@Neo-Tech "Also, since you can bet they will continue making more dollars and with bitcoin capped at a certain number, the will cause a pressure making the price of bitcoin go up over time"

Please. pause. And re-read that one more time. Try to realize what you just wrote.

A very critical outline of bitcoin from a gold bug. They will always criticize bitcoin. I, myself, am not a big fan of bitcoin for some of the reasons mentioned in the above post. Precious metals may or may not be the money of the future but they are a safer bet than Bitcoin just from the fact they have physical

The fact of the matter is that nations today like to dictate what the "money"of their nation is going to be. And big bankers like to determine the value in relation to each other on the market. This is how money works today and of course there are maneuvers to do an end run around these bankers and international financiers. Hence, bitcoin. They actually have no right of control over money or its value. Because they manufacture or print it they feel they should completely control it. Bitcoin is the tool to escape their clutches of complete control. It is not a very good replacement although the early stages of it made a lot of people millionaires. And so, on that basis, the fantasy of bitcoin persists.

The coming monetary collapse is being engineered and of course the international players will come to the rescue with its CBDC. But the people may not settle for that because what will be known as "money" - the CBDC - means...a total loss of the rights of property. You will own nothing and they will be happy.

Money represents the wealth of the society, all the extant commodities, services, etc., etc., anything that can be expressed as having a monetary value. Money only facilitates the transfer of wealth from one person to another or one company to another, whomever is involved in the trade. We are mistaken if we think that money is the wealth. It is, if it has any characteristic of money at all, a store of value. All those billionaires wheeling and dealing right now with engineering the planet are about to find out that money is not the wealth, especially the money issued and controlled by the international bankers. All currencies on the planet will be rolled into one and everyone will get an equivalent token to replace those currencies. But those tokens are now not just representative of wealth, like money, they are the property of the issuers and they will decide if you get to use those tokens or not and how you will use them.

Money needs to stay out of the control of politicians and governments that cannot be held accountable. If they have that they will enslave the general population.
It is best to diversify in wealth when "money" and its supply are under threat of someone's control. Gold and silver have been very sound forms of money and are good to own. Buy some bitcoin if you want but the hazards of it make it a temporary investment, real estate is good, stash some cash; we just don't know right now what form money will take in the future. Before it is established, barter might be popular.

@FrankZeleniuk "Bitcoin is the tool to escape their clutches of complete control."

it is wholly dependent on the system, how can it be tool of escape, if its made by the system, supported by the system and can be wholly unmade by the system in a short time, as it was demonstrated by the FED.

"Buy some bitcoin if you want but the hazards of it make it a temporary investment, real estate is good, stash some cash; we just don't know right now what form money will take in the future"

All of that depends on FED. Temporary investment was 2020 - 21 time when the ponzi was till working . Real Estate is a bubble going down. Bitcoin is a bubble going down. Cash is better than depending on successful bank run, but cash in form of fiat paper currency, again controlled by the FED. You stash it under mattrace , it will be taxed via inflation, controlled by the FED.

"Before it is established, barter might be popular. "

Barter works, yes, but the invention of money was there to solve the limitations of barter, so if one uses barter its a good last resort, but ultimately it will run into same limitations which prompted invention of money. Store of value and unit of account.

Also if you were referring to me as gold bug, that's simply wrong as is bitcoin notion in the original post. I ain't no gold bug, but I do have basic level of financial literacy to know what is money and what is not money.

Fiat is not money, and bitcoin does not even qualify as currency, while at the same time being wholly dependent on said fiat.

If you see bullish gamblers and scam artists pumping the price of bitcoin one last time,, that's because they are either in the last desporate effort to get the last suckers in before they dump it for good... or you are dealing with true believers. The cult followers. Who will go down with the proverbial ship.

As the inflation increases via monetary policy, the fiscal policy will not have the luxury to cater to bitcoin , it will be busy fighting wars, paying off debt, bailing out banks etc. The covid era is not coming back.

Bitcoin might indeed reach a million dollars. But consider what that means ? lol If it was paper you would be able to whip your ass with it, but alas, you can't even do that with bitcoin.

Don't worry we will all be millionaires before soon, the only trouble is that eggs will be priced at two million.

You can try to deal with real estate, but when you consider how much its priced now and how far it will fall, how much the mortgagee will be, maintenance cost. Unless you own it, the idea of investing in real estate is only if you are covered enough to weather the long storm coming you can buy cheap land and wait.

@Krunoslav

Fiat is not money.

Money is more an idea than a thing. Whatever people use as money is money. If you are using it to trade for things you would prefer to have and other people are accepting it then it is money. Our confidence in its store of value is sinking, I know, but it has been and still is the preferred method of trade above barter.

Fiat is not the best form of money. So people have lost the idea of what good, sound money is. Thinking that a central bank controlled paper issue or electronic debit/credit system of account is a sound form of money is the path to slavery.

It looks like the US is under communist/socialist attack at the moment so we are about to find out how sound the CB issued form of money is. The CB paper issue of "money" which we all fell for will soon be replaced with a token which shall remain under their total control. If anything money should be private property and used exclusively by the owner. They plan on owning it all.

All I have said is that we are not certain people will accept a CBDC as "money". Pretty likely they won't so there will be some other form of money coming into existence and the CBDC will be nothing but a token. Much like the the Soviet Russian ruble was during the cold war. Vodka and western goods, like Blue jeans, became a stronger form of money than the ruble.

There are only a few characteristics of money that make it sound. The more of those characteristics that it intrinsically holds the sounder it is and the more confidence people will have in it.

A store of value is one of those characteristics. I think there is little confidence that Bitcoin will be a solid store of value. It can disappear at the stroke of a key. If our bank accounts can be frozen and our "store of value" becomes inaccessible it will degrade confidence in the money. It is supposed to be ours and represents our labor, our contribution to the total production of the land. Uncertainty of our control over our property is a big danger sign.

Our fiat "money" has been losing value since its inception, just through inflation alone. Our confidence in it lowers value even more. The US treasury paper issued dollar and the Federal Reserve paper issued dollar were only currencies and not money but that's turned itself on its head and the currencies have become the money, replacing gold and silver in the US as the constitutionally established form of money. As long as the American people have confidence in the US government, the issuer of its "money", it could hold its value. The confidence in the trustworthiness of the US government is waning and so is the US dollar. All fiat currencies are under pressure at this time as governments have become less trustworthy. They are not being honest with the people. Is it any wonder people are talking about alternatives to their fiat currencies that we call money?

@FrankZeleniuk "Money is more an idea than a thing. Whatever people use as money is money"

That is wrong again. Money is very specific thing based on function. What you said , simply does not stand up to scrutiny.

Lets define what Money is.

It the most simplest terms money is a medium of exchange that is widely accepted in transactions for goods, services, and debts. Money is used as a store of value, a unit of account, and a means of payment. It allows people to save, invest, and perform economic transactions with each other.

And that is very important to understand. In the beginning people use simple barter for exchange. For example. I give you chicken and you give me rice. I give you wheat, and you fix the wheel on my wagon and so on.

But people quickly realize that there are limitations to simple barter, much less more complex barter. So they invented money to solve this problem.

It is said that barter is 'inefficient' because:

There needs to be a 'double coincidence of wants' (For barter to occur between two parties, both parties need to have what the other wants.)

There is no common measure of value/ No Standard Unit of Account (In a monetary economy, money plays the role of a measure of value of all goods, so their values can be assessed against each other; this role may be absent in a barter economy.)

Indivisibility of certain goods (If a person wants to buy a certain amount of another's goods, but only has for payment one indivisible unit of another good which is worth more than what the person wants to obtain, a barter transaction cannot occur.)

Lack of standards for deferred payments (This is related to the absence of a common measure of value, although if the debt is denominated in units of the good that will eventually be used in payment, it is not a problem.)

Difficulty in storing wealth (If a society relies exclusively on perishable goods, storing wealth for the future may be impractical. However, some barter economies rely on durable goods like sheep or cattle for this purpose)

Money solves this problem, and for something to qualify as money it has to fulfill certain demands.

The main functions of money are distinguished as:

--- 1. A medium of exchange, (In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is assumed to have arisen in antiquity as awareness grew of the limitations of barter. The form of the "medium of exchange" follows that of a token, which has been further refined as money. A "medium of exchange" is considered one of the functions of money. The exchange acts as an intermediary instrument as the use can be to acquire any good or service and avoids the limitations of barter; where what one wants has to be matched with what the other has to offer.)

--- 2. A unit of account, (In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. Money acts as a standard measure and a common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is necessary for developing efficient accounting systems.)

--- 3. A store of value, (A store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most reliable store of value has been sound money, pegged to a commodity like a precious metal (Gold and sometimes silver). The point of any store of value is risk management due to a stable demand for the underlying asset.)

Any item or verifiable record that fulfils these functions can be considered as money.

Any item or verifiable record that does not fulfils these functions cannot be considered as money.

Claiming what you did, ""Money is more an idea than a thing. Whatever people use as money is money"" shows you never actually tried to define money with any level of standards that would scrutinize the definition. If you did, you would find like I have, that what you claim simply is not sufficient. Weather you may think on personal level, your statement about what money is, simply is insufficient on practical level. populace.

@FrankZeleniuk
"Our fiat "money" has been losing value since its inception, just through inflation alone."

Yes. I mean that was the idea behind fiat money, to decouple it from anything that would impose fiscal discipline on the governed ever greedier to spend other people’s resources and labor. Fiat money is based on government decree and trust of the people who either are left with no choice or are naive enough to trust the government. Either way, with no imposed discipline on the government spending, the monetary policy of inflating the "money supply" in circulation or rather fiat currency supply, is how government funds itself when it cannot collect in traditional taxes enough. Inflation is a form of tax, because it devalues the purchasing power of the currency. Government loves it because it controls the supply and it is taxation without legislation, prompting less resistance from the populace.

@FrankZeleniuk "A store of value is one of those characteristics. I think there is little confidence that Bitcoin will be a solid store of value. It can disappear at the stroke of a key. If our bank accounts can be frozen and our "store of value" becomes inaccessible it will degrade confidence in the money. It is supposed to be ours and represents our labor, our contribution to the total production of the land. Uncertainty of our control over our property is a big danger sign."

Yes. Bitcoin is not a store of value because its to volatile and while value of bitcoin is very vague we all know the price of bitcoin and how is it measured, in fiat, namely US dollars. Bringing us back full circle.

Bitcoin is not good for function as unit of account, because of same reasons as it is not good for store of value, but even worse, if one bit coin is 70 000 USD at some point, people didn't buy one bit coin they buy satoshis.

A bitcoin is divisible to the eighth decimal. The smallest portion of Bitcoin has its own name: satoshi, whereas 1 BTC = 10^8 satoshis = 100,000,000 satoshis.

The satoshi is the lowest denomination of bitcoin—there is 100 million satoshi per bitcoin. The denomination was named after Satoshi Nakamoto, the person or group who invented Bitcoin.

Who decided on this is another matter and since its so many of them with price going whichever it can, using this as unit of an account makes very little sense in any practical matter.

Furthermore, bitcoin cannot protect itself from the competition of other clones and crypto. Anyone with a laptop and coding skills can make new crypto by themselves. Making bitcoin very vulnerable to the inflation of other cryptos.

And off course bitcoin cannot work as a currency because unlike fiat of US dollars by which its priced, it cannot be used as currency if its so volatile. And off course because its created as speculative bubble asset it attracts gamblers (day traders) who watch charts all day to buy and sell and make a profit by finding a bigger sucker. They have no interest in using bitcoin as currency, because that is not the work they do. This than inflates the price of bitcoin and the ponzi scheme grows and as long as FED pumps dollars into it, but bitcoin never lived as currency, that is deliberate misnomer by the tech bros to try to artificially sell bitcoin as something its not, a currency. Even a fiat currency. Much less currency backed by commodities or gold or silver. Calling it digital gold is a test of ones intelligence.

@FrankZeleniuk "The confidence in the trustworthiness of the US government is waning and so is the US dollar. All fiat currencies are under pressure at this time as governments have become less trustworthy. They are not being honest with the people. Is it any wonder people are talking about alternatives to their fiat currencies that we call money?"

Yes. Fiat is disposable was to tax people in ways they don't realize it and when the trust is gone so is fiat. All fiat has gone down to zero over time. Its how it works. Its like a condom goverment use and discard and put a new rubber on.

@Krunoslav

It the most simplest terms money is a medium of exchange that is widely accepted in transactions for goods, services, and debts. Money is used as a store of value, a unit of account, and a means of payment. It allows people to save, invest, and perform economic transactions with each other.

It sounds like you have just described all the functions of a fiat currency today? Are you calling a fiat currency "money"? I wouldn't be ashamed, the majority of people also call it "money".

I am saying, essentially, we have been duped into thinking it is "sound" money. It is no different than clipping coins in the old days or debasing the coinage through alloying it with base metals. It's a deception that destroys value and confidence or trust in, not only the money itself, but the issuer as well. He becomes known as a common thief, be he a King or President or Prime Minister or a central banker.

@FrankZeleniuk "It sounds like you have just described all the functions of a fiat currency today? Are you calling a fiat currency "money"?"

No I didn't. Because fiat currency of today, does not function like money. It is not a store of value, since central bank controls it via inflation. It is therefore only used as unit of account based on faith alone, like fiat itself, but it does not pass the test of time. The one dollar bill of the 1971 is not as valuable as is one dollar bill of today. Clearly not a store of value, but its only partially useful as unit of account in a system where only dollars are used. However when you compare it by purchasing power, there is a problem. This is best illustrated by Big Mac test as they call it. The materials and cost of making a big mac should be the same and its the closest to stable way we can illustrate how it differs around the world. Since McDonallds is everywhere.

The Big Mac Index: A Measure of PPP and Burger Inflation

The Big Mac was created in 1967 by Jim Delligati, a McDonald’s franchise owner in Pennsylvania. It was launched throughout the U.S. the following year, and today you can buy one in more than 70 countries. However, the price you pay will vary based on where you are, as evidenced by the Big Mac Index.

Spanning from 2004-2022, this animation from James Eagle shows the U.S. dollar price of a Big Mac in select countries around the world.
What Does the Big Mac Index Show?

The Big Mac Index was invented by The Economist in 1986. It is intended to be a lighthearted way to demonstrate the concept of purchasing power parity. In other words, it helps illustrate the idea that market exchange rates between countries may be “out of whack” when compared to the cost of buying the same basket of goods and services in those places.

Given that McDonald’s is one of the biggest companies in the world and the Big Mac is widely available globally, it means that the famous burger can be used as a basic goods comparison between most countries. It also has the advantage of having the same inputs and distribution system, with a few minor modifications (like chicken patties in India instead of beef).

Using the price of a Big Mac in two countries, the index can give an indication as to whether a currency may be over or undervalued. For example, a Big Mac costs ¥24.40 in China and $5.81 in the United States. By comparing the implied exchange rate to the actual exchange rate, we can see whether the Yuan is over or undervalued.

[visualcapitalist.com]

@FrankZeleniuk "I wouldn't be ashamed, the majority of people also call it "money". I am saying, essentially, we have been duped into thinking it is "sound" money. It is no different than clipping coins in the old days or debasing the coinage through alloying it with base metals. It's a deception that destroys value and confidence or trust in, not only the money itself, but the issuer as well. He becomes known as a common thief, be he a King or President or Prime Minister or a central banker. "

True.

Yes. Its an unfortunate habit that was promoted by the government and bankers to make sure people are financially illiterate and don't rebel. Hence, colloquality most people use the term money instead of fiat.

By the way, when I use automatic tranalstor to translate Fiat money from English to Spanish. And then used Spanish translation to translate back to English . It gave me a very accurate term. It translated it as "Trust money".

Etymology of fiat

Etymology is the study of where words came from, i.e., their origins, and how their meanings have evolved.

Etymonline.com says that the word ‘fiat’ emerged in the English language in the 1630s. It meant ‘authoritative sanction.’

It comes from the Latin word Fiat meaning ‘Let it be done.’ It is the passive of the Latin word Facere, meaning ‘to make, do.’
In 1750, the English word ‘fiat,’ also began to mean, ‘a decree, order, command.’

According to Dictionary.com, it was not until 1870-1875 that we started using the term ‘fiat money’ with its modern meaning.

Take QE or Quantitive Easing. A fancy term to say inflationary policy. Basically, central banks create fiat out of thin air and buy all the worthless stuff from government and financial institutions, like bonds and securities, etc. Inflating their balance sheet with junk.

If central banks and governed said to people, our official policy is inflation , people would rebel. But if they say, our official policy is QE a fancy name to fool the financially illiterate and please the gamblers at Wall Street, then its easier sell.

Speaking of inflation, they even change the definition of that. Inflation properly defined means to inflate the money supply in circulation. Or in our case fiat supply in circulation. This correlates but is not a direct causation of increase in prices. I hope I don't have to explain why.

Anyway, today most definitions of inflation are general increase in prices of goods and services, blaming the consumers and producers, instead of real guilty party, central bankers and governed. Something old definition would do.

@Krunoslav You have one of the best understandings of money than anyone I have talked to about the subject.

Older societies used seashells and sticks for money. As long as the instruments used for money had the characteristics of money and could be used as money. They could be called money. Gold and silver became the finest form of money and became recognized internationally as money because it was the best. All other forms of money were not as sound. So, your description of money fits exactly how almost everyone sees a fiat currency and will describe it as money.

My only contention is that the "quality" of the money is not as sound as other forms of money. Correctly, a fiat currency has been foisted upon the public as money. Technically, you are correct, that is what it is. Realistically, people believe it is money, call it that and use it as that. You generally cannot argue with them that it is not money. Gold bugs will agree with this point because they are stuck at the point where the CBs disconnected their fiat currencies from precious metal backing and told people that the fiat currency was as good as gold. It was until 1933 when Americans were told they could not own gold as a form of money, they could only own it if it were jewelry or part of a coin collection. And in 1971 the fiat currency, as you know, was totally unbacked by precious metals and the banks/government were the only ones backing the international monetary system. We had been using their currency like it was money for a long time and were used to it so most of us had confidence in it, but some knew it was a debasement of the money. We had more confidence in the government/bankers at the time but they have only further debased the "money", you and I would call it a "fiat currency", and created massive National, State and Municipal debts, along with ever increasing levels of taxation.

Inflation properly defined means to inflate the money supply in circulation. Or in our case fiat supply in circulation. This correlates but is not a direct causation of increase in prices. I hope I don't have to explain why.

Correct, inflation is an increase in the money (Fiat currency) supply. The result of that is an increase in the general price level. You will have to explain to me why it is not a "direct" causation of increases in prices. There is only supply and demand that determine a price level for a specific good. If everything is scarce or everything is in demand then the general price level may rise. I will grant that the price level of oil which is involved in the transportation and delivery of many if not all goods may increase the general price level but I know of nothing else that would.

The drop in the value of the dollar caused by inflation should raise all prices. Mind you it isn't an instant thing for all products and services which is why politicians can fool the people so easily and not mention inflation at all. They will just say that the cost of living has gone up because the population increased placing more demand on goods suggesting we need to have population control or some stupid thing like that.

@FrankZeleniuk "You have one of the best understandings of money than anyone I have talked to about the subject."

Thank you.

"Older societies used seashells and sticks for money. As long as the instruments used for money had the characteristics of money and could be used as money. They could be called money. "

Yes and no. its a mixed bag. All the things used were not technically speaking money, some were, most were not, but they try to play the role of money, until money role was well defined and tested over time, with conclusion that gold and silver fit the role best.

I used ChatGPT to summarize some of the following comments. I don't find ChatGPT reliable enough, especially in some topics, but it can be very useful to condense or summarize complex lengthy topics. If you want to use it yourself, here is free option. [huggingface.co]

Beyond silver and gold what else was historically used as currency

Throughout history, various items and commodities have been used as money in different cultures and regions. Some examples of these alternative forms of money include:

1. Copper and bronze: Before the widespread use of gold and silver, copper and bronze were used as currency in many ancient civilizations, such as Ancient Rome and China. They were minted into coins and used for trade and commerce.

2. Cowrie shells: Cowrie shells were used as a form of currency in many ancient civilizations, particularly in Africa, Asia, and the Pacific Islands. Their small size, durability, and relative scarcity made them a suitable medium of exchange.

3. Salt: Salt was a valuable commodity in ancient times due to its use in food preservation and flavoring. It was used as a form of currency in some cultures, including the Roman Empire, where soldiers were sometimes paid in salt. The word “salary” is derived from the Latin word “salarium,” which refers to a payment made in salt.

4. Barley and grain: In ancient Mesopotamia and Egypt, barley and grain were used as a form of currency. They were easy to store, transport, and divide, making them a practical medium of exchange.

5. Livestock: Livestock, such as cattle, sheep, and camels, were used as a form of currency in some ancient societies. They represented wealth and could be easily transported and exchanged for other goods and services.

6. Tobacco: In colonial America, tobacco was a valuable cash crop and was used as a form of currency to facilitate trade and commerce.

7. Potlatch: In the Native American cultures of the Pacific Northwest, a ceremonial gift-giving event called the potlatch was used as a form of currency. Prestigious items such as blankets, canoes, and food were exchanged during these events to establish social status and strengthen relationships within the community.

8. Rai stones: In the Micronesian island of Yap, large limestone disks called rai stones were used as a form of currency. These stones, some weighing several tons, were considered valuable due to the effort required to transport and carve them.

9. Wampum: Native American tribes in the northeastern United States used wampum, which were strings of polished shell beads, as a form of currency. Wampum was also used for ceremonial purposes and as a record-keeping system.

10. Tally sticks: In medieval Europe, tally sticks were used as a form of currency and record-keeping. These wooden sticks were notched to represent values and then split in half, with one half being given to the creditor and the other half being retained by the debtor.

These examples demonstrate that throughout history, various societies have used different items and commodities as money based on their availability, practicality, and cultural significance. However, historically the best track record in the function of money (medium of exchange, unit of account, store of value), silver and gold in particular remain the best more purest forms of money.

@FrankZeleniuk Is gold the same as other commodities or does it have special status among commodities?

Gold is a commodity, as it is a raw material traded in standardized contracts in the global market. However, it does hold a special status among commodities due to its unique properties and historical significance. Some factors that set gold apart from other commodities are:

1. Store of value: Gold is considered a relatively stable store of value due to its limited supply and global recognition. Investors often turn to gold during times of economic uncertainty or when they seek to preserve their wealth against inflation.

2. Safe-haven asset: Gold is perceived as a safe-haven asset because its value tends to hold up or even increase during financial market turmoil, geopolitical tensions, and other crisis situations. This characteristic makes gold an attractive investment option for risk-averse investors.

3. Monetary reserve: Central banks around the world hold gold as part of their foreign exchange reserves. Historically, gold has been used to back national currencies, and although the gold standard is no longer in place, central banks still maintain significant gold holdings to support their currencies and ensure financial stability.

4. Non-reactive and durable: Gold is chemically inert and does not corrode or tarnish over time. This property makes it an ideal material for various uses, such as jewelry, art, and coinage.

5. Industrial and technological applications: Gold has unique properties such as high conductivity, malleability, and resistance to corrosion, making it valuable in various industrial and technological applications, including electronics, dentistry, and aerospace.

6. Cultural and historical significance: Gold has been valued and sought after by humans for thousands of years, playing a significant role in various cultures, traditions, and ceremonies. Its aesthetic appeal and symbolic value contribute to its lasting appeal.

In summary, although gold is a commodity like others, it holds a special status due to its unique properties, historical significance, and role as a store of value and safe-haven asset. These factors set gold apart from other commodities in the market.

Why is gold used as money vs other previous metals?

There are several reasons as to why gold has historically been used as money over other metals:

1. Rarity: Gold is relatively rare, which makes it valuable.

2. Durability: Gold does not corrode or tarnish, and it can be melted down and reshaped without losing its properties.

3. Divisibility: Gold can be easily divided into smaller units without losing its value.

4. Recognizability: Gold is easy to recognize and distinguish from other metals.

5. Portability: Gold is relatively easy to transport and store compared to other metals.

6. Consistency: Gold is consistent in terms of purity and quality, which makes it easier to determine its value.

7. Demand: Gold has been in demand for centuries, making it a commodity that is widely accepted as currency.

Why Gold is Money?

Just the right mix: Gold was fairly easy for pre-industrial people to work with. Though it was rare, pieces could still be plucked from waterways without sophisticated technology. What's more, gold’s unique yellow hue differentiated it from more common metals.

Summery: Gold has been used as money for thousands of years due to its durability, rarity, and divisibility. It is a store of value that holds its worth over time and is accepted as a medium of exchange in many cultures and economies. Gold has also been used as a standard of currency value, with the value of paper money being pegged to a certain amount of gold. This system, known as the gold standard, was used by many countries until the mid-20th century when it was abandoned in favor of fiat currency systems. Despite no longer being used as an official standard of currency value, gold remains a popular investment and store of value for individuals and central banks. It is considered a safe-haven asset during times of economic uncertainty and is often used as a hedge against inflation and currency fluctuations.

Gold has been popular as money throughout history for several reasons:

1. Rarity: Gold is a rare metal, which makes it valuable. Its scarcity ensures that it retains a high value, making it an attractive choice for use as currency.

2. Durability: Gold is a very durable metal that does not rust, corrode or tarnish easily. This makes it ideal for long-term storage and use as a medium of exchange.

3. Malleability: Gold is a soft, malleable metal that can be easily shaped into coins, bars, and other forms. This makes it easy for people to handle, divide, and exchange gold as a form of currency.

4. Stability: Gold has a relatively stable value over time, which makes it a reliable store of value. People trust that gold will maintain its value in the long run, which is an essential characteristic of money.

5. Universality: Gold has been recognized as valuable across different cultures and geographical locations. This universal appeal makes it a suitable choice for an international currency.

6. Inertness: Gold is a chemically inert metal, meaning it does not react easily with other elements or compounds. This property ensures that gold remains pure and unchanged over time, making it a suitable material for use as currency as gold coins.

7. Aesthetic appeal: Gold has a unique and attractive appearance, which adds to its desirability as a form of currency. Its luster and shine have made it a symbol of wealth and luxury throughout history.

8. Historical precedent: Gold has been used as a form of currency for thousands of years, which has reinforced its status as a widely accepted and trusted form of money.

Overall, gold’s properties make it an ideal choice for use as money, and its historical role as a trusted medium of exchange has further cemented its position as a popular form of money.

@FrankZeleniuk Silver as money

Alongside Gold, Silver was also used as money. Silver is also a precious metal that has many similar characteristics as Gold does, and can be used as money because it satisfies the functions required of money (medium of exchange, unit of account, store of value).

Some of the silver produced today is used, as in the past, in making coins. But large quantities are used for silver utensils and jewelry, and in plating tableware electrolytically from a solution of sodium silver cyanide. Alloys of silver with copper, in which the copper adds hardness, are important. Coin silver is an alloy consisting of 90% silver and 10% copper. Sterling silver contains 92.5% silver and 7.5% copper. Silver alloys are used in dental amalgams and for electrical contacts.

What makes sliver popular as money compared to other metals? And how does it compare to gold as money?

Silver has also been popular as money throughout history for several reasons:

1. Rarity: While silver is more abundant than gold, it is still a relatively rare metal, which contributes to its value. This rarity makes silver a valuable commodity for use as money.

2. Durability: Similar to gold, silver is a durable metal that does not rust, corrode, or tarnish easily. This ensures that silver coins and bars remain in good condition for long-term storage and use as a medium of exchange.

3. Malleability: Silver is a soft, malleable metal that can be easily shaped into coins, bars, and other forms. This makes it easy for people to handle, divide, and exchange silver as a form of currency in form of silver coins.

4. Stability: Silver has a relatively stable value over time, which makes it a reliable store of value. Although it can be more volatile than gold, silver is still considered a trusted form of money.

5. Universality: Like gold, silver has been recognized as valuable across different cultures and geographical locations. This universal appeal makes it suitable for use as an international currency.

6. Conductivity: Silver is the most electrically conductive of all metals, which makes it useful for various industrial applications. This additional demand for silver contributes to its value as a form of currency. One can even extract silver parts from electronic devices, melt it down and use as money, hundreds of years later.

7. Aesthetic appeal: Silver has an attractive appearance and luster, which adds to its desirability as a form of currency.

Comparing silver to gold as money:

1. Value: Gold is generally considered more valuable than silver, primarily due to its rarity.

2. Volatility: Silver prices tend to be more volatile than gold prices, which can make it a riskier store of value. However, this volatility can also provide opportunities for investors to profit from price fluctuations.

3. Affordability: Due to its lower value compared to gold, silver can be more accessible and affordable for everyday transactions and smaller investors.

4. Industrial demand: Silver has more industrial uses compared to gold, which can impact its value as a form of currency. Increased demand from the industrial sector can push up silver prices, while reduced demand can lead to lower prices.

5. Storage: Because silver is considered less valuable compared to gold, one needs more ounces of silver for same value as in gold. This puts burden on storage capacity. Making gold easier to story compared to silver for the same value.

Overall, both gold and silver have desirable properties that make them popular as forms of money. However, gold is typically considered a more stable and valuable store of value, while silver is more affordable and accessible for everyday transactions and investments.

The gold-to-silver ratio is a metric used to measure the number of troy ounces of silver one can acquire with one troy ounce of gold. The gold silver ratio represents the number of silver ounces it takes to buy a single ounce of gold. Historically speaking, the gold silver ratio has rested somewhere between 15 and 10 to 1, reflecting the average supply of each metal. There were times throughout the history of money where the ratio was even lower — China once had a 4 to 1 ratio and the ancient Egyptians even had a 1 to 1 ratio at one point.1

Historically speaking, this ratio has rested somewhere between 15 and 10 to 1, reflecting the average supply of each metal.0

Geologists find roughly 8-parts of silver to 1 part gold in the ground. However, silver has been divorced from the modern financial system since 1964 and its historic monetary ratio has typically averaged around 16.

longtermtrends.net 0 sdbullion.com1

Gold to Silver Ratio - 100 Year Historical Chart

This interactive chart tracks the current and historical ratio of gold prices to silver prices. Historical data goes back to 1915.

[macrotrends.net]

Gold vs. Silver [The 5 Differences That Matter Most to Investors]
Jeff Clark, Senior Analyst, GoldSilver

[goldsilver.com]

@FrankZeleniuk Difference between money and currency

Money and currency are related concepts, but they have distinct meanings in the context of economics and finance:

1. Money: Money is a medium of exchange, a unit of account, and a store of value. It is an economic instrument that facilitates the exchange of goods and services, provides a standard measure of value, and allows people to store value over time.

Commodities (gold or silver) serving as a function of money, can take various forms such as coins or bullion (gold, silver, or other precious metals in the form of bars or ingots. An ingot is a mass of metal that has been cast into a size and shape (such as a bar, plate, or sheet) that is convenient to store, transport, and work into a semi-finished or finished product.

The primary functions of money are to:

a. Serve as a medium of exchange: Money is used to buy goods and services, making transactions more convenient and efficient than bartering.
b. Act as a unit of account: Money provides a standard measure to compare the value of different goods and services, simplifying trade and valuation.
c. Function as a store of value: Money allows people to save and accumulate wealth over time, which can be used for future transactions or investments.

2. Currency: Currency refers to the physical or digital representation of a country’s money in circulation. It is generally accepted medium of exchange for goods or services, issued by a government or central authority, in form of coins, banknotes, or digital tokens.

Commodity backed currency that is backed by sound money such as silver or gold is the most recognizable and widely accepted representation of money within a particular country or economic region, while the fiat currency is a form of legal tender issued by the government via decree. It is not backed up by money or commodities, but by either trust in government as a guarantee of its value or it is backed by force of the government.

The primary characteristics of currency are:

a. Legal tender: Currency is recognized by the government as the official medium of exchange for settling debts, paying taxes, and conducting transactions within its jurisdiction.
b. Standardized design: Currency usually has distinct features, such as images, symbols, and security elements, which make it recognizable and difficult to counterfeit.
c. Denomination: Currency is issued in specific units or denominations that represent different values, making it easier to facilitate transactions of varying amounts.

In summary, money is a broader concept that encompasses any medium of exchange, unit of account, and store of value, while currency is a representation of money, issued by a government or central authority that serves as the official legal tender for transactions within its jurisdiction. Unless it’s a fiat currency, in which case it’s either mandated by the central authority such as government, or it is based solely on trust in central authority of the government.

Commodity backed currency vs fiat currency

Commodity-backed currency and fiat currency are two types of monetary systems used by countries to issue and regulate their money supply. Each system has its unique characteristics and implications for the economy:

1. Commodity-backed currency: A commodity-backed currency is a type of currency that is directly linked to a tangible commodity, such as gold, silver, or oil. The value of the currency is determined by the value of the underlying commodity, and holders of the currency can theoretically exchange it for a fixed amount of the commodity. The most well-known example of a commodity-backed currency is the gold standard, under which the value of a country’s currency was tied to a specific quantity of gold.

Advantages of commodity-backed currency:

a. Price stability: The value of the currency is anchored to a commodity, which can help maintain stability and protect against inflation.
b. International credibility: A commodity-backed currency can inspire confidence in foreign investors and trading partners, as the value of the currency is supported by a tangible asset.

Disadvantages of commodity-backed currency:

a. Limited money supply: Tying the currency to a commodity can restrict the money supply, as it requires the country to hold a sufficient amount of the commodity to back its currency.
b. Vulnerability to commodity price fluctuations: Commodity-backed currencies can be affected by changes in the value of the underlying commodity, which may lead to economic instability or disruptions in trade. Unless commodities used for backing up the currency are gold or silver witch have stability, unlike oil or similar type commodity.

2. Fiat currency: A fiat currency is a type of currency that is not backed by a physical commodity. Instead, its value is derived from the trust and confidence of the people using it, as well as the authority of the government or central bank that issues it. Fiat currencies are declared legal tender by the government and are accepted for all public and private debts. Most modern currencies, such as the US dollar, the euro, and the Japanese yen, are fiat currencies.

Advantages of fiat currency for the government:

a. Flexible money supply: A fiat currency system allows the government or central bank to control the money supply more easily, which can help manage economic growth, inflation, and interest rates.
b. Independence from commodity price fluctuations: Fiat currencies are not directly tied to the value of a commodity, which can provide greater stability and flexibility in response to economic changes.

Disadvantages of fiat currency for the people:

a. Inflation risk: Without the backing of a tangible asset, fiat currencies may be more susceptible to inflation if the government or central bank mismanages the money supply.
b. Potential loss of confidence: The value of a fiat currency relies on the trust of the people using it, which can be undermined by economic instability, political turmoil, or poor management by the issuing authority.

In summary, commodity-backed currencies derive their value from a tangible asset, which can provide price stability but may limit the money supply and be vulnerable to commodity price fluctuations. In contrast, fiat currencies are not tied to a physical commodity and offer greater flexibility in managing the money supply, but they may carry a higher risk of inflation and depend on the confidence of the people using them.

"money supply" is sometimes used colloquially, but context adds to differentiation.

@FrankZeleniuk History of Bimetallism

Bimetallism is a monetary system in which a country uses two metals, usually gold and silver, as the basis for its currency. The value of each metal is fixed in relation to one another, and both can be used as legal tender. Bimetallism has been used by various countries throughout history, and it played a significant role in the development of monetary systems.

1. Early use of bimetallism: The use of bimetallism dates back to ancient civilizations, such as the Greeks and Romans, who used both gold and silver coins as a form of currency. This dual use of metals provided flexibility in the monetary system, allowing for the exchange of goods and services with varying values.

2. Bimetallism in the Middle Ages: During the Middle Ages, bimetallism continued to be used in various European countries. The use of both gold and silver coins allowed for a more diverse and stable monetary system, enabling trade and commerce to flourish.

3. The Gresham’s Law: In the 16th century, English financier Sir Thomas Gresham observed the phenomenon that “bad money drives out good.” Gresham’s Law states that when two forms of currency are in circulation, the one with a lower intrinsic value tends to be spent more, while the one with a higher intrinsic value is hoarded. This principle became an important consideration in the design of bimetallic monetary systems.

4. Bimetallism in the United States: In the late 18th century, the United States adopted a bimetallic standard, with both gold and silver coins being used as legal tender. The Coinage Act of 1792 established the U.S. Mint and set the value ratio of gold to silver at 15:1. However, due to fluctuations in the market prices of gold and silver, the bimetallic standard faced challenges in maintaining fixed exchange rates between the two metals.

5. The Gold Rush and the decline of bimetallism: The discovery of gold in California in 1848 led to an influx of gold into the U.S. market, causing the market value of silver to rise relative to gold. This made it more profitable to exchange silver for gold, leading to a depletion of silver coins in circulation. As a result, the U.S. shifted towards a de facto gold standard in the 1850s.

6. The Free Silver Movement: In the late 19th century, the U.S. experienced an economic depression, leading to a political movement advocating for the free coinage of silver. Proponents of the Free Silver Movement believed that increasing the money supply through the coinage of silver would stimulate the economy and alleviate financial hardships. However, the movement was ultimately unsuccessful, and the U.S. formally adopted the gold standard with the Gold Standard Act of 1900.

7. The end of bimetallism: By the early 20th century, most countries had abandoned bimetallism in favor of the gold standard or other monetary systems. Bimetallism faced several challenges, such as maintaining fixed exchange rates between the two metals and the impact of Gresham’s Law. Moreover, the gold standard was seen as a more stable and reliable system, leading to its widespread adoption.

In summary, bimetallism played a significant role in the history of monetary systems, providing flexibility and stability through the use of two metals as the basis for currency. However, due to various challenges and the rise of the gold standard, bimetallism eventually fell out of favor and was replaced by other monetary systems.

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Bimetallism

In economic history, monetary system in which two commodities, usually gold and silver, were used as a standard and coined without limit at a ratio fixed by legislation that also designated both of them as legally acceptable for all payments. The term was first used in 1869 by Enrico Cernuschi (1821–96), an Italian-French economist and a vigorous advocate of the system.

In a bimetallic system, the ratio is expressed in terms of weight, e.g., 16 oz of silver equal 1 oz of gold, which is described as a ratio of 16 to 1. As the ratio is determined by law, it has no relation to the commercial value of the metals, which fluctuates constantly.

Gresham's law, the economic principle that in the circulation of money bad money drives out good, i.e., when depreciated, mutilated, or debased coinage (or currency) is in concurrent circulation with money of high value in terms of precious metals, the good money is withdrawn from circulation by hoarders.

Gresham's law, therefore, applies; i.e., the metal that is commercially valued at less than its face value tends to be used as money, and the metal commercially valued at more than its face value tends to be used as metal, valued by weight, and hence is withdrawn from circulation as money. Working against that is the fact that the debtor tends to pay in the commercially cheaper metal, thus creating a market demand likely to bring its commercial value up to its face value.

In practice, the instability predicted by Gresham's law overpowered the cushioning effect of debtors' payments, thereby making bimetallism far too unstable a monetary system for most modern nations. Aside from England, which in acts of 1798 and 1816 made gold the standard currency, all countries practiced bimetallism during the late 18th cent. and most of the 19th cent.

See J. L. Laughlin, The History of Bimetallism in the United States (1897, repr. 1968).
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2023, Columbia University Press. All rights reserved.

@FrankZeleniuk The Gold and Gold Bullion Standards

The first modern international monetary system was the gold standard. Operating during the late 19th and early 20th cents., the gold standard provided for the free circulation between nations of gold coins of standard specification. Under the system, gold was the only standard of value.
The advantages of the system lay in its stabilizing influence.

A nation that exported more than it imported would receive gold in payment of the balance; such an influx of gold raised prices, and thus lowered the value of the domestic currency. Higher prices resulted in decreasing the demand for exports, an outflow of gold to pay for the now relatively cheap imports, and a return to the original price level (see balance of trade and balance of payments).

A major defect in such a system was its inherent lack of liquidity; the world's supply of money would necessarily be limited by the world's supply of gold. Moreover, any unusual increase in the supply of gold, such as the discovery of a rich lode, would cause prices to rise abruptly. For these reasons and others, the international gold standard broke down in 1914.

During the 1920s the gold standard was replaced by the gold bullion standard, under which nations no longer minted gold coins but backed their currencies with gold bullion and agreed to buy and sell the bullion at a fixed price. This system, too, was abandoned in the 1930s.

The Gold-Exchange System

In the decades following World War II, international trade was conducted according to the gold-exchange standard. Under such a system, nations fix the value of their currencies not with respect to gold, but to some foreign currency, which is in turn fixed to and redeemable in gold. Most nations fixed their currencies to the U.S. dollar and retained dollar reserves in the United States, which was known as the key currency country. At the Bretton Woods international conference in 1944, a system of fixed exchange rates was adopted, and the International Monetary Fund (IMF) was created with the task of maintaining stable exchange rates on a global level.

The Two-Tier System

During the 1960s, as U.S. commitments abroad drew gold reserves from the nation, confidence in the dollar weakened, leading some dollar-holding countries and speculators to seek exchange of their dollars for gold. A severe drain on U.S. gold reserves developed and, in order to correct the situation, the so-called two-tier system was created in 1968. In the official tier, consisting of central bank gold traders, the value of gold was set at $35 an ounce, and gold payments to noncentral bankers were prohibited.

In the free-market tier, consisting of all nongovernmental gold traders, gold was completely demonetized, with its price set by supply and demand. Gold and the U.S. dollar remained the major reserve assets for the world's central banks, although Special Drawing Rights were created in the late 1960s as a new reserve currency. Despite such measures, the drain on U.S. gold reserves continued into the 1970s, and in 1971 the United States was forced to abandon gold convertibility, leaving the world without a single, unified international monetary system.
Floating Exchange Rates and Recent Developments

Widespread inflation after the United States abandoned gold convertibility forced the IMF to agree (1976) on a system of floating exchange rates, by which the gold standard became obsolete and the values of various currencies were to be determined by the market. In the late 20th cent., the Japanese yen and the German Deutschmark strengthened and became increasingly important in international financial markets, while the U.S. dollar—although still the most important national currency—weakened with respect to them and diminished in importance. The euro was introduced in financial markets in 1999 as replacement for the currencies (including the Deutschmark) of 11 countries belonging to the European Union (EU); it began circulating in 2002 in 12 EU nations (see European Monetary System), and additional EU members have since adopted it.

The euro replaced the European Currency Unit, which had become the second most commonly used currency after the dollar in the primary international bond market. Many large companies use the euro rather than the dollar in bond trading, with the goal of receiving a better exchange rate. The record deficits incurred by the United States in the wake of the financial crisis that began in 2007 and the resulting weaker dollar led many central banks to diversify their foreign reserves and greatly increase the percentage held in yen and euros. The growing economic importance of China in the 21st century led, by 2013, to its currency (the renminbi, whose main unit is the yuan) displacing the euro as the second most commonly used currency in world trade.

See T. Agmon et al., ed., The Future of the International Monetary System (1984); R. D. Horman, Reforming the International Monetary System: From Roosevelt to Reagan (1987).

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2023, Columbia University Press. All rights reserved.

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United States

In 1792, Secretary of the Treasury Alexander Hamilton proposed fixing the silver to gold exchange rate at 15:1, as well as establishing the mint for the public services of free coinage and currency regulation "in order not to abridge the quantity of circulating medium". With its acceptance, Sec.11 of the Coinage Act of 1792 established: "That the proportional value of gold to silver in all coins which shall by law be current as money within the United States, shall be as fifteen to one, according to quantity in weight, of pure gold or pure silver;" the proportion had slipped by 1834 to sixteen to one. Silver took a further hit with the Coinage Act of 1853, when nearly all silver coin denominations were debased, effectively turning silver coinage into a fiduciary currency based on its face value rather than its weighted value.

Bimetallism was effectively abandoned by the Coinage Act of 1873, but not formally outlawed as legal currency until the early 20th century. The merits of the system were the subject of debate in the late 19th century. If the market forces of supply and demand for either metal caused its bullion value to exceed its nominal currency value, it tends to disappear from circulation by hoarding or melting down.

Political debate

The American Civil War (April 12th, 1861 – May 26th, 1865; also known by other names) was a civil war in the United States. It was fought between the Union ("the North" ) and the Confederacy ("the South" ), the latter formed by states that had seceded. The central cause of the war was the dispute over whether slavery would be permitted to expand into the western territories, leading to more slave states, or be prevented from doing so, which was widely believed would place slavery on a course of ultimate extinction. The Civil War would have a huge impact on American politics in the years to come. Many veterans on both sides were subsequently elected to political office, including five U.S. Presidents.

In the United States, bimetallism became a center of political conflict toward the end of the 19th century. During the Civil War, to finance the war the U.S. switched from bimetallism to a fiat money currency. After the war, in 1873, the government passed the Fourth Coinage Act and soon resumption of specie payments began (without the free and unlimited coinage of silver, thus putting the U.S. on a mono-metallic gold standard.) Farmers, debtors, Westerners and others who felt they had benefited from wartime paper money formed the short-lived Greenback Party to press for cheap paper money backed by silver.

The latter element—"free silver"—came increasingly to the fore as the answer to the same interest groups' concerns, and was taken up as a central plank by the Populist movement. Proponents of monetary silver, known as the silverites, referred back to the Fourth Coinage Act as "The Crime of '73", as it was judged to have inhibited inflation, and favored creditors over debtors. Some reformers, however, like Henry Demarest Lloyd, saw bimetallism as a red herring and feared that free silver was "the cowbird of the reform movement", likely to push the other eggs out of the nest.

Nevertheless the Panic of 1893, a severe nationwide depression, brought the money issue strongly to the fore again. The "silverites" argued that using silver would inflate the money supply and mean more cash for everyone, which they equated with prosperity. The gold advocates said silver would permanently depress the economy, but that sound money produced by a gold standard would restore prosperity.

Bimetallism and "Free Silver" were demanded by William Jennings Bryan who took over leadership of the Democratic Party in 1896, as well as by the Populists, and a faction of Republicans from silver mining regions in the West known as the Silver Republicans who also endorsed Bryan. The Republican Party itself nominated William McKinley on a platform supporting the gold standard which was favored by financial interests on the East Coast.

Bryan, the eloquent champion of the cause, gave the famous "Cross of Gold" speech at the National Democratic Convention on July 9, 1896, asserting that "The gold standard has slain tens of thousands." He referred to "a struggle between 'the idle holders of idle capital' and 'the struggling masses, who produce the wealth and pay the taxes of the country;' and, my friends, the question we are to decide is: Upon which side will the Democratic party fight?" At the peroration, he said: "You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold."

However, his presidential campaign was ultimately unsuccessful; this can be partially attributed to the discovery of the cyanide process by which gold could be extracted from low-grade ore. This process and the discoveries of large gold deposits in South Africa (Witwatersrand Gold Rush of 1887 – with large-scale production starting in 1898) and the Klondike Gold Rush (1896) increased the world gold supply and the subsequent increase in money supply that free coinage of silver was supposed to bring. The McKinley campaign was effective at persuading voters in the business East that poor economic progress and unemployment would be exacerbated by the adoption of the Bryan platform. 1896 saw the election of McKinley.

Domestically, the direct link to gold was abandoned in 1934 in Franklin D. Roosevelt's New Deal program and later the link was broken internationally by Richard Nixon when he closed the gold window.

Economic analysis

In 1992, economist Milton Friedman concluded that abandonment of the bimetallic standard in 1873 led to greater price instability than would have occurred otherwise, and thus resulted in long-term harm to the US economy. His retrospective analysis led him to write that the act of 1873 was "a mistake that had highly adverse consequences".

@FrankZeleniuk The Gold Standard

The gold standard is a monetary system in which a country’s currency is directly linked to a specific amount of gold, and its value is determined by the value of that gold. Under the gold standard, countries agreed to convert their currency into a fixed quantity of gold upon demand. The gold standard has a long history and has had a significant impact on the global economy.

History of the Gold Standard:

1. Early use of gold: Gold has been used as a medium of exchange for thousands of years due to its rarity, durability, and divisibility. Ancient civilizations, such as the Egyptians and the Romans, used gold coins as a form of currency.

2. Emergence of the gold standard: The gold standard as a formal monetary system emerged in the 19th century. The United Kingdom adopted the gold standard in 1821, and other countries, such as the United States, Canada, and Germany, followed suit in the subsequent decades. By the late 19th century, the gold standard had become the dominant global monetary system.

3. The Classical Gold Standard (1870s-1914): The period between the 1870s and the outbreak of World War I in 1914 is often referred to as the era of the classical gold standard. During this time, many countries adopted the gold standard, and international trade and investment flourished. Countries maintained fixed exchange rates, as their currencies were pegged to gold, which facilitated international transactions and reduced currency risk.

4. World War I and the Interwar Period (1914-1944): The gold standard was temporarily suspended during World War I, as countries needed to print more money to finance the war effort. After the war, countries attempted to return to the gold standard but faced challenges due to economic imbalances and the Great Depression. The gold standard became increasingly unstable, and countries began to abandon it in the 1930s.

5. The Bretton Woods System (1944-1971): In 1944, the Bretton Woods Agreement established a new international monetary system in which the US dollar was pegged to gold, and other currencies were pegged to the US dollar. This system, known as the “gold-exchange standard,” was a modified version of the gold standard. However, by the late 1960s, the US was facing economic challenges, and the fixed exchange rate system became unsustainable. In 1971, President Richard Nixon ended the direct convertibility of the US dollar to gold, effectively ending the Bretton Woods System and the gold standard.

Function of the Gold Standard:

1. Fixed exchange rates: Under the gold standard, exchange rates between countries were fixed, as their currencies were all linked to gold. This facilitated international trade and investment by reducing currency risk and uncertainty.

2. Price stability: The gold standard helped to maintain price stability by tying the value of currency to a tangible asset, which acted as a constraint on inflation.

3. Fiscal discipline: Governments were required to hold sufficient gold reserves to back their currency, which limited their ability to print money and finance public spending, encouraging fiscal discipline and responsible economic policies.

4. Confidence and credibility: The gold standard promoted confidence in the stability and value of a country’s currency, as it was backed by a tangible asset.

Despite its historical significance, the gold standard is no longer used as a global monetary system. Critics argue that it is inflexible, constrains monetary policy, and can exacerbate economic downturns. Today, most countries use fiat currencies, which are not tied to a physical commodity and allow for greater control over the money supply and economic management.

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The story of the U.S. dollar as the world’s reserve currency

The story of the U.S. dollar as the world’s reserve currency begins in the early 20th century, at a time when the global economy was shifting and power dynamics were changing. Prior to the U.S. dollar’s rise to prominence, the British pound sterling held the title of the world’s primary reserve currency due to the British Empire’s extensive trade and financial networks.

However, the economic landscape started to change with the growth of the American economy and the decline of the British Empire. The two World Wars played a significant role in this shift, as they weakened European economies and paved the way for the United States to emerge as a global superpower.

In 1944, representatives from 44 countries gathered in Bretton Woods, New Hampshire, to establish a new global monetary system in the aftermath of World War II. The Bretton Woods Agreement created the International Monetary Fund (IMF) and the World Bank, with the primary goal of promoting global economic stability and cooperation. One of the key decisions made at this conference was to peg global currencies to the U.S. dollar, which in turn was pegged to gold. This established the U.S. dollar as the world’s reserve currency.

The decision to use the U.S. dollar as the reserve currency was driven by several factors. The United States had emerged from World War II with a strong and growing economy, making it a stable and reliable choice. Additionally, the U.S. held the largest gold reserves in the world, which instilled confidence in the dollar’s value.

For a while, the Bretton Woods system functioned well, as it provided much-needed stability to the global economy. However, by the late 1960s and early 1970s, the system began to face challenges. The U.S. was struggling with inflation and balance of payments deficits, and the fixed exchange rates became increasingly difficult to maintain. This led to a growing concern that the U.S. would be unable to fulfill its commitment to redeem dollars for gold.

In 1971, President Richard Nixon announced the suspension of the dollar’s convertibility to gold, effectively ending the Bretton Woods system. This move, known as the “Nixon Shock,” marked the beginning of the era of floating exchange rates. Despite the end of the gold standard, the U.S. dollar remained the world’s primary reserve currency, as it was still seen as a stable and reliable option.

Since then, the U.S. dollar has continued to dominate global trade and finance, with central banks around the world holding large amounts of dollars in their foreign exchange reserves. The petrodollar system, which emerged in the 1970s after an agreement between the U.S. and Saudi Arabia to price oil exclusively in U.S. dollars, further cemented the dollar’s status as the world’s reserve currency.

The U.S. dollar’s role as the world’s reserve currency has its advantages and disadvantages. On one hand, it allows the United States to borrow at lower interest rates and gives the country significant influence in global markets. On the other hand, it also puts pressure on the United States to maintain economic stability and can lead to trade imbalances.

In recent years, there have been discussions about the potential for a shift away from the U.S. dollar as the world’s reserve currency, with alternatives such as the euro, the Chinese yuan, or even digital currencies being considered. However, for the time being, the U.S. dollar remains the dominant global reserve currency, playing a crucial role in international trade and finance.

[huggingface.co]

@FrankZeleniuk The story of the petrodollar

The story of the petrodollar begins in the early 20th century when the world started to rely more and more on oil as a primary energy source. As countries like the United States became major oil producers, oil started to be traded internationally, and it became crucial to have a stable currency for oil transactions. This led to the rise of the U.S. dollar as the dominant currency for global oil trade.

The term “petrodollar” refers to the U.S. dollars earned by oil-exporting countries, mainly in the Middle East, through the sale of oil. The birth of the petrodollar system can be traced back to the 1970s when the United States faced an economic crisis. The U.S. had abandoned the gold standard in 1971, which caused the value of the dollar to decline. In response, the Organization of the Petroleum Exporting Countries (OPEC) decided to raise oil prices to offset the loss of value in the dollars they received for their oil exports.

In 1974, the U.S. and Saudi Arabia struck a deal that would shape the global financial system for decades to come. In exchange for the U.S. offering military protection to Saudi Arabia and providing them with weapons, the Saudis agreed to price their oil sales exclusively in U.S. dollars. This agreement effectively made the U.S. dollar the global currency for oil trade and solidified the petrodollar system.

Other OPEC countries soon followed suit, and by the end of the 1970s, the majority of oil transactions worldwide were conducted in U.S. dollars. This created a huge demand for the dollar, which in turn helped to strengthen the U.S. economy. The petrodollar system also enabled oil-exporting countries to recycle their oil revenues by investing in the U.S. and other western countries, funding infrastructure projects, and purchasing arms and other goods.

Over time, the petrodollar system has become deeply embedded in the global economy, with the U.S. dollar serving as the world’s reserve currency. However, it has also faced challenges and criticism. Some argue that the system contributes to global economic imbalances and that the U.S. uses its economic power to exert political influence over oil-exporting countries.

In recent years, there have been discussions about alternative systems for global oil trade, such as using a basket of currencies or transitioning to a digital currency. Countries like China and Russia have also started to trade oil using their own national currencies in some cases, which could potentially challenge the dominance of the petrodollar.

In conclusion, the story of the petrodollar is a tale of economic, political, and strategic alliances that have shaped the global financial system for nearly 50 years. While the future of the petrodollar system remains uncertain, it is undeniable that the U.S. dollar’s role in global oil trade has had a significant impact on the world economy and geopolitics.

[huggingface.co]

@FrankZeleniuk I suspect that when dollars were peg to gold , dollar was as good as money. And when US went off the gold standard and became fiat currency, and not currency backed by commodity such as gold, most people probably didn't know what that means. After all it was hipi era, so I doubt many cared or understood. And no doubt central banks and government wanted to keep the idea that dollar is as good as gold, meaning money, hence fiat retain the pretense of money, in common talk.

The Day the Dollar Died - Director's Cut

The so called "Nixon shock" was a series of economic measures undertaken by United States President Richard Nixon in 1971, in response to increasing inflation, the most significant of which were wage and price freezes, surcharges on imports, and the unilateral cancellation of the direct international convertibility of the United States dollar to gold.

Although Nixon's actions did not formally abolish the existing Bretton Woods system of international financial exchange, the suspension of one of its key components effectively rendered the Bretton Woods system inoperative. While Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, all attempts at reform proved unsuccessful. By 1973, the Bretton Woods system was replaced de facto by the current regime based on freely floating fiat currencies, but still measured against the ultimate fiat currency, the USA dollar.

[en.wikipedia.org]

@FrankZeleniuk Why bitcoin is not a currency. [huggingface.co]

Bitcoin is often considered more of a digital asset rather than a traditional currency due to several factors:

1. Volatility: Bitcoin’s price is highly volatile, making it challenging to use as a stable medium of exchange. The value of a currency should ideally remain fairly stable to facilitate transactions and enable users to make informed decisions when purchasing goods and services. By contrast, Bitcoin’s price can fluctuate significantly even within a short period, creating uncertainty for both buyers and sellers.

2. Limited acceptance: While the number of merchants accepting Bitcoin has grown over the years, it is still not widely accepted as a means of payment. Many businesses are hesitant to accept Bitcoin due to its volatility, regulatory concerns, and the potential for illicit activities associated with "cryptocurrencies."

3. Scalability: The Bitcoin network currently has limitations in terms of the number of transactions it can process per second, leading to slower transaction times and higher fees during peak periods. This makes it less efficient for everyday transactions compared to traditional payment systems like credit cards or electronic transfers.

4. Not a unit of account: A currency should serve as a standard measure of value, allowing people to compare the worth of goods and services in the market. However, due to Bitcoin’s volatility and limited acceptance, most transactions and financial accounting are still denominated in traditional currencies like the US dollar or the Euro.

5. Legal and regulatory environment: In some countries, the use of Bitcoin and other "cryptocurrencies" is either prohibited or restricted. Regulatory concerns surrounding money laundering, tax evasion, and the financing of illicit activities have led some governments to implement strict controls or bans on cryptocurrency usage.

6. Storage and security: Bitcoin ownership relies on the secure storage of private keys, which can be vulnerable to loss, theft, or hacking. This creates challenges for individuals and businesses in managing their digital assets securely and can undermine the trust required for a widely used currency.

Despite these limitations, Bitcoin and other "cryptocurrencies" have gained popularity as speculative investments. However, until the issues mentioned above are addressed, it is unlikely that Bitcoin will fully function as a traditional currency in the foreseeable future if ever.

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The myth of cryptocurrency decentralization refers to the belief that cryptocurrencies, such as Bitcoin and Ethereum, operate in a completely decentralized manner, without any central authority or control. This belief is rooted in the core principles of blockchain technology, which underlies most cryptocurrencies. Blockchain is designed to be a distributed, secure, and transparent system that relies on a network of computers (nodes) to validate and record transactions.

However, the reality of cryptocurrency decentralization is more complex than the myth suggests. Here are some reasons why the decentralization of cryptocurrencies may not be as complete as it appears:

1. Concentration of mining power: The process of validating and adding new transactions to a blockchain is known as mining, and it requires computational power. Over time, mining has become more resource-intensive, leading to the emergence of large mining pools that control a significant share of the network’s computing power. This concentration of mining power can undermine the decentralization of cryptocurrencies, as these large players can potentially influence the network or even manipulate transactions.

2. Centralized exchanges: Most cryptocurrency transactions are facilitated by centralized exchanges, which function as intermediaries between buyers and sellers. These exchanges are often subject to government regulations, and they can be hacked or shut down, posing risks to users’ funds. The reliance on centralized exchanges contradicts the idea of total decentralization in the cryptocurrency ecosystem.

3. Influence of developers and founders: The development and maintenance of cryptocurrency protocols are often controlled by a small group of developers or organizations, such as the Bitcoin Core developers or the Ethereum Foundation. These entities can exert significant influence over the direction and updates of the underlying protocols, which can impact the decentralization of the network.

4. Wealth distribution: The distribution of wealth within cryptocurrency networks is often highly skewed, with a small number of addresses owning a significant portion of the total supply. This concentration of wealth can lead to centralization of control and influence over the network, as large holders may have the power to manipulate markets or sway decisions about the protocol’s development.

5. Regulatory pressure: Cryptocurrencies are increasingly subject to government regulations and scrutiny, which can impact their decentralization. Governments can impose restrictions on the use of cryptocurrencies or require exchanges and other intermediaries to comply with specific rules, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Such regulatory pressures can limit the extent of decentralization in the cryptocurrency ecosystem.

In conclusion, while cryptocurrencies are designed to be decentralized, the reality is more nuanced. Various factors, including the concentration of mining power, the use of centralized exchanges, the influence of developers and founders, wealth distribution, and regulatory pressures, can challenge the ideal of complete decentralization. It is essential to recognize these limitations when considering the potential benefits and risks of using cryptocurrencies.

[huggingface.co]

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Bitcoin

a) Price is what you pay, value is what you get. We know the price of bitcoin, and if one bitcoin is for example $50 K, what is the value? I know what I can buy or exchange for $50 K but when I try to do the same with 1 Bitcoin, the options are severely restricted. In other words, Bitcoin is gambling, hoping that a bigger sucker/dreamer will pay more for it than you did and that you will be able to cash out before the bubble bursts.

b) it’s not decentralized because you are in the middle of civilization, not on some far away planet. Which means that in order to actually use Bitcoing for anything other than gambling you have to deal with government regulation. They don't even have to regulate bitcoin itself, they can simply regulate the business that accept bitcoin.

c) Away from authority and government? Hmm. I think there is that already and have been around for a very long time. Its called black market. You trade with what is most convenient and you are away from tax collecting government. If you want you can use Bitcoin as well. Stolen paintings, information trading, organ trading, drug trade, anything you want. And it works.

d) How does bitcoin protect itself from inflation? There is a ledger, but what is the protection against fork bitcoin and other crypo's? Anyone can make one and adopt it at any point. How does bitcoin protect itself from that? There is already something like 20 000 cryptos, and going up, at some point, at any point, one of them can provide more than Bitcoin can and if its adopted, bitcoin has nothing to protect itself from that. Crypto creation that anyone can do, creates inflation against other cryptos, including Bitcoin, which may have a head start, but that is not a protection, only temporary advantage.

e) Bitcoin has disproportionately small number of large mining cartels. It does not sound as fair and even as advertised. How many of all the miners mine for all of the bit coins? What is the percentage?

f) Bitcoin is not competitive as currency since other currencies cost less to trade with, faster transactions with less energy involved and can be physical as well as digital representation.

g) Bitcoin is not like stocks because it’s not invested in anything that has production behind it. Like investing in car-making company, for example. Zombie companies not counted here.

You invest in their ability to be competitive on the market with cars and even if they fail there is still value of factories, etc. Nothing like that happens when you pay for bitcoin. You only get ones and zeros. And unlike precious metals that represented energy stored, meaning you don't have to mine it again, with bit coin you have to expend energy to keep it, use it or trade with it, and its the energy you don't get back.

h) There is also how fast and how low the price can fall at any moment of bitcoin. There is nothing that is linked to. Not like any precious metal , like gold or silver or anything similar.

i) it’s not hedge against inflation, never mind it is being devalued by inflation of others crypot being made, that it can't protect itself, but it’s not a store of value since its highly unstable. Its price goes up and down like yoyo, based on some arbitrary tweets. lol there is more security in storing your cash under the mattress, despite the runaway inflation. Just for the absurd notion of fighting inflation with bitcoin that depends on inflation of fiat to go up in price.

Hell, if anything Bitcoin is a place where government hides inflation effects. If the inflation is an increase in circulation of currency, than normally in the past, government would print money and put it in circulation , and effects would be felt by the general public. With ones and zeros , how Fiat currency is now by and large used and "printed", government just makes more of it, and give it away in trillions of dollars via stimulus, and many young people sitting locked up at home got the money and watch YouTubers telling them to get on the Bitcoin train so they buy Bitcoin and extra currency government created is not in circulation among the general public, but locked up in bitcoin, hence government can "print" more and the effects of inflation are going to be delayed. Much of this extra currency can also go in Zombie companies, all kinds of bubbles, like real estate or as we are not in everything bubble, it can go into all kinds of overvalued nonsense and delay the inevitable. Debasement of Fiat currency.

j) You can't protect yourself from actually trading in bitcoin unless you either go underground, black market, which already exists and doing fine with or without bitcoin, but in any legit way you can't protect yourself since you do not have your own army. Government can pass the law to make Bitcoin itself illegal or illegal to trade with or mine for, at any point like in China.

And why would any country that likes tax collection let bitcoin be used and not have it collect taxes obligations? What fantasy world would that be. Unless its illegal black market in which case you are competing on the black market that already uses everything from cash to information to trade with. And any new crypo can be made at any point that does all bitcoin do and it’s more efficient. And since Bitcoin is linked to nothing but ones and zeros it has no way to protect itself from it unless off course governments take over, in which case

a) you have the opposite of advertised and b) it’s not a currency its social credit system.

k) Bitcoin does not have interests you get by loaning money or something similar, it is purely a speculative asset that is highly unstable. In other words, gambling. Some gamblers win, most lose. And usually those that win, are not as lucky as much as they are inside players. And for those who want to risk it, go for it, but it’s not a currency.

l) there is also privacy concerns with bitcoin as stated in the video, it can be tracked, and it is vulnerable to electricity and machines to process it. We take electricity for granted, but what to do in the case of natural disaster, EMP attack, nuclear blast , terrorist sabotage or electro dam, or breaking of the dam, or no wind or sun if you are using that. And what about some of the laws they try to pass that you cannot use internet like I heard for Jan 6 incident. Those laws are going to be pushed by the draconian technocrats. If all eggs are in one basket (internet access and electricity), it can be even more risky than the risky nature of bitcoin itself. So it really would never be suitable as currency, even as a social credit system the government would have the same problem of depending on the internet and electricity we take for granted.

A theory of a bigger fool or dreamer depends on how you look at it. Paying for something that has no intrinsic value and hoping you will find a bigger sucker to pay more for it before everyone realizes it’s a bubble and tries to sell at the same time then nobody will be buying and price will go down faster than you can say Dot.com bubble. Thanks but no thanks.

Bitcoin has grown out of get rich fast Silicon Valley type culture, and that is its biggest strength and biggest weakness. I think blockchain technology and its many uses is future proof, but cryptocurrency is questionable and Bitcoin in particular is highly questionable.

@FrankZeleniuk oh, we forgot one more thing.

History of the Silver standard

The Silver Standard is an economic term that refers to a system in which a country’s currency is backed by a fixed weight of silver. This system was prevalent in many countries throughout history until it was gradually replaced by the gold standard and later, fiat currencies. The history of the silver standard can be traced back to ancient civilizations and has evolved over time with significant periods of adoption and decline.

1. Ancient civilizations: Silver was used as a form of currency as early as 700 BCE. The ancient Greeks and Romans minted silver coins, and the value of these coins was determined by their weight in silver. The Chinese also used silver ingots as a medium of exchange.

2. Middle Ages: In Europe, silver coins were the most common form of currency during the Middle Ages. The English pound sterling, for example, was originally a pound of sterling silver. The silver standard continued to be widely used in Europe and the Middle East throughout this period.

3. Spanish Empire: The Spanish conquest of the Americas in the 16th century led to a massive influx of silver, which became the primary form of currency in the Spanish Empire. This created a global silver standard, as silver coins from Spain and its colonies circulated widely in international trade.

4. 19th Century: The silver standard faced competition from the gold standard during the 19th century, as countries such as the United States, United Kingdom, and Germany adopted the gold standard. This led to a decline in the use of silver as a basis for currency.

5. Bimetallism and the decline of the silver standard: In the late 19th and early 20th centuries, some countries adopted a bimetallic standard, where both gold and silver were used to back currency. However, bimetallism was unstable due to fluctuations in the relative value of gold and silver. This led to the eventual abandonment of bimetallism and the silver standard in most countries.

6. The United States: The US adopted a silver standard in the late 18th century, with the Coinage Act of 1792 establishing a fixed exchange rate between silver and gold. However, the country shifted towards a gold standard in the late 19th century, with the Coinage Act of 1873 effectively putting the US on a de facto gold standard. The silver standard was briefly revived in the early 20th century with the passage of the Silver Purchase Act of 1934, but this was short-lived, and the US eventually abandoned the silver standard in 1965.

7. The end of the silver standard: By the mid-20th century, most countries had abandoned the silver standard in favor of the gold standard or fiat currency, which is not backed by any physical commodity. The decline of the silver standard was driven by several factors, including the discovery of new silver deposits, which led to increased supply and decreased value, and the development of new international monetary systems that favored gold or fiat currencies.

In summary, the history of the silver standard spans several millennia, from its origins in ancient civilizations to its eventual decline in the 20th century. Although the silver standard has been largely replaced by gold and fiat currencies, silver continues to be used as an investment and store of value today.

@Krunoslav Thanks for the references. Couldn't make heads or tails out of huggingface??? I'm not much of a techy.

The only point of disagreement in all those articles would be on Bitcoin. It is trying to establish itself.
I agree it is risky. There are forces working for and against. Banks and governments are probably going to control the entire internet so I don't think it has much chance. In the case of an EMP device or some such loss of the power grid we are all hooped. Communications are going to be pretty localized and we will have to get our information as to what is going on from some form of network.