The Snobs’ Attack On Gold Is Failing, Thanks To Bitcoin

The classical challenge to fiat money is gold. Populations wary of sovereign or bank money-printing—or taxes and regulations—pile into precious metal, leaving the fiat without volunteer users and high and dry. This was the way of the world for centuries, millennia. In the United States in the early 1930s, the American people, tiring of income tax increases taking rates absurdly higher than they had ever been in peacetime, property tax increases far and away the highest in the nation’s history, and exceptional tariffs that made everything more expensive, said forget it and pushed into gold, selling their United States banknotes for it, at $20 per ounce (the official price). The president, FDR, found this so very objectionable and outlawed the private ownership of gold. A better solution would have been to go easy on the tax-rate levels. It would have been enough to dispatch the Great Depression while retaining classical money.

Today people still do this. Hence gold zooming up past $4,250. It was at $275 in 2000. Microsoft stock sure has done well in the 21^st century. Not as well as gold, though.

But today people do something else too. They go into a new gold alternative, which is therefore a new fiat alternative, Bitcoin in a word although encompassing the cryptocurrency universe as well. By the 2000s, the fiat-gold contest had become long in the tooth. After 1971, gold had no official monetary role for the first time basically ever in the world. For forty years we got lectures on how crank-like gold is—its advocates are “goldbugs”—and how professional fiat money is, via the ministrations of credible, credentialed staff at the Federal Reserve and in the economics establishment broadly.

The nature of this emasculation of gold was social. The demonetization of gold that held from 1971 to roughly 2011 used attitudes of social superiority to enforce the new regime. Mention gold, and you are out of polite conversation. Say go back to a gold standard, get labeled a crank. Not an economist in the top thirty departments say a gold standard can work. It is nowhere in the peer-reviewed literature, etc.

What was rising in 2011 was, of course, a remarkable attempt at emulation of gold that would cut off the snobbery at the pass. Bitcoin, which began trading in fractions of a cent in 2009, was cutting-edge computer science. Economists and officials at the Federal Reserve could snob that? What, it is not intellectually sophisticated enough? Not only was it intellectually sophisticated, it was a crowning achievement—if only still in germ, making it all the more fearsome and impressive—of the most remarkable intellectual and technical development of modern times, the IT revolution.

Bitcoin is for fools? It came from obviously exceptional intelligence. Economics departments and central banks are more intellectually sophisticated that Bitcoin, the old parlay against gold? Cut off at the pass, the money establishment was, in Bitcoin’s inherent sophistication.

To begin our book Free Money, on Bitcoin and its consonance with the long American monetary tradition over the centuries, we report how in Bitcoin’s early days of public visibility, 2013 or so, the establishment did try to use its old tool, social snobbery, to pack off Bitcoin for good. Its users lived in their parents’ basement. People who played video games all day were its base. It was male. Important people like monetary officials paid no attention to it. All sorts of snobbery spaghetti, thrown at the wall. Did it stick? Did the price go up?

On or about 2020, it became impossible to continue with the snobbery. Blockchain technology and peer-to peer Internet transactions, it was becoming altogether clear, were amounting to another major entry in the relentless IT revolution. It was interesting how Bitcoin understood, at the very outset in 2009, that it had to bring a different kind of weapon in the fight against fiat money. It had to bring overwhelming intellectual superiority to the fight.

No self-respecting monetary establishmentarian can scoff at the computer science revolution. Computers—the people who do them are 100 percent dumb. To say such a thing is to get yourself escorted out of the room. Yet only yesterday (before 2009), to say gold got you escorted out of the room. How ingenious it was for Bitcoin to marshal an intellectual frontier far beyond the scope and abilities of the advocates and preservers of the fiat money regime. The fiat people had chosen social snobbery to oust gold, and thereby set themselves up, showed where their vulnerability lay. What if a gold alternative began from a premise of intellectual superiority that the monetary establishment could never touch?

Now we hear Bitcoin is too sophisticated. People don’t understand it. Buffett: I don’t understand it. Bernanke: said the same thing about gold (actually a fire-able offense for a Federal Reserve chair). This is where the beauty lies. If Bitcoin is too sophisticated, there is an alternative that is homely and comfortable and simple as an old shoe, gold.

What a lovely pair of scissors in which fiat money has found itself. Trash gold because it’s old-fashioned? Here’s Bitcoin, so new-fangled it will blow your mind. Trash it for being far out? Oops, we are back to having to deal with gold. It is perfectly understandable that gold and Bitcoin recently have been traveling up to heights largely together. Each alternative batters the aging fiat money consensus against that consensus’ own aging prejudices. Obviously we are going to have monetary reform, probably of the organic variety, globally in the perhaps near term. An outstanding possibility is a grand alliance between Bitcoin and gold.