It’s just a coincidence, but two unrelated developments in the digital currency world this month make a clear and important case for owning gold.
The first is the bankruptcy of the digital currency platform FTX. How an exchange in the center of the blockchain and distributed ledger world was able to lose track of up to $10 billion in client deposits is a mystery, at least until we remember that the Pentagon has lost track of trillions of dollars.
The fallout continues to spread from Sam Bankman-Fried’s digital FTX fraud. BlockFi and eight affiliated companies have now filed for bankruptcy, listing more than 100,000 creditors who are owed between $1 billion and $10 billion.
There will be others.
FTX and its peers grew to their immense scale only because the Federal Reserve was shoveling money around like it grew on trees. Or, to mix metaphors, Bankman-Fried’s company was drinking from a firehose gushing out made-up Fed dollars.
The Fed’s Made-Up Money
Loose money makes things look cheap. Stocks look cheap no matter their earnings (or lack thereof). With the Fed buying down interest rates, bonds look attractive, even ones issued at the lowest interest rates in 5,000 years, until rates reverse. Houses look cheap when mortgage rates are being suppressed by the central bank.
And that is how bubbles are created.
The Fed firehose pumped up more than just the traditional investment markets. Digital currencies bubbled up as well. $8 trillion of made-up money in 14 years was enough to create the cryptocurrency bubble.
Now the money firehose has been turned off–at least for the time being. And the bubbles are being undone.
The monetary authorities can foster malinvestments in all those markets, but they can’t print gold, which is why gold is the world’s preferred monetary alternative to failing currencies.
The Fed’s Digital Currency
At the same time, even as we are watching the FTX calamity and Bitcoin fall from the heights, the Fed has begun testing its own new digital currency. It has launched a 12-week digital dollar pilot program in conjunction with select major banks, including Citi, HSBC, Wells Fargo, and even Mastercard.
This is the central bankers’ dream, for it allows them to debase the currency at any time because any amount of digital currency can be put into or taken out of circulation, or even put into and taken out of individual accounts instantaneously.
For authoritarians, it has the added advantage of allowing the state to effortlessly track all its citizens’ comings and goings, their spending, and their savings. It’s the most powerful tool of surveillance and total social control in history.
A central bank digital currency is the ultimate tool of an authoritarian regime, enabling it to track and approve or disapprove of any activity it chooses. China leads the way in developing such a social credit system. Protests there are a reaction to the exercise of the state’s total social control.
Do we really want the same government that has destroyed the U.S. dollar’s purchasing power surveilling every single transaction in America and micromanaging the people’s behavior? And why, in our age of computer hacking and the widespread theft of digital data, should the Fed be herding the people into having all their financial affairs online somewhere and vulnerable?
Nothing compares to non-trackable gold for privacy in your financial affairs. And it brings to mind an old Swiss expression: gold is coined freedom.
A U.S. central bank digital currency has been fast-tracked. Be sure you have taken steps to help protect your wealth, your retirement, and your privacy with precious metals like gold and silver.
If you’re interested in investing in precious metals, let us provide you with a free one-on-one consultation.
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.