Where is the safest place to Store Value? The Evolution from Grain to Gold to Bitcoin and ICO’s
Disclaimer — this might be my most rambling blog I have ever written — In it i’m openly considering a few topics that currently consume my thinking. It might be my most rambling blog post ever but ideologically it is the one which I have committed most to and if you commit to reading it I’m certain you will find value in some, if not most, all of it.
I’m fascinated by the fact certain things can be ‘a store of value’
Grain, Gold, Dollars and now Bitcoin
The thinking is that in times of strife these things will maintain the value we have invested in them and we will be able to redeem them for value if needed (or not in the case of Bitcoin if you listen to some people).
Initially this started out with grain. This is understandable on a number of levels. Mainly though, grain has an obvious utility — it can be consumed.
Gold had less utility, but could be manufactured and turned into jewlery.
Dollars had less utility again. They were ofcourse linked to the ever reliable US federal bank, which was linked to the gold standard until the 70’s. Laterly, since it departed from being tied to the price of gold, the only utility dollars have is as paper or fuel for a fire. Irrespective of that it remained the standard for ‘storing value’ — because it was the most trusted currency in the world. People put their faith in the United States’ growth.
And now we have bitcoin which is again lower on the scale of utility.
How can something which has zero utility hold ‘value’ over time? In short, the only way it can is through continued belief in the myth that it is worth anything at all. The only reason something can hold value is because people believe that it does.
Hypothetically, if an alien species came to Earth is it likely that they would place value in the same things as us? Whether that be precious metals, rare stones, or printed paper, it is unlikely that they would ‘store value’ in the same things. This would mean it was impossible to trade with them.
If we stop believing that something stores value it immediately becomes worthless, and all the wealth stored in that item disappears for the owner.
Let’s look at something related
More and more wealth is concentrated within fewer and fewer people
If they aren’t spending money, how does the traditional capitalist economy continue to operate as it was envisioned?
The gap between the have and have not’s has never been bigger. The 1% acquire a larger portion of the available capital every day. What is described as a trickle down economy has slowed to a drip.
These pools of capital are operated as multi-generational fortunes that effectively limit the rest of the populations ability to enrich themselves
Increasingly they are managed in financial vehicles which stores the value illiquidly.
This is how bubbles are formed
If the exceedingly wealthy aren’t selling things, be that Bitcoin, Stocks, Gold or Dollars, their value will continue to rise.
This becomes more pronounced as more wealth becomes concentrated in fewer people. Less people need to sell which focuses more wealth in these ‘stores of value’.
Is it all a facade?
It is if we ever stop believing
Or shift our belief to other mechanisms of storing value
Is that what we are seeing now with Bitcoin and Ethereum?
This is why Crypto has the opportunity to emerge and redistribute wealth. Bitcoin has been adopted by a few as an alternative to Fiat currency. It’s massive growth has made a few individuals very wealthy, but it has not been adopted widely enough to become a mechanism of shifting wealth.
Any financial system depends on the myth its participants believe about it. Without continued reliance on these norms the symbol crumbles.
Then There are ICO’s
Our desire to find new ways to store value could be our undoing
Sure it’s good for the people offering these new forms or wealth storage to speculators, but the reality is that the vast majority are going to fail, with the winner taking all.
I don’t have any answers
I’m just making the observation that storing wealth in things which have less and less utility is incredibly dangerous
All it takes is our belief in that security to fade and it’s value evaporates
The world is looking to alternatives from the dollar
We no longer want to trust governments with being responsible for currency