough to not exchange those bitcoins for Pounds or Euro's? I can tell you, if that would happen to me, the first thing i'd do on this moment is exchange for FIAT money and buy a nice piece of land with a lot of trees on it

Yes an ex barley field and plant 1800 trees and an orchard then realise that wasn’t enough trees so plan to plant more!