The Argument of Bitcoins v. Gold Laid to Rest, Part II
Here is Part 2 of my article “The Argument of Bitcoins v. Gold Laid to Rest, originally released at my blog, www.theundergroundinvestor.com on April 9, 2013. Interestingly enough, because both bitcoins and gold were simultaneously raided shortly after I released my two part-series of bitcoins v. gold on my blog, I added the brief two paragraph introduction below to provide some context to reactions to my series BEFORE the bitcoin crashed happened and some context to my beliefs in gold as a far superior monetary alternative to BTCs. In fact I concluded my two paragraph intro with this thought, given BTCs' crash and the banker raid of paper gold (bankers cannot raid the real physical prices of gold and silver for lasting periods of time as proven by Apmex's listing of 2013 bullion American silver eagles yesterday at $29.01 per troy ounce when spot prices in Asia were $22.99 an ounce): Now is the "perfect opportunity to test my thesis that the real intrinsic value of gold and silver provides physical gold and physical silver holders a way to fight back against immoral bank price manipulations of gold and silver executed in fake paper markets" that BTC owners lack. Yes, I understand that gold has pulled back from a high of $1800 six and half months ago to a low of $1335 a few days ago for a 26% pullback (and alternatively from a high of $1900 if you want to go back to 20 months ago), but still this kind of pullback cannot compare to an 80% crash in bitcoin valuation from $260 to $50 in just a few days. Furthermore, because this banker raid on gold prices was one executed in paper markets with fake paper prices selling fake paper contracts of gold that reprsent millions of fake ounces of gold that do not even exist except for in the fraudulent world of futures markets, this raid compels me to desire more physical gold and physical silver right now. However, the crash in BTCs does not compel me to want to buy BTCs at its low valuation now because as I stated in Part I, I have never owned any BTCs because I just do not view them as sound money, though I think that down the road, BTCs could still serve a valuable service as a short-term medium of exchange.
The reaction to Part 1 of this article, printed on my online blog on March 28, 2013 interestingly illustrated certain aspects of human nature quite well. Though I outlined both significant strengths and serious flaws of the Bitcoin monetary model in Part I, those that support Bitcoin focused only on trying to discredit the flaws I discussed and stated that I should please stop attacking Bitcoin even though I implicitly stated in Part I that I believe Bitcoins should be able to co-exist as a competitive currency, because in the end, as long as gold and silver are allowed to return as competitive currencies as well, the best currency or currencies will always win the battle for the widest acceptance and use. On the contrary, in reaction to Part 1, those that dislike Bitcoins focused only on trying to discredit the positives of Bitcoins I stated, even though I was very careful to point out the flaws of even the positives, including that Bitcoins were open to significant manipulation in price because of susceptibility to control of its nodes and to the common trait it share with all fiat currencies - being a digital currency backed by air. Again, comments surrounding my Bitcoin article were an interesting exercise in human behavior as we tend to seek out facts that only support our point of view while paying no attention to all other facts that discredit our point of view. This is the essence of the human ego.
The truth of the matter is that since I released part 1 on March 28, 2013 both the positives and negatives of Bitcoins that I have discussed have both come true. Since the date I wrote that Bitcoins should be “viewed with skepticism in being able to provide a stable store of value over extended periods of time” due to the fact that they “have no inherent value”, Bitcoins plunged 75% in value in a 96-hour period before the recouping some of those losses in value. Furthermore, during this plunge, the top Bitcoin exchange, MTGox, issued a statement that read, “Trading is halted until 2013-04-12 02:00am UTC to allow the market to cooldown following the drop in price”, also exposing that Bitcoin redemptions are subject to the whims of one decision maker even though BTCs claim to be a “people’s money” mined by the people and for the people. On the other hand, the positives I wrote about Bitcoins on March 28, 2013 also still hold up despite the recent plunge in BTCs valuation. I wrote in “The Argument of Bitcoins v. Gold Laid to Rest, Part I” that “Bitcoins are better than fiat”. Well despite this recent plunge, BTCs have still appreciated much more than any fiat currency since their introduction into the monetary world. Unless you were one of the first adopters of Bitcoins, you probably did not purchase Bitcoins when they were $5 per BTC, but as an early adopter, maybe you purchased BTCs around $30 per BTC. Even with the plunge that brought BTC back down to $100 (remember that I originally released this article on April 9th on my blog so BTCs had not yet plunged to $50), that is still a triple in price appreciation. Given that all fiat currencies have been losing massive amounts of purchasing power over the past 3 years, that still makes BTCs better than fiat currency.
And that brings us to Part 2 of my article. With a massive banker raid executed against gold and silver prices in the paper markets only (paper gold and paper silver ounces backed by nothing but air were sold off to engineer this latest coordinated attack of the Western Central Banking cartel and their puppet bullion banks against gold and silver prices), this makes it the perfect opportunity to test my thesis that the real intrinsic value of gold and silver provides physical gold and physical silver holders a way to fight back against immoral bank price manipulations of gold and silver executed in fake paper markets. So without further ado, I present to you Part 2.
In part 2 of my Bitcoins v. Gold thesis, I am going to address the curious need of bitcoin fanatics to state that bitcoins are the best currency in the world and their attempts to point out “supposed flaws” of the only true sound money in the world, gold and silver. I wouldn’t have embarked on this exercise were it not for the fact that BTC fanatics shockingly embrace a lot of Central Banking anti-gold propaganda in their defense of BTCs. Again, I’m distinguishing between BTC fanatics and advocates as I label as fanatics those that believe BTCs are the alpha and omega when it comes to real money. Consequently, I want to ensure that the majority of the rational BTC community does not let the propaganda of a few bitcoin fanatics pollute their minds about the true value of a BTC.
I still include myself among those that believe that BTCs should be allowed to persist as an alternative currency as long as the people are allowed to bring back gold and silver as competing currencies, so the people can choose which currency they believe to be best, as should be the case in a free society. If the global banking cartel allows BTCs to persist while at the same time shutting out a return to gold and silver money, this would be a development that would be very worrisome to me if I were a BTC owner. Again, I actually still like BTCs as an alternative competitive currency as long as they are not controlled and under the influence of the same banking cartels that control all fiat digital currencies. I also consider myself a physical gold and silver advocate (not a fanatic), and one that can also see flaws in gold/silver as money as well. I don’t believe that there is any “perfect” form of money. However, gold and silver fit the bill of having the most desirable qualities of sound money, and yes, even more so than BTCs. I quite enjoy speaking to BTC advocates. I only have serious problems with the blind, biased bitcoin fanatics. So let’s take a look at a recent article I encountered titled “Why Bitcoins are Just Like Gold”, by Alec Liu. By analytically dissecting this article, I can explain why BTCs are most definitely NOT just like gold, and expose how the author has co-opted the same false arguments bankers have disseminated for decades to denigrate gold to build his own false case for the equality of BTC and gold as sound money.
Let’s start with disinformation piece #1. Mr. Liu states: “The only reason gold has value is because one day, way back when, long before recorded history, society simply decided that this yellowish precious metal should represent ‘money’.” First of all, this sounds exactly like something US Federal Reserve Chairman Ben Bernanke or IMF head Christine Lagarde would say. I can’t tell you how many ways this statement illustrates the ignorance of the author. Gold has about 10 qualities I can think of that make it a better form of money than anything else including homogeneity, durability, rarity and ease of divisibility. These are just a few of the qualities that make gold a far superior form of money than other commodities and qualities that precluded other commodities from serving as money over centuries of time. By the way, BTC’s ease of divisibility into very small units is what makes BTC so appealing as well. However, the fact that gold has been coined as money for nearly 3,000 years was due to gold’s possession of these ideal monetary qualities and not simply an arbitrary decision as Mr. Liu foolishly avers. For example, though diamonds are also beautiful, diamonds’ supposed “rarity” is just another banker lie, (see this article),they are neither homogeneous in clarity or quality, and they are not easily divisible. Consequently, because diamonds lack these ideal monetary characteristics, no civilization has ever adopted diamonds for widespread use as money over long periods of time.
The second lie Mr Liu attributes to gold, again copied straight out of the Central Banker propaganda playbook, is the following: gold’s “limited quantities were never able to keep up with demand”. This statement, one that was also erroneously presented as fact in the Goldman Sach’s book of the year, The Lords of Finance, by Liaquat Ahamed, is even more foolish than Mr. Liu’s first statement that gold was simply plucked out of the air like a rabbit out of a hat in a decision to deem it as the best commodity suitable as money. Bitcoin fanatics do not realize that their arguments for bitcoins simultaneously destroy their arguments against gold because of the indefensible contradictory logic they apply when making many of their arguments. For example, I’ve often heard bitcoin fanatics state that that bitcoin’s appreciation upside is unlimited and better than that of gold’s. However, gold is a hard asset and rare while BTCs , while also rare, are backed by the most abundant element in the earth’s crust and third most abundant element in the universe - oxygen. Would it not make more sense for a rare form of money backed by a rare hard asset to have a much better chance to appreciate to a much higher price than a rare form of money backed by the most abundant element in the earth’s crust? Actually if BTCs can survive an inevitable attempt of the Central Bank, Government, Commercial Bank troika’s attempt to shut them down as a legitimate form of money, I don’t really see why BTCs can’t keep rising in value. I just don’t believe that its final price point can rise higher than that of gold due to the important distinction I’ve laid out. And this is why I also continually distinguish between bitcoin fanatics and rational bitcoin advocates. Often the fanatics dominate the online discussion forums and spread harmful disinformation.
But let’s return to the Central Bankers’ claim that gold’s “limited quantities were never able to keep up with demand” that some BTC fanatics seem so fond of parroting. Gold’s rarity was never a problem in its use as money in the past. This was just a false myth spread and propagated by bankers that have now been taken up BTC fanatics. Central Bankers and their puppets have always claimed that gold’s rarity limited economic growth in the 1920s and that the bottleneck of gold’s rarity greatly constricted economic growth during this time period and caused the Great Depression. That is as revisionist a retelling of history as a Keynesian economist can possibly conjure up. The Great Depression resulted from bankers at the Bank of England counterfeiting of the Pound Sterling during WWI, their subsequent refusal to revalue their counterfeited Pound at a lesser gold exchange rate after the war, the consequent loss of massive gold reserves due to this fraud, and their lobbying of the US Federal Reserve to start counterfeiting US dollars to stop their gold loss. The consequent massive price distortions, aka stock market bubble, that resulted as a result of these counterfeiting efforts is what caused the crash in the 1920s and consequent global economic crisis. Though every global economic crisis is deliberately “manufactured” by Central Bankers and their Commercial Banker puppets, bankers try to deceive the masses by blaming past historical economic crashes on gold. It is truly unfortunate that some fanatics (again, not the advocates) among the BTC community help Central Bankers propagate these egregious lies.
When the bankers ended the Gold Standard in 1933 due to gold’s so-called “handcuffing” of the economy, the price of gold was only $20.67 per ounce! By simply allowing the price of gold rise to $300 an ounce, bankers could have expanded monetary supply by nearly 15 times. However, bankers were too interested in artificially suppressing the price of gold so that the serfs would not discover that the true intrinsic worth of their fiat currency, as Cypriots are now discovering today, was zero. Why? A rising gold price always reveals the dirty secret that bankers are devaluing fiat currency and stealing purchasing power from the citizens. Rarity is an element to be desired, not feared, in a commodity that backs sound money. If it were not, then BTCs founders would have capped BTCs supply at 1 quadrillion instead of slightly under 21 million (20,999,999.9769 BTCs). Thus, the problem with the global economy during the Great Depression was without a doubt, NOT the gold standard nor a lack of gold.
The problem arose due to:
(1) bankers’ abandonment of the gold standard for the world’s reserve currency (British Pound) due to war;
(2) the bankers’ decision to deliberately counterfeit a second world’s reserve currency (the USD) to aid the problem that resulted from (1); and
(3) an improper valuation of gold by bankers to preserve their global banking system of fraud and fractional reserve banking.
It is absolutely feasible today to have not a 20% backed, not a 30% backed, but a 100% gold backed system, whether or not we forgive all criminally- imposed banker debt in this world, as we should. We would need to scrap all fiat currencies in use and form a new currency to replace all fiat currencies, and then revalue gold to a significantly higher price, the exact price which would be determined by whether or not we enact jubilee or not. Again, I explain the mechanisms of how this can be accomplished in my book The Golden Gift, an excerpt of which can be found here at Scribd.
Today, the same people that buy diamond engagement rings and have no problem paying the equivalent of several million dollars per troy ounce for a flawless one-carat diamond are the same people with zero logic that say a mere $10,000 per ounce of gold is “too expensive”. Do you know how dumb this sounds from people that just paid between $2.5MM to $6MM dollars per troy ounce for their diamond engagement ring? Yes, the price of flawless one carat diamonds when you convert the price from carats to a single troy ounce is in the millions of dollars per one troy ounce.
Finally, the last utterly wrong statement Mr. Liu makes about gold is the following: “[Gold is] backed by no one…Your gold coins [ ] won’t do much good at the grocery store [because it] lack[s] intrinsic value.” Again, another foolish argument taken straight out of the Central Banker propaganda playbook. Ask Zimbabweans and Germans living during the Weimar Republic if they were able to buy food with their gold? In fact, to give you a contemporary example, go to Cyprus, and see if Cypriots that had no access to cash for about two weeks were able to buy food and other services with gold during the time bankers blocked all access to their digital bytes of air known as fiat currency. I guarantee you that Cypriots that had gold reserves and no cash were glad they did. In Zimbabwe and Weimar Germany, gold was universally accepted as money to buy nearly anything, including food. And this is why I am careful to distinguish between BTC fanatics and BTC advocates. BTC advocates that I’ve met are rational people capable of critical independent thought that understand all banker lies about gold and monetary history. On the other hand, many BTC fanatics parrot every single piece of disinformation spread by Central Bankers about gold throughout history and serve, much to the delight of bankers, as conduits to pollinate banker lies about gold and silver among the masses. Central Bankers could not have been happier with articles like “Why Bitcoins Are Just Like Gold”, because articles like these help spread banker-originated disinformation that helps keep humanity in slavery.
The characteristics that grant gold great intrinsic value are its beauty and rarity. Thus gold doesn’t need anyone to back it because its rarity AND utility grant it its value. BTC fanatics perpetually discount the fact that gold’s uses as jewelry and money, two of gold’s primary, but not only uses, grant it intrinsic value. If jewelry did not grant a commodity intrinsic value, then diamonds, rubies, emeralds, and sapphires should all be free like air (though perhaps diamonds don't belong in this same category as they have industrial uses as well). However, this obviously is not the case. Secondly, the fact that gold is the best commodity in the world that can serve as a medium of exchange AND as a store of value, gives it great intrinsic value. Thirdly, gold is a great conductor of electricity, and the reason we only find gold used in this capacity in very high-end, expensive electronics, is due to its rarity. If gold were as abundant as copper, gold would be used widespread in the electronics industry as a conductor.
So while BTC fanatics seem to not have any knowledge of monetary history, BTC advocates, are on the contrary, very well versed in the value of BTCs today. BTC advocates understand its great value as a medium of exchange but also understand its limitations in that they do not fit sound money’s need to be backed by a commodity that is a stable and consistent store of value. Trust me, if bankers can figure out a way to convince investors to trust in a bitcoin ETF, they will invent a bitcoin ETF to fraudulently manipulate bitcoin valuations in the same manner they have used the GLD and SLV ETFs to fraudulently manipulate gold and silver prices. People can fight back against this fraud in gold and silver by dumping or refusing to buy the GLD and SLV ETFs and buying physical precious metals, as illustrated by the University of Texas Investment Management Company, who bought $1 billion of physical gold bars in 2011 (but who made a huge tactical strategic error by choosing to vault their physical gold in New York vaults owned by the US Federal Reserve). If bankers invented a bitcoin ETF, there would be no way to fight against the price manipulation executed by the banker management of this ETF because buying physical bitcoins that have no intrinsic worth cannot succeed in stopping manipulation. I know that BTC owners will think that this is a ludicrous idea and that anyone that understands how BTC works will never in a million years buy a bitcoin ETF. However, owners of physical gold and physical silver that understand why only physical gold and silver are real and sound money also believe that only a fool would buy the GLD and SLV ETFs as well. But this hasn’t stopped bankers from deceiving people into dumping billions of dollars into the GLD and SLV ETFs. As long as there are people to be fooled, the bankers will use them to manipulate the currency at hand. That is why, in the end, intrinsic value is a vital, necessary trait that all sound money must possess so that the people have a means to effectively fight back against fraud that bankers inevitably will inject into the system.
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About the author: JS Kim is the Founder & Managing Director of SmartKnowledgeU, a fiercely independent research & consulting firm with a mission of helping Main Street avoid the deceit and chicanery of Wall Street and of triggering a wave of global economic freedom only possible through one pathway - the end of all global fiat currency and a return to sound money. Follow us on Twitter @smartknowledgeu and on our YouTube channel to view our weekly vlog.