Many believe—and I won't hide the fact that I am one of them—we're about to experience a rapid loss in value of currencies such as the USD or the EUR, in other words, fiat money. We may therefore consider shifting our long-term investments toward precious metals or cryptocurrencies. If you are, as I am, thinking about this, I encourage you to read this post. Information is power, and uncensored information is real power. (#freespeech)
Let's jump right into what I want to discuss today:
What truly is the difference between fiat money and real money?
Don't let misleading articles such as this one on the IRS website fool you. Bank notes—such as the dollar or Euro—are not real money. They are what is called fiat money. “Fiat” is the Latin word for “let it be,” as in “Let it be money!” This means, by definition, fiat money only has value because someone says so. I won't go into who that someone is, at least not in this post. I'll just say one thing (spoiler alert): It's not the government, at least not any elected official or king or queen.
The point we all need to understand here is very simply this distinction:
Real money is any money that has value because of what it is regardless of what some jester says: Gold has value because it's shiny and pretty, resists most chemical attacks, can't burn, has some other physical properties such as malleability, but above all because there is a limited quantity of it in this world. We don't know exactly what that quantity is, but we know some clown can't just say, “Let's give every citizen an ounce of gold to reward them for buying into the corona myth, and let's do the same thing again next month, and the month after that…” At some point, the treasury would run out of gold.
Fiat money, on the other hand, has practically no intrinsic value. Some clown can actually decide to give every citizen $1200 this month and again next month and the month after that. As long as that clown is sufficiently well-connected to the clown who is in charge of the ceremony that creates fiat money out of thin air, they can play this game indefinitely. In other words, for any fiat currency, there is no cap, no maximum quantity. There is literally no limit to how much of it can exist. You can't make arbitrary amounts of it. I can't. The President of the United States can't. Kennedy tried to do something about that, and we all know how that worked out. But there is a clique of bankers who can and will print arbitrary amounts of fiat money.
Real, fiat: Where do cryptocurrencies stand?
Most cryptocurrencies, most famously Bitcoin, do have a cap on how much will ever exist. In that sense, they are much more akin to real money than fiat money. Before you invest in any cryptocurrency, you should familiarize yourself with how much of it is currently in existence and—more importantly—how much of it can and will ever be created.
Assuming the cryptocurrency you have selected for your long-term investment has a limited supply, it's good as gold, isn't it?
Well, not quite. There are some advantages and some disadvantages of precious metals versus crypto:
Advantages of crypto over precious metals
Cryptocurrencies are by nature pure information, so you don't have to store any physical thing that could be taken by “kings or robbers,” to quote the Buddha. If you have a brain wallet, you can flee from your home and start over half way across the world with all your crypto still readily available to you and only you.
Similarly you can send crypto anywhere in the world within minutes without having to worry about it being lost or stolen in transit.
You can't carry arbitrary amounts of gold around with you, but with crypto that's not a problem. You can even use a paper wallet for this purpose if you don't want to trust your memory with your life savings.
One advantage of crypto over precious metals stems from the fact that cryptocurrencies have the capability of adapting and evolving to respond to changing conditions. If a huge gold deposit were to be found today, the value of all gold would presumably plummet. If any kind of problem—see below for some examples—should arise for a cryptocurrency, there is always at least the theoretical possibility that the developers might find a way to address the new situation and preserve the value of a cryptocurrency.
Advantages of precious metals over crypto
On the flip side, if you lose your secret key, your crypto is lost forever. That's right: If your paper wallet is destroyed in the washing machine or you have a car accident and lose your memory, there is nothing anyone can do to recover your crypto. Of course, if you had both a brain wallet and a paper version of the same secret key or seed phrase, then either one of those events would not be catastrophic by itself.
One thing I don't see people discussing much is the possibility that governments or other nefarious entities might turn off or censor the Internet. I can hear you saying right now, “You don't say!” :D Yes, there are ways we individuals can fight oppressive government measures, but we need to be aware of the simple fact that it is a struggle, not a walk in the park. If you have a gold coin under your mattress, someone in London can't just push a button and make it disappear from your world. With crypto, unfortunately, that could be a very real possibility under certain political circumstances.
Quantum computers, on the other hand, are discussed more frequently as a potential danger to the technology on which cryptocurrencies rely. I won't deny the validity of this concern, but I do want to point out that anyone who has a quantum computer with the ability to break Bitcoin will also be able to break all our banking and shopping websites, so don't think you can hide from this specter by simply owning anything at your bank. Precious metals in your physical possession are going to be safe from that kind of attack. Anything else, I wouldn't be so sure.
Conclusion
This list of pros and cons is by no means exhaustive. I view this post as a contribution to or the starting point of a discussion, and so should you. As always, I encourage you to research yourself and think for yourself, particularly before you make life-altering decisions.
This writing in this post is original content by 