“Credit is an evidence of banking, but it is not money itself. Money is gold, and nothing else”

JP Morgan (18 Dec 1912)

The renowned scientist and author Carl Sagan once said “You have to know the past to understand the present.” For thousands of years, gold has been a borderless store of value and medium of exchange. In 1913, when the US Federal Reserve was established (the same year JP Morgan died) all dollars printed were issued as gold certificates “payable to the bearer on demand”.

So what happened? In 1914 WWI happened and governments around the world abandoned the gold standard to pay for the war. However, gold was re-introduced in 1919 only to be suspended again in the wake of the 1929 crash. In 1939 WW2 started and even more money was printed to fight it.

Some economic historians blame the flight to gold as one issue that worsened the Great Depression, but they do not look at the underlining cause – which was over speculation and other abuses – gold had nothing to do with the actual crash of 1929. Wall Street gambling led to the formation of the SEC by FDR, and when citizens continued to store their wealth in gold, FDR made gold ownership illegal with Executive Order 6102 on April 5, 1933.

In 1971 when President Nixon finished FDR’s work of taking the US dollar completely off the gold standard the world’s reserve currency established under the Bretton Woods Agreement in 1944 became a pure fiat system with no stable assets supporting it… and ever since the world economy has revolved around credit and debt cast out of thin air issued legally by central banks on behalf of irresponsible governments running enormous deficits.

 In the midst of the financial turmoil of 2008 (again due to over-speculation on Wall Street), the Bitcoin white paper was released and strong money principles found in Austrian economics returned. The rise of a truly borderless electronic cash system founded on censorship resistant immutability is a logical step towards an honest economic system using digital currencies as its’ medium of exchange, digital contracts to codify those transactions, and much more. In many ways Bitcoin mirrors (and could even strengthen) a return to strong money which the world once had under gold.

Bitcoin is a very simple and obvious idea – if you believe in a free and open Internet, than a free and open economy based on an Internet of Money is a logical conclusion. Its’ distributed ledger system forces honesty in a way never seen before because every transaction is immutable (ie. un-changing). It is the first money born with an in-built immunity to cheating.    

Yet Bitcoin (alongside other altcoins attempting to be money) must be what it was born to be. Meaning it is trusted money because it is:

    • – Open
    • – Trusted
    • – Borderless
    • – Censorship resistant
    • – Peer to peer electronic cash system that is….
    • – Scalable and stable on its’ own like TCP/IP so that it can be trusted long term.
    •  

Without these per-conditions Bitcoin (and its’ altcoin clones) will eventually die because the door to mass adoption cannot open.

The Bitcoin white paper is the Magna Carta of all currencies (digital or not) that will come after it, because for the first time in human history money creation, settlement, and accounting can all be trusted under one system. 

Money is trust. Trust is necessary for its’ survival; and trust can only be earned via real utility with strong engineering and economic fundamentals that are proven to work in the real world.

Pictures:

Welcome: Walt Disney “It’s a Small World” 1965
$100 Dollar Bill: https://www.littletoncoin.com/
US Dollar Graphs: https://raymondpronk.wordpress.com/2011/02/13/time-to-end-the-federal-reserve-system-for-failing-to-maintain-price-stability-or-the-purchasing-power-of-the-u-s-dollar-currency-debasement-videos/  -&-  https://mebfaber.com/2010/11/17/the-dollar-and-purchasing-power/
Magna Carta Signing: https://winstonchurchill.org/publications/finest-hour-extras/churchill-to-gift-magna-carta/