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The recent rise in Bitcoin prices, amidst a backdrop of money printing gone mad, should be a wake-up call to billions that mistrust of global Central bankers is going mainstream.  Sadly, it won’t be; as the vast majority has neither the means to protect themselves, or the will to explore the possibilities of a more complex future.  Clearly, if 12 years of PM outperformance and surging inflation didn’t spur the masses to action – notwithstanding this year’s epic raids; than certainly, new-fangled virtual currencies won’t do so either.  Irrespective, it’s undeniable that the fiat currency system is rapidly destroying itself; whilst both physical Precious Metals demand and the un-manipulated Bitcoin price are at record levels.  And thus, it’s time to ask some hard questions about what comes next; given the certainty that the ill-fated fiat currency regime will spectacularly fail – just as the previous 599 attempts, throughout 1,000 years of history.

Given my 24 years of financial market experience – including 15 of public writing – I have been as diligent a student of global economics as possible.  Not only have I watched the markets tick for tick, but done extensive research in not only my specific areas of focus – i.e., energy production, mining, and precious metals – but countless others as well.  I have also read volumes of history to gain context for current trends, and spent the past decade identifying the rapidly contracting list of “good, smart people” with both superior intellect and benign intentions.  I’m not a rocket scientist; but then again, I’m certainly no dummy; and I’ll match my macroeconomic track record with the best of them.  Thus, nothing makes me crazier than assumptions I don’t “get it” because PM prices are down this year; or better yet, I haven’t accepted virtual currencies without reservation.

Certainly, technology is advancing in leaps and bounds; as are government attempts to suppress those that oppose them.   And even more certainly, I am not a technology expert.  Better put, I keep up with modern technology solely to survive; as is the case with perhaps 99% of society.  However, when it comes to the topic of money, it’s difficult to argue I “don’t’ know what I’m talking about.”  And the same goes for David Schectman and Bill Holter; as cumulatively, we have been in the “money business” for seven decades.

As global money printing explodes – whilst PAPER PMs decline and Bitcoin rises – are we “missing” something?  Has the cumulative knowledge of thousands of years of human experience suddenly evaporated?  Is it possible that the age-old reason for owning Precious Metals – i.e., wealth preservation from currency debasement – has become obsolete?  And if so, can their place be taken by “virtual” currencies – in many aspects, also created out of thin air?

Last night, I had dinner with my good friend Mike Krieger of libertyblitzkrieg.com – in my view, an expert in the field of virtual currencies; as well as Megan Duffield of the Silver Circle Movie.  I could not have been happier, as not only are the three of us both intelligent and devoted to our fields, but represent the “youth movement” necessary to usher in better times.  Not that we have the power to individually do so, but few of my peers are younger than me; so hearing such forward-looking, impactful analysis from Mike, age 35, and Megan, 27, inspire me to continue educating myself – and others – for as long as it takes.

As you can imagine, much of the conversation related to Precious Metals and virtual currencies, particularly Bitcoin.  Clearly, virtual currency technology is a force to be reckoned with; although at this point, it is impossible to discern if Bitcoin will be a “winner” – as “Excite” and “Ask Jeeves” once were in the search engine space; or if time and tide will allow a new “Google” to emerge.  Or, for that matter, if virtual currencies will in fact have a prominent role in the future.

Interestingly, both Mike and I immediately brought up yesterday’s article by Martin Armstrong, who claimed Bitcoin would eventually die; likely due to government pressure, in light of this week’s hostile Senate hearings.  Moreover, Armstrong stated:

The precious metals are NOT going to be a hedge against the dollar, hyperinflation, or any of the other nonsense the gold promoters have spun to sell whatever they can like snake oil salesmen. The role of the metals will be as an alternative currency to ELECTRONIC when they terminate “printing” paper money.

Armstrong Economics, November 20, 2013

As you can imagine, I took great exception to this statement – given its historical inaccuracy.  However, it’s hard to argue with his notion that society is being taken “cashless” by a government intent on controlling our lives, and commandeering the means of payment.  One can simply look to the recent FATCA and FBAR regulations as proof positive of such intentions; let alone the anti-alternative currency actions taken by other governments, such as India.

While admitting Bitcoin itself may not survive – given the unpredictable, potentially volatile events surrounding a global monetary change, Mike pointed out that Bitcoin’s technology is what ultimately matters, as opposed to the company itself.  This is why he tells people to invest no more than 1% of their funds in it.  And I do emphasize invest, as at this point, Bitcoin remains highly speculative – as opposed to physical gold and silver, which Cartel or not, tapering or not, Bitcoin or not, aren’t going anywhere.

Bitcoin technology has by no means been perfected, but clearly represents a growing movement away from government-regulated payment systems.  Generally speaking, a rapidly growing group of people don’t want insolvent, thieving banks executing, monitoring, and taxing their transactions; and certainly don’t want currencies mass produced by governments that ultimately debase them into extinction.  Ignoring this movement could be financial suicide; but at the same time, believing it will replace gold and silver could be equally dangerous.

Cashless society or not, “cash” and “money” are two different things entirely.  That is, while governments can mandate the means of payment, they will always fail in their attempts to create it.  That is, due to the definition of money, no “fiat” monetary decree can last – as history vehemently tells us.  In order for something to serve as money, it must be fungible, scarce, and verifiable – while serving as both a medium of exchange and store of value.  Knowing this, it shouldn’t surprise anyone that only gold and silver have successfully occupied this role throughout history – as demonstrated in this short video.  All 599 previous attempts to replace them as money have failed; and given the current exponential growth in global debt, it is becoming increasingly clear that number 600 is right around the corner – or more accurately, numbers 600 through 781, given 182 fiat currencies currently circulate.

To a great extent, Western society is already cashless.  In America alone, just 27% of all point-of-sale purchases were made with cash last year, a percentage that is rapidly declining.  True, a substantial cash economy exists “off the books”; but generally speaking, at least 60% of all business is transacted with credit.  Five years from now – assuming the current system lasts that long – this figure could be closer to 70%; and ten years from now, who knows?  However, if Armstrong is correct – which for once, I agree with – cash transactions will ultimately be banned.  Just as the NSA spies on all emails and phone calls, the IRS will want to be privy to all financial transactions.  Remember, it was just a year ago when the government attempted to sneak “fine print” into the Obamacare bill mandating the reporting of all transactions above $600.  Ultimately, such draconian measures was before its time; but trust me, it’s coming.  Similarly, the House actively debated the confiscation of IRAs amidst the 2008 financial crisis; which I assure you, is a debate not yet ended.  In time, even if simply for practical purposes, cash will disappear.  And in its stead, what?  A “gold standard?” Virtual currencies?  Or a combination of both?

What Armstrong fails to address is the fact gold and silver have always been money; not to mention, that Bitcoin, while “convenient,” would take decades, if not centuries, to establish a track record.  When one reads of this year’s record physical gold demand – principally, from the soon-to-be undisputed Superpower China – it’s frankly, ludicrous to state otherwise.  Not to mention, insinuating silver prices have fallen to multi-year lows – entirely during U.S. trading hours – due to anything other than manipulation, when considering this year’s record U.S. Mint Silver Eagle sales.  Yes, the mint sold more silver Eagles in the first nine months of 2013 than all of 2011, when prices hit $50/oz. and a so-called “bubble” was forming.  And yet, we’re told silver is in a “bear market” – as worldwide money printing accelerates at its highest-ever level.

US Mint Silver Eagles

Last night, Mike thoughtfully expressed that the only way gold and silver would actually be used as money would be the “Mad Max” scenario of global social unrest.  I agree entirely, but I don’t own Precious Metals for that reason; aside from a bit of junk silver, of course.  Both of us agree that ultimately, the world’s next monetary system must be based on something of value, and even a “gold standard” per se may not work – given trust in government gold holdings would still be necessary.  I mean, if we haven’t been afforded a Fort Knox audit since the 1950s, why would we trust the next government to be truthful – particularly when they have countless “off balance sheet” methods to lease, swap, and otherwise encumber such assets?

More likely, the new system would be based on gold, but managed with “off the grid” technology like Bitcoin.  In other words, a so-called third party arbitrator of value.  I wouldn’t dream of trying to figure how it would work, as such dynamics involve countless unknown variables of varying technological complexity – not to mention, political agendas.  And honestly, I don’t expect such a Star Trek-like advancement until long after the current system implodes; after which, I anticipate many difficult years.  However, irrespective of the what, when, and how, the one thing I am sure of is gold and silver will maintain their purchasing power over time.

No matter how things evolve, 5,000 years of monetary history won’t suddenly be erased by a new form of fiat currency; which, by the way, is exactly what Bitcoin is.  To believe Bitcoin’s masters will never allow supply expansion is pure folly; in my view, no different than what was agreed in 1944’s Bretton Woods Conference.  Moreover, bigger, smarter computers will surely enable increased rates of production, at cheaper costs; yielding a rapid technological evolution involving more complex virtual currency algorithms and faster computers.  But in the end, it’s still fiat currency – until proven otherwise.

Frankly, I could care less if gold and silver again become the money of the realm; stores of value like $259 million Cezanne paintings; or, as Armstrong predicts, “alternatives” to new, “cashless” currencies.  However, what I do know is I will never sell my coins – barring emergency or barter, of course – until a currency exists I deem worthy of selling them for.  Could that one day be Bitcoin?  Perhaps, or another form of virtual currency.  As for today, Occam’s Razor tells me PM prices have been purposefully suppressed to levels well below their current worth; while simple math tells me the fiat Ponzi scheme must expand until it eventually implodes under its own weight.

To conclude, the past two years have been very trying for those in our camp – as it’s extremely frustrating being macro-economically correct but punished miserably for it.  Like it or not, we have been born into an inflection point in financial history; and thus, while volatility will surely become a way of life, the END GAME of gold and silver revaluation – to many multiples of their current purchasing power – is set in stone.