On 1 November 1961, the US, UK and six European nations agreed to manage the gold price via what was known as the London Gold Pool. They did so by pooling some of their reserves. When demand spiked, they would use these reserves to manage the price at US$35 an ounce.
The system worked for a while. But it collapsed in March 1968, when France withdrew. They saw the writing on the wall. The gold price was undervalued. They weren’t going to continue selling it cheaply.
12 years later, the gold price peaked at US$850 an ounce. The central bankers had lost control. They could not rig a system when the monetary denominator was a physical, limited supply asset.
The Reverse Alchemy Solution
They learnt from that. Their solution was reverse alchemy. Over the years, the bankers managed to turn gold into paper. A limited supply monetary denominator suddenly became limitless. ‘Paper gold’ replaced physical gold.
‘Don’t worry about physical gold’, the alchemists said. Have this paper gold, it’s cheaper and easier to trade and gives you ‘exposure’ to the gold price. The physical gold, meanwhile, went into the vaults of the central banks.
Thus, the bankers mugged the gold price, ensuring its price signal would never reveal the monetary illusion needed to keep their game going.
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As Ben Hunt wrote in his recent Epsilon Theory note:
‘What is the GLD ETF? It’s gold!™. What is a unit in an ETF basket of gold miner stocks? It’s gold!™. They and their many kin are securitizations of gold ownership that promise the price appreciation of gold without the hassle of gold ownership. They are casino chips that represent the price of gold.
‘I’m old enough to remember when people bought and sold gold coins in private transactions. I guess we’d call that peer-to-peer today. I’m old enough to remember when well-meaning people would have earnest conversations about gold as a reserve currency, just like well-meaning people today have those earnest conversations about Bitcoin. I’m old enough to remember how quickly those conversations died out after State Street launched GLD in 2004 and took in a billion dollars in a few days. Turns out people didn’t really want the grumpy grandpa identity of owning physical gold in some Mad Max world as much as they wanted gold!™ in their financial portfolios as an abstracted insurance policy against central bank error.’
I quoted from Hunt’s piece yesterday too. It’s interesting that he makes the argument that bitcoin is at risk of Wall Street turning it into Bitcoin™.
Buying Bitcoin ETF
There are similarities. Buying real bitcoin is a hassle for some. You have to create and store it in a digital wallet. And if you forget the password, you’ve lost your bitcoin. Forever.
Wouldn’t it just be easier to buy a bitcoin ETF?
Well, yes. But what are you really buying?
‘Wall Street and Treasury are running a psyop with their creation of Bitcoin! ™, and it’s necessary to think about Bitcoin in those psyop/narrative terms if the goal is to preserve an active community with an identity of autonomy, entrepreneurialism, and resistance to the Nudging State and the Nudging Oligarchy in the context of Bitcoin specifically and crypto more generally.
‘That’s my goal, anyway.
‘I’m not in this for Bitcoin-as-global-reserve-currency. I’m not in this for Number Go Up. I’m not in this for “store of value” against that gosh darn “dollar debasement”. I’m not in this for Flow. I’m not opposed to any of those things, and I don’t think you’re a Bad Person if those are your things. They’re just not my things. I’m in this for Bitcoin as good art and the inspiration it provides to a community that shares my values and goals for making a better world.’
This gets to the point.
Bitcoin is the basis for a whole new monetary system. The price grabs all the headlines, but it’s the underlying technology that gives rise to the price. This is where the understanding is. Once you see the potential for this technology, you’ll see just how much of a threat bitcoin is to the financial establishment.
More on that in a moment.
‘The goal of the US Treasury is to see all of the money in the world.
‘The US Treasury is the Eye of Sauron — a gigantic panopticon tower that sweeps the world with its unblinking gaze, seeking out the owners of power, i.e. money.
‘The US Treasury can’t see Bitcoin.’
And this terrifies them. That’s why Wall Street is busy creating Bitcoin™.
But will it work?
I have my doubts.
The system has failed the younger generation building out this new technology. They’re locked out of housing, which is the building block of family life. They have no alliance to the ‘system’ of finance that has denied them what former generations have taken for granted.
Bitcoin is code, not a physical asset. It will be much harder to trademark than gold.
Wall Street and the bankers may have finally met their match.
The potential of this coming change is so profound that we as a business are going to start following it much more closely. And you can too. It starts today. To join the discussion and find out about the possibilities this new money system presents, click here.
I’m looking forward to the journey!
Editor, The Rum Rebellion
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