What Is Real Money? Why Dollars Aren’t Savings & Gold Returns | @Goldsilver's Alan Hibbard

Key Concepts

• True Saving vs. Investing: Holding depreciating currency is not saving; preserving value with assets like gold, silver, and potentially Bitcoin is saving. Investing involves risking value for potential gain.
• Money vs. Currency: Gold represents money (store of value), while the dollar is currency (medium of exchange).
• Dollar System Vulnerability: The current dollar-based global monetary system is facing increasing pressure due to national debt, anti-dollar sentiment, and Federal Reserve policies.
• Gold as a Foundation for a New System: Gold is positioned as central to a potential new monetary order, potentially through a “cover clause” requiring central banks to hold gold reserves.
• Bitcoin’s Limited Role: While acknowledging its potential, Bitcoin is deemed too volatile and lacking the market cap to serve as the backbone of a global monetary system in the near future.
• Entropy & Value Preservation: Gold and silver resist entropy (disorder) by maintaining inherent value, while currency is susceptible to value loss.

The Re-Evaluation of Money & Value

Allan Hibbert’s analysis begins with a fundamental distinction between money and currency. Money, designed to store value, is exemplified by gold, while currency, designed to move value, is represented by the dollar. Holding dollars is not saving, but rather accepting a depreciating asset. True saving involves acquiring assets that preserve value over time, like gold, silver, and potentially Bitcoin. This concept is tied to the idea of entropy – the tendency towards disorder – which erodes the value of currency but is resisted by the inherent properties of money. Hibbert outlines 12 properties of ideal money: portability, durability, divisibility, fungibility, quantifiable, recognizable, desirable, liquid, secure, verifiable, arduous (difficult to obtain), and decentralized.

The Looming Dollar Crisis & Potential Reset

The discussion shifts to the potential collapse of the dollar-based global monetary system. Despite the dollar’s resilience, current economic indicators – specifically the national deficit, growing anti-dollar sentiment, and Federal Reserve actions – signal a critical inflection point. The speaker argues the dollar is “falling apart” and a new monetary system is inevitable. Evidence of this shift includes expressed interest from figures like Donald Trump and Treasury Secretary Scott Bent in revisiting a gold-backed system, reminiscent of a “new Bretton Woods.” Interventions like the Venezuela situation (utilizing gold, oil, and bypassing SWIFT) and sanctions against Russia (freezing assets in 2022) are presented as examples of the US being forced to act due to the dollar’s vulnerabilities. The speaker believes the dollar must be inflated away to facilitate a re-establishment of a new system.

The Federal Reserve & Turning Points

A key turning point identified is 2021, when the Federal Reserve engaged in $120 billion monthly Quantitative Easing (QE) while GDP was at 6% and unemployment fell from 14.8% to 5%, with CPI rising to 5% (and heading towards 7%). This is viewed as a loss of credibility for the Fed, despite its continued operation.

Gold’s Central Role & Central Bank Activity

Gold is positioned as central to the new monetary system, potentially through a “cover clause” requiring 25% of central bank balance sheets to be denominated in gold. Central banks have been increasing gold purchases, currently around 800 tons per year (double the previous decade’s 400 tons), and European central banks are “right-sizing” their gold-to-GDP ratios, suggesting coordinated preparation for this change. However, backing the dollar with gold would necessitate drastic measures, including potentially cancelling social security, defaulting on debt, and risking civil unrest or war.

Bitcoin’s Limitations & Political Dynamics

While acknowledging a personal investment in Bitcoin, the speaker argues it’s “too young, too volatile, and doesn’t have a large enough market cap” to serve as the backbone of a global monetary system. He also highlights the “branding risk” associated with government endorsement, which could trigger distrust. Bitcoin might play a role in 30-40 years. The discussion also touches on the political dynamics, particularly Donald Trump’s desire to be credited with establishing the new monetary system, but potentially facing constraints due to time limitations, while leaders like Putin and Xi Jinping have more negotiating leverage.

Recent Market Performance & Resources

Recent market performance (as of the recording date) showed gold up 65% and silver up 147% in the past year, while Bitcoin was down 6.5%. In January 2024 alone, gold rose 17.5% and silver 47%. Viewers are encouraged to explore Allan Gray’s “Hidden Secrets of Value” series and utilize Hard Assets Alliance for investing in physical gold and silver.

Conclusion

The core takeaway is a re-evaluation of traditional financial thinking, prioritizing value preservation over speculative gains. The current dollar-based system is presented as increasingly vulnerable, with gold poised to play a central role in a potential new monetary order. While Bitcoin is acknowledged as a potential long-term store of value, its limitations prevent it from being a near-term solution. The analysis emphasizes the importance of understanding the fundamental principles of money, entropy, and the need for a system that prioritizes security and decentralization over scalability.