The benefits of cryptocurrency without all the nonsense
Here's what we do. Let's start a bank where all deposits and withdrawals are made in gold bullion. Each depositor's balance will be listed as gold weight on deposit. And let us place our depository someplace safe, like Switzerland.
Before we start pondering the logistical nightmare of such an arrangement, what with delivery, assaying (verification), acceptance, etc., let us consider one other simple possibility. How about this? Deposits can be made in any major currency, and that currency will, immediately on deposit, be used to purchase gold at the then current market price. So for example, if you deposit one thousand dollars, your account will then reflect not the one thousand dollars, but rather that amount in gold bullion.
The bank will issue each account holder checkbooks and debit cards, which will allow customers to spend their funds as with any bank. Spend ten dollars at Walmart, and your account will reflect a ten-dollar reduction in your deposited gold weight. Need cash to pay your babysitter? Debit cards will work in the ATM.
The bank will purchase and sell gold daily on the open market to facilitate deposits and withdrawals. Since the bank is buying and selling based on the collective needs of all depositors, the bank would receive the best possible commissions and spreads on these transactions. Then of course, these expenses would be shared among deposit holders based on their respective transactions. It is worth noting that to the extent that deposits and withdrawals match, the only cost to the bank would be the bookkeeping charge of moving funds from one account to another.
The bank will maintain a high percentage of gold in its depository. Maybe 85%. The remaining gold deposits would be holdings of various gold instruments like ETFs. This is to insure quick and inexpensive purchases and sales.
The benefit of such an arrangement is that funds are maintained in bullion and not dollars or any other currency. These deposits are therefore immune to the irresponsibility of modern governments and the fragility of their respective currencies.
Start your own gold bank
Individuals can limit their exposure to the dollar in a similar fashion. Invest in gold ETFs and move investment income into these ETFs, and keep funds there, rather than in dollars. It is the same if you get a paycheck; roll your dollars into gold ETFs.
First Bank of Blockchain
This model is deposit/withdraw/spend in dollars (or any government-sponsored currency) and store in gold. But clearly, and perhaps more easily, this could also be done with cryptocurrency. Why has no one has thought to do this? If the crypto folks want to be taken seriously, they need to get rid of the Sam Bankman-Fried type grifters, and bring in some serious players.
One certain takeaway from the Trump-Musk split and the Big Beautiful Bill is that relative to the US dollar, gold is the safer store of long term value. Sure there may be some minor fluctuations here and there. But for now this is a political certainty: There is zero will among US politicians to control dollar-denominated US government debt. At this point I think it is safe to say: The US national debt will never be paid off. Never. Even if, magically, the politicians develop the will, at this point they lack the ability.
What does this mean? Three possibilities. One, the politicians will devalue the dollar. Think one new dollar for ten old dollars. Two, the politicians will attempt to monetize the debt by a long term policy of increasing and sustaining inflation. Basically it is devaluing the dollar in slow motion. Three, at some point the bond and currency markets will force a dollar devaluation. Since the politicians are not going to address the debt in any meaningful way, one of these three, or some combination, is inevitable.
One thing US politicians will not abide is default. At least not in name. But devaluation, however it comes, is a form of default. So yes, sooner or later, the US government will default on its obligations.
Individuals can prepare for this by: Not owning debt. Especially not government debt, but I would add, do not own any dollar-denominated debt. If you own dollar-denominated bonds, get rid of them. If the state of New York owes you one thousand dollars, in the form of a bond, they will be delighted to pay you back in devalued dollars. And this is true for any and every bond issuer.
So no bonds and no dollars. Do own real estate, gold, common stocks. Although I would avoid equities of businesses that own a lot of debt, that is banks and other lenders. If you are not a believer in gold, fine. But keep your rents and dividends in gold short term until you are able to reinvest. In terms of which common stocks to own, I would focus on companies with an economic franchise as defined by Warren Buffett.
Speaking of Mr. Buffett, he is sitting on all this cash ($350 billion) and is, famously, no fan of gold. Surely you are not disagreeing with the oracle of Omaha?
But how much better is cash than gold? Cash suffers the same basic problem as gold: A store of value without income. Gold provides no income and cash only offers slightly more than none. The reason Buffett maintains cash is in order to move quickly into the market at a time of his choosing. Also this: One might remember that the only reason cash offers any income at all is the fact that almost all cash is stored in, invested in, some form of debt.
Mr. Buffett was born in 1930. His life has spanned the length of US hegemony. And surely that affects how he sees the world. Buffett may be old, but the man is not stupid. My guess is that he will attempt to relieve himself of all that cash (into some hard, income-producing assets) before the coming monetary collapse (whether fast or slow). He is betting that the stock market will collapse before the dollar. The history of American hegemony tells him this is a good bet.
I am not so sure.
Current US national debt is $273,500 per household. Household net worth is around $176,500. A figure which of course does not include national debt. You can do your own math.
As of December 2024, the U.S. national debt as a percentage of GDP is approximately 124%. This is based on data indicating the national debt reached $36.22 trillion, with a nominal GDP of around $29.2 trillion. At the end of World War II in 1946, the debt-to-GDP ratio was about 106%, with a public debt of $241.86 billion against a smaller GDP.
The current ratio of 124% is notably higher than the post-WWII peak of 106%. The increase reflects significant government spending during recent events like the COVID-19 pandemic, which drove debt levels up, compared to the post-WWII period where economic growth, primary budget surpluses, and inflation helped reduce the ratio over time.
In other words, we have the highest government debt level in modern history, no political will to reduce it, and actually no will to reduce its continued growth. For all the left-wing hate of Donald Trump, one might note that he is not, and has never been, a fiscal conservative.
Maybe Mr. Buffett is correct. But if the stock market does collapse with this level of national debt, what are the odds that the dollar will collapse along with the stock market?