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Author Topic: On Bitcoin, gold, and fiat.  (Read 2607 times)
101111
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July 18, 2013, 01:04:07 PM
 #1

Bitcoin will provide an alternative to gold as an insurance policy against the inevitable decline of fiat.

Gold has been getting hammered this year but there is far too much global debt that can never be repaid in present-value fiat, only by:
1. Inflation.
2. In part, through defaults/restructuring ala Cyprus.
3. Fiat devaluation.

There is 10's if not 100's of trillions (in usd) of central bank, public and private debt that cannot possibly be repaid by the global economy, there simply isn't enough income being generated to service the debt. There is also 100's of trillions of future pension and other entitlement obligations of the various governments.

I'm not a gold bug but I think it's sure to rise in the longer term; however for me, I'm more comfortable with bitcoin as it also has other properties in addition to being a store of value.

Long BTC. Just sayin.

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July 18, 2013, 07:25:37 PM
 #2

I have nothing against gold or Bitcoin but you may also want to consider silver.  Silver is consumed, whereas gold is hoarded.  In 2005, global per-capita above-ground gold bullion was 0.8 ounces, -17% vs. 1940 levels of 1.0 ounce for ever man, woman, and child.  Silver, though, was 0.2 ounces in 2005, -96% vs. 1940 levels of 4.4 ounces.

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July 18, 2013, 08:25:19 PM
 #3

I have nothing against gold or Bitcoin but you may also want to consider silver.  Silver is consumed, whereas gold is hoarded.  In 2005, global per-capita above-ground gold bullion was 0.8 ounces, -17% vs. 1940 levels of 1.0 ounce for ever man, woman, and child.  Silver, though, was 0.2 ounces in 2005, -96% vs. 1940 levels of 4.4 ounces.

That silver is still around.  It just isn't in bullion bars.

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July 18, 2013, 11:15:14 PM
 #4

No commodity-based or currency-based hedging strategy will feasibly work for the average consumer. No consumer will have enough money to protect their investment portfolio (the physical act of purchasing enough silver, gold, or other commodity will hurt their total wealth - the amounts they can afford are too little to make for any realistic gains)

For I-Banks & Hedge-Funds, profitable strategies only exist in either High-Value Information Plays, Energy Production, Technology, and Mining [But Risk is inherent to even these].

For the forseeable future, the only 'Riskless' strategies are in Small-Nanometer Hardware (including bioengineering production) and HFT.

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July 20, 2013, 08:24:56 AM
 #5

That silver is still around.  It just isn't in bullion bars.

A lot of silver is subject to inelastic demand.

For example, let's say that each iPhone ($700) contains 20 cents worth of silver.

Next, let's say that the price of silver goes up by 10 times. (After which, each iPhone contains 2 dollars worth of silver.)

Will Apple stop purchasing silver? No. They will keep purchasing the same amount of silver even if the price goes up 10 times. After all, what is $2 to them, when the iPhone sells for $700?

Much of the industry that consumes silver is subject to this sort of inelastic demand.

And once the silver is consumed into devices like this, it's not economical to ever recycle it.

It might as well just be gone forever.

Another example is certain medical cloth, which contain tiny amounts of silver due to its antibacterial properties.

Mirrors, etc.

90% of the silver that has ever been mined, that has been sitting in vaults for the past 5000 years, has been consumed in the last 100 years.

There is more gold bullion above ground right now, than silver bullion.

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July 20, 2013, 09:05:11 AM
 #6

That silver is still around.  It just isn't in bullion bars.
A lot of silver is subject to inelastic demand.
For example, let's say that each iPhone ($700) contains 20 cents worth of silver.
Next, let's say that the price of silver goes up by 10 times. (After which, each iPhone contains 2 dollars worth of silver.)
Will Apple stop purchasing silver? No. They will keep purchasing the same amount of silver even if the price goes up 10 times. After all, what is $2 to them, when the iPhone sells for $700?
Much of the industry that consumes silver is subject to this sort of inelastic demand.
And once the silver is consumed into devices like this, it's not economical to ever recycle it.
It might as well just be gone forever.
Another example is certain medical cloth, which contain tiny amounts of silver due to its antibacterial properties.
Mirrors, etc.
90% of the silver that has ever been mined, that has been sitting in vaults for the past 5000 years, has been consumed in the last 100 years.
There is more gold bullion above ground right now, than silver bullion.
Let's hoard physical silver then...
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July 20, 2013, 09:16:49 AM
 #7

That silver is still around.  It just isn't in bullion bars.
A lot of silver is subject to inelastic demand.
For example, let's say that each iPhone ($700) contains 20 cents worth of silver.
Next, let's say that the price of silver goes up by 10 times. (After which, each iPhone contains 2 dollars worth of silver.)
Will Apple stop purchasing silver? No. They will keep purchasing the same amount of silver even if the price goes up 10 times. After all, what is $2 to them, when the iPhone sells for $700?
Much of the industry that consumes silver is subject to this sort of inelastic demand.
And once the silver is consumed into devices like this, it's not economical to ever recycle it.
It might as well just be gone forever.
Another example is certain medical cloth, which contain tiny amounts of silver due to its antibacterial properties.
Mirrors, etc.
90% of the silver that has ever been mined, that has been sitting in vaults for the past 5000 years, has been consumed in the last 100 years.
There is more gold bullion above ground right now, than silver bullion.
Let's hoard physical silver then...

I second this motion.

Hey.
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July 20, 2013, 10:32:17 AM
 #8

me to Wink

but hoarding some physical gold isn't bad either, because if the government decides that the 'new fiat' should be tied to gold, gold prices could skyrocket also...

But I prefer silver (and bitcoin) though Smiley

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July 20, 2013, 10:57:39 AM
 #9

Gold has gone through the roof, even though Bitcoin has gone down too, it had still appreciated a lot comparatively, why not put a small fortune say 1% of your worth in Bitcoin as a hedge?
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July 20, 2013, 11:04:44 AM
 #10

Gold has gone through the roof, even though Bitcoin has gone down too, it had still appreciated a lot comparatively, why not put a small fortune say 1% of your worth in Bitcoin as a hedge?

I have 10% in crypto Wink
and considering to increase this ammount if gold would go up with 20% against bitcoin.  (sell gold, buy BTC)

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July 20, 2013, 11:10:11 AM
 #11

There is more gold bullion above ground right now, than silver bullion.

There is? Do you have a source for this? Also any figures about how much is in the ground of both (preferably with measures how hard it is to acquire).

I don't hold any silver of gold because I have no secure way of holding it and think the paper variant kind of defeats the purpose. May be I should find a good way to hide some silver in my house Tongue
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July 20, 2013, 05:49:11 PM
 #12

There is more gold bullion above ground right now, than silver bullion.

There is? Do you have a source for this? Also any figures about how much is in the ground of both (preferably with measures how hard it is to acquire).

I don't hold any silver of gold because I have no secure way of holding it and think the paper variant kind of defeats the purpose. May be I should find a good way to hide some silver in my house Tongue

It's been a while, but Google turns this up:  http://www.goldsilverbullion.com/SilverBullMarket.htm

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July 20, 2013, 09:14:13 PM
 #13

Gold has gone through the roof, even though Bitcoin has gone down too, it had still appreciated a lot comparatively, why not put a small fortune say 1% of your worth in Bitcoin as a hedge?

I think diversification is the right way to go, which is why I brought up silver (since title of the thread mentions only fiat, BTC, and gold).  Also, if you are in the deflation camp (which I am) holding fiat at least in the short term is also a good position.  I know that won't go over well with most people who seem to be in the inflationist camp but we all have to play our positions the best we see them.

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July 26, 2013, 12:28:44 PM
 #14

Gold = Bitcoin
Silver = Litecoin


so it would be good go have all of that   Smiley

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July 30, 2013, 10:34:16 AM
 #15

It seems that some CBs (England mainly?) have crashed gold this year so they can re-stock at lower levels in order to have physical available to meet obligations.

How much lower will gold go? I don't know. Maybe we've seen the low?

We could have the mother of all booms in gold ahead of us (silver too, perhaps more so). BTC will be a major beneficiary. Also, a lot of demand for gold will not and can not be met by available supply further reinforcing BTC as an alternative.

When? I don't know, wild guess is 6 - 12 months; depends how much more the CBs need to manipulate the market; they've already triggered a lot of stop-losses and shaken weak hands out. Of course these big CB plays could take years to play out, but when it happens it's going to be pretty exciting.
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August 01, 2013, 03:03:13 PM
 #16

That silver is still around.  It just isn't in bullion bars.

A lot of silver is subject to inelastic demand.

...once the silver is consumed into devices like this, it's not economical to ever recycle it.

It might as well just be gone forever.

...more gold bullion above ground right now, than silver bullion.

I believe the historic Gold:Silver price ratio is 16. Currently it is much higher. But if there is more available silver than gold, and inelastic demand, I wonder if someday the price difference could reverse? Has silver ever been more valuable than gold? I don’t think so. Should/Could it be? Logic suggests maybe. Of course, applying “Logic” to markets is problematic.

Should we be looking at junk silver too? Sliver Wheaton, anyone?
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August 01, 2013, 08:47:23 PM
 #17

Bitcoin will provide an alternative to gold as an insurance policy against the inevitable decline of fiat.

Gold has been getting hammered this year but there is far too much global debt that can never be repaid in present-value fiat, only by:
1. Inflation.
2. In part, through defaults/restructuring ala Cyprus.
3. Fiat devaluation.

There is 10's if not 100's of trillions (in usd) of central bank, public and private debt that cannot possibly be repaid by the global economy, there simply isn't enough income being generated to service the debt. There is also 100's of trillions of future pension and other entitlement obligations of the various governments.

I'm not a gold bug but I think it's sure to rise in the longer term; however for me, I'm more comfortable with bitcoin as it also has other properties in addition to being a store of value.

Long BTC. Just sayin.



If our debts which are denominated in Fiat money are so large and unplayable, why on earth would we try to pay thouse debts in a highly supply inelastic commodity that is already in the hands of the creditors of most of our debts?  It is beyond belief that governments would slit their own monetary throats by making gold once again money, to do so would make their debt situation worse not better.  Sure gold might rise in value as an inflation hedge, but it is not going to become legal tender ever again.  And if your holding out fantasies of government collapse the metal you should be hoarding is lead not gold, every government collapse in the 20th century has brought mobs, gangs, vigilantes or anyone else with force-of-arms to the forefront of power but not once has gold been made money.


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August 02, 2013, 06:40:12 AM
 #18

It is beyond belief that governments would slit their own monetary throats by making gold once again money

I don't think it was governments who "made" gold into money.

Rather, gold was selected as money by the invisible hand of the market.

Since then government force has attempted to control it, to "standardize" it, to dilute it, to confiscate it, to replace it, to suppress it, etc to varying degrees of success. But absent such forces, gold would resolve back to its historical role purely based on market forces.

In fact Bitcoin and gold are very similar in this respect. Bitcoin also has become a form of money purely due to natural market forces, and governments / central banks would love to suppress it just as they have suppressed gold, though BTC has properties that make this difficult for them to do.

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August 02, 2013, 07:24:13 AM
 #19

+1 OP

Get out of paper. Get into Bitcoin.

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August 02, 2013, 09:31:18 AM
 #20

Bitcoin will provide an alternative to gold as an insurance policy against the inevitable decline of fiat.

Gold has been getting hammered this year but there is far too much global debt that can never be repaid in present-value fiat, only by:
1. Inflation.
2. In part, through defaults/restructuring ala Cyprus.
3. Fiat devaluation.

There is 10's if not 100's of trillions (in usd) of central bank, public and private debt that cannot possibly be repaid by the global economy, there simply isn't enough income being generated to service the debt. There is also 100's of trillions of future pension and other entitlement obligations of the various governments.

I'm not a gold bug but I think it's sure to rise in the longer term; however for me, I'm more comfortable with bitcoin as it also has other properties in addition to being a store of value.

Long BTC. Just sayin.



If our debts which are denominated in Fiat money are so large and unplayable, why on earth would we try to pay thouse debts in a highly supply inelastic commodity that is already in the hands of the creditors of most of our debts?  It is beyond belief that governments would slit their own monetary throats by making gold once again money, to do so would make their debt situation worse not better.  Sure gold might rise in value as an inflation hedge, but it is not going to become legal tender ever again.  And if your holding out fantasies of government collapse the metal you should be hoarding is lead not gold, every government collapse in the 20th century has brought mobs, gangs, vigilantes or anyone else with force-of-arms to the forefront of power but not once has gold been made money.

Thanks for your reply. I didn't mean to paint an apocryphal picture of global societal collapse leading to a gold denominated world, sorry about that.

I was simply pointing out that I think gold has been manipulated down by CBs and will inevitably rebound, especially given the state of fiat and debt, and that for me at this point in time I prefer bitcoin over gold. I do like gold though, maybe I'll get some as well  Wink
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