The Case For Gold As A Currency

In a turbulent world does gold represent a path to stability?

MetalStream
Sep 5 · 4 min read

Since ancient times gold has been used as a store of value. The first gold coins to be minted were in 6th century Lydia, in modern Turkey. It is indicative of gold’s endearing value that those first coins still trade today for thousands of dollars. The value of these Lydian coins represents both the current price of gold and the antiquity of the coins.

The value of gold has withstood the test of time and our economy would be wise to look into the past to evaluate how we may again use gold in the future. Bringing any longterm store of value to our currency systems would be better than the fiat currencies we suffer under today.

Image for post
Image for post

Modern detractors of gold as a currency can often be heard saying “just try to buy a cup of coffee with gold”. Yet this is exactly what happens in gold mining camps from the Amazon to Africa. In these mining communities, gold dust is regularly exchanged for basic goods and services as it has been for hundreds of years. Gold has continued to be a store of tradable value since early times and it will continue to be so into the future.

Although modern development means that it is indeed impossible to enter a Western shop and use gold to purchase a coffee, there are still places in the world where gold is bought and sold daily in local markets. In Cambodia, you will find someone to purchase your gold in any regional marketplace where gold traders can be found nestled between fruit and vegetable stalls. Many cultures around the world have not forgotten the value of gold and this is particularly palpable in places like Asia.

The US dollar, which is the world’s reserve currency was decoupled from gold when President Nixon cancelled the convertibility of the dollar into gold during 1971. Since that time the dollar has been adrift and the US economy has been characterized by the unrestrained printing of fiat dollars. Fiat currencies like the US dollar do not hold any intrinsic value and their perceived value is mandated through government mechanisms such as taxes.

The printing of fiat currency creates inflation as the newly created currency does not represent any real asset. Printing fiat currency effectively reduces the purchasing power of all the existing currency in circulation. In every way, inflation can be viewed as a hidden tax on the people by reducing the real purchasing power of their savings.

Many people believe that fiat currencies are a form of fraud perpetrated against the people. It allows a few private banks to print money out of thin air and lend it to people at face value. This model never allows the people to work their way out of debt and adds further insult to injury by demanding interest payments on the newly printed fiat currency. With US debt racing towards 27 trillion dollars, the question remains — who exactly is this debt owed to?

Image for post
Image for post

Is there a mechanism which would allow us to utilize gold’s intrinsic value while still maintaining the ease of transactions in our digital economy? The answer is to use gold as the basis for digital tokens. This is similar to the US dollar before it became a fiat currency where the paper notes were issued to represent gold bullion reserves. This US dollar system allowed easy transactions with paper currency but delivered stability as the paper value was tied to and redeemable for physical gold.

Today we have blockchain technology that creates an immutable record of ownership. MetalStream’s MSGLD security tokens are backed by and redeemable for gold but are digital tokens which can be globally exchanged. This structure marries gold’s intrinsic value with the liquidity and convenience of digital currency.

The acceptance of blockchain tokens as forms payment is growing around the world. We have seen this with the rise of cryptocurrencies such as Bitcoin and Ethereum. It is conceivable that in the future we could see gold-backed tokens such as MSGLD representing a stable form of easily transacted currency that does not suffer a loss of value through inflation. Digital gold-backed tokens are easy to use and importantly they maintain their value as one token will always be redeemable for one gram of gold.

There is a crisis looming in our fiat currency based economic systems. To avoid a major crash it is incumbent upon us to identify structures which allow us to store value but also continue to enjoy the benefits of digital currencies. There is something appealing about combining the ancient value of gold with the convenience of blockchain tokens.

Whatever the currency when planning for your financial future it is wise to remember the words of JP Morgan:

“Gold is money, everything else is credit.”


MetalStream is the issuer of the innovative gold-backed MSGLD token. Please visit our website for more information, and contact support@metalstream.io for enquires related to the purchase of tokens.

MetalStream

Written by

MetalStream Gold (MSGLD) tokens are gold-backed, ERC-1400 compliant security tokens employing a metal stream financing model.

MetalStream

Issuer of the innovative MSGLD security token, backed by and redeemable for bullion. Get the liquidity of a token, plus the safety of gold, at a 30% discount.

MetalStream

Written by

MetalStream Gold (MSGLD) tokens are gold-backed, ERC-1400 compliant security tokens employing a metal stream financing model.

MetalStream

Issuer of the innovative MSGLD security token, backed by and redeemable for bullion. Get the liquidity of a token, plus the safety of gold, at a 30% discount.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch

Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore

Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store