Posted on 07/28/2025 5:01:58 PM PDT by delta7
With the Trump Administration headed down the road to higher inflation and the political chaos that results, it is worth asking why there are “only” $4 trillion in notional crypto tokens, this according to the Financial Times. The rise of bitcoin and other ethereal instruments evidences a strong desire on the part of many Americans to escape a sinking ship, but also confirms the love for creating new games to enable speculation. Are the crypto tokens really a way to avoid the demise of fiat dollars?
As we noted in a recent comment in The Institutional Risk Analyst, the best returns in crypto at present are found investing in the stocks of some of the enablers. The fact that these new companies may or may not be stable businesses long term does not matter in the speculative environment that currently governs Wall Street. We are particularly fascinated by the idea that a crypto firm can generate enough revenue to survive as a bank.
Robinhood Markets, for example, is up almost 500% in the past year, proving that there is a lot more leverage for investors in the facilitators of speculation in crypto and stable coins than in the tokens themselves. Crypto laden “special purpose acquisition companies” (SPACs) and various new, “Level 2” token games linked to existing crypto “markets” are the hot ticket today.
But the larger query, beyond the issues raised by bitcoin and substitutes, is the question about the nature of money. In my new book, “Inflated: Money, Debt and the American Dream,” author James Rickards notes that Americans “no longer know what money is” and have replaced “money with moneyness.” He then describes why money is one of the foundations of civilization.
“Money is not the point of civilization and it’s far from the most important feature,” Rickards argues. “Still, it’s part of the bedrock and performs crucial roles. Money is an advance on barter. Money is an alternative to violence. Money facilitates commerce and investment, and acts as a store of wealth. Money is among the institutions, along with law, religion, and the family, that enable civilizations to be civil and avoid a Hobbesian war of all against all.”
Despite the fact that President Trump wants to make America the crypto capital of the world, and even threatens to open retirement accounts to these speculative notions, the rest of the world is migrating away from dollars back to the only true form of money that is not some form of debt, namely gold. Perhaps the most significant trend is the increasing purchases of gold by global central banks.
On July 1st, 2025, Basel III banking regulations officially reclassified physical gold as a Tier 1 asset, specifically a high-quality liquid asset (HQLA). This means that U.S. banks can now count physical gold at 100% of its market value towards their core capital reserves. Previously, gold was considered a Tier 3 asset, requiring banks to discount its value. But what is the proper discount rate for crypto and stable coins?
A stable coin is a ridiculously expensive prepaid gift card. A stable coin, for example, backed by fiat dollars, does not change your fundamental economic and financial risk from holding dollar assets. You basically pay for the privilege of using a stable coin. The public mania around stable coins is the latest evidence that humans are incapable of making rational decisions when they are part of a crowd. Long-term, we should view stable coins as marketing tools for large advertisers to acquire and retain customers.
A stable coin backed by yen or swiss francs, for example, is a very different proposition in terms of managing dollar risk, but such instruments also may fall afoul of state and federal securities laws. So how do individuals and countries protect themselves from the slow but inevitable decline of the dollar as the world’s primary money?
Owning gold or at least having exposure to the price of gold are perhaps the best options, The physical metal is independent of the fortunes of state put, yet as we learned in the 1930s, gold is vulnerable to confiscation.
More important to the analysis, however may be that fact that so few investors have yet to rebalance their portfolio to reflect the opportunity presented as gold resumes its role as the world’s primary reserve asset.How much is the current allocation to gold by global investors?
“My rough guess, excluding central banks and physical gold in private hands, would be maybe 1% of portfolios globally and perhaps half of that amount for US investors,” notes Henry Smith, Director and Investment Manager, The Keep Fund Ltd. a Bahamas SMART Fund investing in the precious metals complex. “In your grandfather’s day, a trust portfolio would be 10% minimum in gold. We’re headed back there. That means we’re headed to five digit gold and three digit silver.”
Other mainstream analysts agree with Smyth’s prognostication. “Earlier this year, we examined the structural shift in gold’s demand and geopolitically influenced pricing drivers fueling its rebasing higher, ultimately posing the question if $4,000/oz is in the cards,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan, in a June 2025 research note.
“To answer the question — yes, we think it is, particularly now with recession probabilities and ongoing trade and tariff risks. We remain deeply convinced of a continued structural bull case for gold and raise our price targets accordingly,” Kaneva added.
The reason JPMorgan is right and, indeed still too cautious on their gold outlook is that the usage of gold as a reserve asset, legal tender in contracts and collateral for financial transactions is growing, yet this is a gradual process. The narrowing of the market for US Treasury collateral as central banks reduce their purchases in favor of gold is still not top of mind – yet – for US investors, but higher interest rates for LT Treasury paper will end that lethargy.
One of the chief reasons to be bullish on gold and negative on the dollar is that there is so little deliverable gold available. A lack of deliverable gold supply can create upward pressure on prices, but other factors like demand fluctuations, market sentiment, and the role of gold as a financial asset significantly influence its short-term price. Even with limited physical supply, demand and overall market conditions can moderate price increases.
“De-dollarization — a theme among foreign reserve managers and investment institutions who are typically slow to act — is a misnomer as it’s highly unlikely anyone is seriously considering of fully divesting themselves of US assets, argues Simon White of Bloomberg. “But the evolution of events this year has led many foreign investors to consider reducing their exposure to the US which had already grown imprudently large. This will take time to show up in the data.”
If you have no electricity you have no 401k, no bank accounts, no pension payments, no Social Security, no Medicare payments, no credit cards, no food at the grocery store to buy with silver, etc, etc.
Bitcoin would most likely come back before any of those..there is satellite blockchain, HAM radio blockchain, get a few generators and you are back “online” with the thousands of “nodes” that have a record of every Bitcoin transaction back to 2009. (Including a node at my house).
I meant when compared to holding precious metals, ammo, alcohol and other means of trade.
I didn’t know so I asked.
Thank you for your answer!
For the record, I have gold and silver, but no cryptocurrency.
Those are great too...(.22LR ammo, antibiotics, alcohol for trade, etc.), but if you need to get money to a relative or friend in another state or country quick and without government interference/knowledge then a crypto like Bitcoin is the way! Diversify! Gold/silver great, but hard/heavy to move. ;-)
I've done many stablecoin to dollar trades, and in my experience the stablecoins are usually worth slightly MORE than a dollar. Why would the symbol of something be worth more than the thing itself? Contra this authors' biased insults, it is because the "symbol" (the stablecoin) offers greater utility than the dollar itself. With a stablecoin I can store value on my own computer (etc.) without any bank and with greater security if desired (using multisig) than any physical asset. I can send it to anyone around the world for pennies in just a few minutes, compared to a day or more delay and tens of dollars to do a wire transfer (that assumes the recipient has banking access).
Stablecoins thus offer much greater utility and freedom than using electronic dollars, but they are ultimately just a bridge to the public as it transitions to cryptocurrency. They are linked to dollars and other worthless, non-scarce, centrally managed and controlled currencies that will die out soon enough.
Hmm, the choice between something I can touch and feel, and carry around, vs something that doesn’t exist at all if the internet crashes.
If you can’t pick it up and hold it in your hand it’s worthless when the shtf.
,,, there’s the Bureau of alcohol, tobacco and firearms - that’s gotta be the best government guidance on what to stash first.
Take your gold bars down to the local market and see if they will make change ...
I have silver for that.
Gold coins are for buying a used car.
Post EMP Supplies. If the electric world fails then the We are screwed. Most people these days don’t know how to use a map and compass so that GPS Is USELESS.
Credit Cards/Checks and Cash will be useless if the SHTF.
Lead in the form of bullets.
Brass in the form of ammo.
Firearms for the above.
Gold in various weights: .5 gram/1 gram/5 gram/10 gram and 1 ounce.
Silver in various weights: .5 gram/1 gram/5 gram/10 gram and 1 ounce.
Other “Precious” Metals.
Potable Water stash and Personal Water Filters plus some Bleach or Shock and Ammonia for Disinfecting Water.
Stable Food supplies dried/canned.
Good 1st Aid Kit
Assorted Alcohol products.
Yeah I know I have gone a bit off the path here. But still, just incase.
So tell me how it works without electricity.
I stacked crypto in one hand and silver in the other. Guess which filled up first.
—> So tell me how it works without electricity.
1. Block chain ledger of ownership is duplicated in tens of thousands of computer nodes worldwide.
2. There will never be zero electricity worldwide at the same time.
3. Even if a node goes out, the ledger is preserved.
4. When the electricity comes back on in a node, the ledger updates.
5. This redundancy is superior to any bank ledger.
… and that points out the advantage and disadvantage of both silver/gold and BTC
—> If you can’t pick it up and hold it in your hand it’s worthless when the shtf.
Agree. And if you can hold it in your hand it can be taken from you when tshtf
Stopped reading there even though the topic interests me.
I am investing more this year than I ever have before. In fact, investing is my hobby and where I “overspend”.
I add to my stocks every week.
I add to my bitcoin every week
I add to other alt coins every week
I buy silver or gold every other week
Sometimes I buy too much of any of the above and have to slow down, but my wasteful spending is on investments, and I can get it back, if needed unlike most people’s hobbies and bad spending.
Right now when I spend too much investing, I cut out other spending. I am enjoying my profits on stocks, bitcoin, alt coins, silver, and gold go up and I am having fun doing it.
I don’t consider investing to be a chore or drain on resources. I consider it fun.
Really no excuses nowadays not to invest. If you can afford Starbucks everyday, you can invest. Only have $50 a paycheck, use Cash App. Its free.
Stopped reading there even though the topic interests me.
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Your loss, emotions interfere with reasoning abilities. Fact is inflation is rising, ( many reasons) and will continue to rise.
Pull up the Fed’s Fred charts and you will see we often had -6.5 percent inflation pre 1970’s….research what was different.
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