Gold, the honest currency

In his book Currency Wars, the economic researcher Song Hongbing calls gold and silver the “divine protectors against price instability”.

When you think specifically about the gold standard, the first thing that comes to mind is a money creation system based on a physical counterpart and above all on guaranteed exchanges of currency for gold. But the idea underlying VeraOne is not to promote a return to the gold standard, which also came with its own weaknesses due to its centralized, authoritarian management by the State. Instead, we strive for a perspective of stability of prices (microeconomics) and markets (macroeconomics), and we have found that, as concerns this point and many others, the current monetary system has done worse than what previously existed.

Crisis-proof gold

Although it has endured for millennia all over the planet, the gold-based monetary system is now considered to be a relic of a barbaric economic past and it is now the debt-based money which reigns over the economy, a brilliant invention of American government and financial apparatuses which wanted to flood the world with the dollar, without the slightest limitation. The trouble is that crises, periods of market instability, decline and institutional default have since occurred, likewise without limitation!

Of course, we would like to tell ourselves that those troubles are uncorrelated with the disconnect between monetary policies and their precious metal counterparts, and that the evolution of markets, technologies and society as a whole would still have produced these unavoidable crises, but we might also wonder about the surprising stability of prices and economies at times when the world was experiencing substantial upheavals. Times when the gold standard was in effect and with which it can be tempting to make the comparison…

Wealth comes from stable monetary systems

To put it plainly, many economists consider that, although the golden age of capitalism (in the positive sense of the term, as creating wealth and underlying a degree of economic liberalism) corresponds to the period when the gold standard was the worldwide norm, and that it was the gold standard itself which enabled the rapid development of Western societies between the 17th and 20th centuries, thanks to a reasonable, stable monetary climate. This is, at the end of the day, the diametric opposite of a fiat currency which can be issued arbitrarily by a State (or, to be more precise, by a central bank, since those institutions are now the ones in possession of what was traditionally a sovereign power), in quantities and following rules which can vary depending on the circumstances… or the opportunities.

People today understand that debt-based money was designed with the aim of collecting a “hidden tax” from citizens, a clever and dishonest way of artificially controlling the economy to divert wealth from production to speculation. And the arguments put forward by detractors of the gold standard are equally clever (and equally dishonest) when they claim that the old system could only lead to deflation, namely due to the slower progression of the production of precious metals compared to the progression of the wealth being created. First, because a low percentage of this allegedly created wealth corresponds to the real economy (the rest of it comprising perpetually expanding debt). And second, because people’s growing distrust of fiat currencies strips them of their sol intrinsic value: trust. Such debt-based money, that can only exist on the basis of mutual trust, has now shown its limitations, more specifically since the 2008 crisis which exposed to the world the unbelievable deception perpetrated by the global finance industry over the course of decades. That embezzlement is still ongoing today, now with even more determination, greed and irresponsibility (with an attitude essentially saying, “After all, since we’ve been discovered, why bother taking precautions to try to conceal our dealings?”). The consequences thereof are becoming increasingly visible: money no longer has any value (with low or even negative rates), economies are receiving injections of money manufactured with no checks and balances, and there are attempts to make savers pay and to re-create that inflation which our elders spent their time combating.

A system whose day has indeed come and gone

Now that we are aware of the unbelievable escalation into which we have been forced by current monetary policy, does that mean we should wish for a return to that famous gold standard? The answer is undeniably no or, in any case, not in the form which was in effect up until the early 1970s. First, because that system was largely corrupted over time, to the point of eventually suffering from the same lapses of which debt-based money is now accused (price manipulation, possible confiscation of private citizens’ gold as occurred in the US in 1933, and so on). Second, making gold the official new monetary standard of reference would paradoxically deprive private individuals of the only weapon at their disposal to combat an official system which is corrupt or spinning out of control: if gold is highly prized in times of crisis, that is specifically because it offers an alternative to the excesses of debt-based money. Above all, gold must not be returned to the bosom of State governance but should instead remain that powerful rival which the human community is able to reappropriate on its own, in a fabulous movement of collective intelligence.

The strength of the current sick system lies in the fact that it developed with considerable speed, almost immediately plunging the whole world into debt at levels which are so high that it has become quite impossible to go back to the previous state of affairs. That is, unless the value of gold explodes completely, causes serious social and economic imbalances, alongside which the worst repercussions of the latest global conflicts would appear trivial. In short, replacing one excess with another is not a solution.

The solution might however be to conceive a new currency based on gold, but one which is completely independent of the States and financial institutions.

This would be a decentralized, intelligible open source exchange currency (to use a computing analogy) which would not be sensitive to price manipulations designed to serve the interests of speculation and above all which would remain peripheral to major political and financial negotiations on a planetary scale. In short, a strictly responsible currency which people could appropriate and exchange in a fairer day-to-day economy, backed by the tangible, historical and immutable counterpart that is gold. VeraOne’s stablecoin, and the entire logical universe of which it is already a part, is a first milestone in this far-reaching project.

And so, if gold were to be remonetized, it would not be a result of the will of the States, but rather of the desire of the world’s citizens to get some distance in respect of currencies in which they have less and less trust. Gold is the currency we lack. Who would have imagined such a thing in the late 1990s when it was considered a barbaric relic, good only for finishes on printed circuit boards? But that only shows a misunderstanding of its timeless resilience and its adaptability which naturally propelled it to the forefront during the 2008 crisis, the year when Bitcoin was created, and every year since. Gold has even gone digital since that time.

The next generations, accustomed as they are to innovative alternative payment methods, are more receptive to global paperless tools alongside modes of communication which let them get in touch with the world as easily as they do their next-door neighbours. And we expect them to content themselves with ageing, slow, costly monetary models which promote some of the very values they are fighting? No. For them, the irreversible movement surrounding cryptocurrencies, neobanks and new payment methods are the logical evolution of society today. Within this context, a return of gold will fail if it is unable to reach this new audience.

Gold is made to be that “open source” currency. But we still need to ensure that it is appropriated by its users, not by the financial industry. The blockchain is the perfect way for people to rediscover gold as a currency, whose use would be under their own control. Its storage obviously cannot be completely decentralized, but with ultra-secure facilities outside the banking system like the ones we offer, gold no longer needs to be stored in the vaults of a central bank in order to ensure it is in its rightful place. In fact, the opposite is true: to be sure that gold is in its rightful place, it absolutely should not be kept in central bank vaults.

VeraOne’s smart contract contains all the positive DNA of this project. For more than 10 years, VeraOne’s ecosystem has been proving just how resilient a non-bank model can be. Gold backing the VRO crypto-asset reaps the benefits of that experience and already adresses the issues, needs and evolutions of tomorrow’s society.

As Song Hongbing put it so succinctly, “Gold as a currency is a natural product of evolution which also evolves along with it, an authentic product of the market economy, an honest currency in which people can place their trust.”

VeraOne is that honest currency.