I often speak about it myself and to those who are in the space about the benefits of investing in something that cannot be easily debased. Precious metals and, of course, Bitcoin are the obvious two that come to mind, and while Bitcoin has absolute scarcity, precious metals have a relative scarcity as new supply is pulled out of the ground each year.
We know the cap on Bitcoin is 21 million, we don’t know what the verifiable cap on gold or silver is, and therefore you’re always subject to some dilution each year.
Saving yourself by saving for yourself
Saving in one or both of these assets in the current economic environment looks to be the smart move as everyone is looking to get onto the defence instead of being aggressive and investing in more risk-on assets.
Yes, we can debate the risk of Bitcoin, but the idea of investing in any of these assets is about wealth protection and growth as fiat is misused. So if we’re sucking purchasing power out of fiat and into these asset classes, we effectively reduce the ability of governments to grow as their money losses its effective buying power.
Once it reaches a point where it seriously starts to affect governments takings, they may think about trying to attack it first. The best option would naturally to get on board and purchase Bitcoin and gold, but fiat systems have been notorious for trying to confiscate the good money and leave us with the bad.
If governments start to feel threatened by precious metals and Bitcoin, what could they do to us? It’s a question I’ve heard a lot lately.
They could declare them both illegal for commercial use and, in the case of gold, could either confiscate it with compensation at a pegged rate or without compensation depending on how shit your government is or how badly they need the good money.
Gold has had a history of confiscation, and while not all forms were confiscated, only bullion, where jewellery and collectable remained, it could be taken further if needed.
Bitcoin is unconfiscatable; as soon as it’s in a wallet where you own the keys, you cannot have your Bitcoin taken from you. Governments can naturally block your accounts with exchanges, but that’s about it.
If it gets to a point like this in your country, you’d either need to get out physically or trust someone outside your country with your keys and get them to bring you somewhere else.
As for gold, you sure could leave a country with a lot of jewellery and coins, but it would hardly be the most practical move as well as putting yourself at risk of being robbed.
Liquidity and acceptance
If regulations are tightened on these assets, it won’t be as liquid to sell; you won’t have many open markets and exchanges and stores that accept them. What’s the use of having $1 million worth of gold or Bitcoin if you cannot get any food or accommodation? It is rendered effectively useless, so while you’re wealth in buying power terms, you cannot buy anything due to governments enforcing regulation on a local or national level.
In cases like these, you may need to exchange your Bitcoin or gold for a foreign currency first, say US Dollars and then sell that for your local currency before you can buy anything.
So there are ways and means around it, but it doesn’t mean it’s going to be smooth sailing for you.
Regulation & governments
We don’t know how far governments are willing to go to retain their power and what regulations they’ll put into play. We’ve seen china try to ban bitcoin and block off the Western internet, we’ve seen India try to ban Bitcoin, we’ve seen Egypt try to stop internet connections in their country, governments are not above extreme measures.
I personally don’t trust governments, they’re made up of people, and I don’t trust people either. While Bitcoin does give us an escape hatch for our money, it doesn’t mean it’s an escape hatch from your government.
Having a second passport, having cash to leave a place that becomes growingly desperate to force you into their currency may become very important in the coming years. I don’t put it past any country, and it’s something I hope does not happen, but it’s something I am preparing for in any case.