Crying Wolf on the Gold Standard

tl;dr: Contrary to most opinions that the gold standard impoverishes, one economist argues that it enriches. Bitcoin as the new gold

I watched this presentation “Politicians and Bankers Have Broken the USD – Will We Return To The Gold Standard?” with a great deal of interest.

Not only did it touch on many themes that are of interest to me, but it was unusual in how it told a story of the gold standard in parallel to the story of the gray wolf in Yellowstone.

The story goes like this.

The gray wolf is an “apex predator” and, contrary to popular opinion/lore, they are critical to stabilizing the ecosystem in a variety of ways. For example, when the wolves were reintroduced to Yellowstone, over fierce protest, they started killing off deer and elk as predicted. However, what wasn’t predicted was that the killing off of the dear would positively impact the ecosystem in many other ways.

The most dramatic example is how the deer and elk began to avoid certain areas of the park where their escape routes from the wolves would be limited. This led to a growth in vegetation in those areas, instead of being eaten down, which firmed up the soil, preventing the erosion of the riverbanks, leading to increase in the beaver/otter population and a strengthening of the rivers themselves.

The point of all of this is to say that an apex predator can be a good thing.

Gold is the Apex Predator of Finance

The presenter, Grant Williams, who was at the Gold and Silver Summit (so a friendly audience) uses analogy and historical data to show that gold is the “apex predator” of the financial system.

By imposing a discipline on governments (fiscal) and central banks (monetary), it balances out the financial ecosystem in the same way that the gray wolves bring equilibrium to the natural ecosytem.

Keep in mind, if you do watch this, that the presentation was given before Covid was even on the radar, so I can only imagine what the charts would look like if he were giving the presentation today (over zoom, of course).

Bitcoin as new Gold

The argument that Williams makes is quite convincing and he predicts that there will need to be a massive exogenous shock to the system that leads to political upheaval, social upheaval, and financial upheaval in order to create a deleveraging event that forces us back onto the gold standard. I don’t know if the past 9 months are it or not, but it sure fits the pattern.

Naturally, as I watched this presentation and his advocacy for gold, I couldn’t help but think that Bitcoin, as the digital version of gold, (call it Gold 2.0) would fit in nicely here.

Of course, it depends on the timeframe for the return to the Gold Standard (which Williams says inevitably will happen because with every fiat currency, it eventually has to happen.)

That’s a thesis I agree with.

The question is when, not if, Bitcoin as a digital currency born of the Internet and suited for a networked age becomes the de facto reserve currency alongside (more likely in the 1st iteration) or in place of (over time due to inherent advantages of digital over physical) gold.

But leave BTC out of this and focus on the threat to fiat.

That’s the takeaway from this video.

And worth heeding.

I’m crying wolf here.

Maybe some will listen.