10 Comments

Akshually, gold is created by colliding neutron stars, as best as we're able to tell. Which might as well be God because it is quite outside our ability to smash neutron stars together.

Also akshually, it is possible to create gold in the lab - first time this was done was in 1941, by firing neutrons at Hg to knock off a proton; it's also possible to add a proton to Pt by a similar process. It costs a hell of a lot more to do that than it does to mine it, though, so nuclear physics hasn't quite discovered the philosopher's stone.

Solid argument, by the way. Very difficult to disagree with. The follow-up would be, how do we return to using precious metals, and can this be done in such a fashion as to make debasement very difficult while preserving ease of transaction?

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author

Both points are correct. With regards to lab creation, the practical problem is that it cannot be scaled, given how expensive smashing neutrons is. To create one oz of gold could cost trillions of dollars, which isn’t worth it.

Thanks, I am glad you like it! I actually see us returning to a gold standard soon: the BRICS nations understand gold’s value, and have openly touted the idea of a gold-backed CBDC. That could preserve ease of transactions, while preventing debasement; the participating countries would just need to agree to gold convertibility on demand.

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The problem with a gold *standard* is that it is very easy to debase ... even gold coins of standardized weight open the door to adulteration. Paper or digital tokens make it even easier.

One idea I've been playing with is a dispenser for gold dust, which simultaneously serves as a scale. The device would need to be able to evaluate the purity of gold, while dispensing it in precisely measured amounts. This would enable gold to be used directly and easily for small transactions, and make debasement practically impossible since purity would be independently evaluated with every transaction.

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I respectfully disagree. The classical gold standard of the 19th Century is the best example: nations established a reputation with each other for honesty in gold convertibility. This is a repeated game, after all, and players which cheat will suffer the consequences of ejection from world trade and the global monetary system.

In an extreme case, this would lead to a speculative attack. A nation that debases its gold, under a gold standard, is easy prey for Soros-type attacks on their currency. Not worth the risk.

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To clarify, I don't mean that it can't work for a time, it clearly can. And it would certainly be superior to what we're doing now. My point was simply that historically, it tends to break down under the temptation to inflate, and that perhaps this could be ameliorated by finding a way to use uncoined gold directly.

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My apologies, I misunderstood you. Yours is a fair point.

To be honest, your dispenser idea is the best one I've heard; however, I am cynical. We have seen this monetary cycle repeat so many times in history, that I doubt we can escape it. It is a human tendency to want to debase money, because it temporarily means a redistribution of wealth to those who control the money printers.

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Yep, I'm also skeptical debasement can be kept at bay indefinitely, any more than any other form of entropy. It isn't called the temporal realm for nothing.

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May 15, 2023Liked by Ignatius of Maidstone

You forgot about Bitcoins halving cycle every 4 years…. Whether or not people believe in Bitcoin, the daily new supply gets cut in half in 2024, 2028 etc. Which means if the demand for it as an asset stays the same, the only thing that can move is the price. Traditionally halving cycles start huge bull runs of 10-20x. Without even wild speculation or any other reasoning, Bitcoin should roughly double in price when the active liquid supply is halved.

If your money doubles approximately every 4 years in the most conservative case - what other asset can compete with that? That’s also assuming no further increase in adoption.

Bitcoin is complicated and does assume too much intelligence of the average person… but steadily doubling peoples wealth will be hard to reason against.

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author

I already address the limited supply cap in Part 1.

I am aware of the halving cycles, but the argument here is not against Bitcoin as a speculative investment, but as a monetary asset.

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