Schiff on Bankless: History is on Gold’s Side
Last week, Peter appeared on Bankless, a Youtube channel that promotes cryptocurrency. Hosts Ryan and David question Peter on why he thinks gold is superior to Bitcoin, and the trio discuss other issues, such as the origin and meaning of money, the stock market, and abolishing the Federal Reserve.
Peter starts the interview by reminding the audience that gold is a time-tested money that functioned well for millenia:
“Gold is real money. So for all the people who are rightly concerned, like I am, about fiat currency, about central banks and inflation and all the debt, and they’re looking for an alternative that they want a real store of value that can also be, you know, a medium exchange and a unit of account. You don’t have to reinvent the wheel. Gold works just fine.”
The reason gold became money is because people were willing to use it in indirect exchange as a medium of exchange:
“Gold is the most marketable commodity. Because you have to look back at the origin of money. Where did it come from? Eventually societies discovered that you could take one commodity that everybody could accept in exchange for whatever they had. And so that was the invention of money.”
Gold (and silver) emerged as superior monies because of their physical properties, including their uniformity and convenient value density:
“Gold beat out other forms of money in a competitive free market. It’s portable, divisible, immutable, it doesn’t decay, so it has all these things that money has to have. And because it doesn’t decay, it’s a store of value. So if I accept gold in exchange for my goods or services, I can hold on to the gold for a while.”
Precious metals aren’t doomed in the digital age either. With the right infrastructure to support them, they could resume their role as money via tokenization:
“You could theoretically tokenize gold. But the tokens that you’re creating themselves are not gold. They’re just tokens. … But what they can do is they can represent ownership of gold. I can just give you my ownership of that gold by transferring that ownership to you digitally, which I could do instantaneously at basically zero cost. It’s a lot more efficient than transferring Bitcoin.”
Bitcoin does not have an intrinsic non-monetary use, and so it’s candidacy for money is limited:
“Bitcoin just has these properties without the underlying value. And without the value, you can’t be a store of value, because you have nothing to store. In that sense, Bitcoin has a lot in common with fiat.”
Bitcoin, while superficially similar to gold, ultimately has no substance:
“[Bitcoin is] no more digital gold than an image of a hamburger is digital food. You can’t eat digital food. You’re going to starve to death if your only diet is digital food. So that’s the same thing with gold. You know, gold has to be physical because the properties of gold are physical.”
Its only current use is as a speculative and highly volatile asset to be sold to “greater fools:”
“Nobody has to use Bitcoin for anything, because you can’t use it for anything. So it’s just a token that people buy because they hope somebody else buys it at a higher price. Well, there are thousands of other tokens that are like that. Tens of thousands, actually. And there’s no limit to how many can be created in the future.”
One thing proponents of both crypto and gold can agree on is that fiat currency is terrible. When asked if the Fed should be abolished, Peter explains the libertarian view of monetary policy:
“It depends on what we’re going to replace it with. So if we abolish the Federal Reserve and replace it with nothing, and we go back to what we had before the Federal Reserve, I’m all for it. What we had before the Federal Reserve was a bunch of regional banks. They were privately owned banks that issued paper currency backed by gold. And there was no one bank that was sanctioned above any others. It was all free market competition.”
Check out the rest of the interview for Peter’s take on the current stock market and principles to grow personal wealth.
