The Battle for the 'Soul of Money'

The dollar, gold, and bitcoin... The world's next reserve currency... 'This time is different?'... Why won't the government just ban bitcoin?... The battle for the 'soul of money'... 'The ultimate asymmetric bet'...

One of the most beautiful, iconic skyscrapers in New York City is the Chrysler Building...

You would probably recognize its image if it was put in front of you. It stands above most of the rest of the skyscrapers in Midtown Manhattan, its top showing off rounded Art Deco features and a shiny spire.

Completed in 1930, the building was the tallest in the world for a brief period before workers finished the Empire State Building 11 months later.

What most people don't realize or remember, though, is that the Chrysler Building is capped in aluminum. You don't see that in grand new buildings erected today.

Our founder Porter Stansberry told this story last Thursday in his "Capitalism in Crisis" presentation to make an important "big picture" point...

Aluminum was once the most valuable metal in the world...

It was worthy of being used to make a show, like adorning the tallest building in the world – and before that, capping the Washington Monument in our nation's capital.

And it was expensive. In the 19th century, aluminum was more expensive than gold. In 1880, it went for $12 a pound. But the price dropped dramatically after scientific discoveries about how to refine it better.

Today, it's likely that you have a roll of aluminum foil in your kitchen. About 450 square feet of it will cost you $11.99 at Costco.

Porter brought up this example to show "why it's dangerous to have your economy rooted in a single commodity, whether it's gold or oil or anything else." He said...

We know what happened [to aluminum]. We had an enormous increase in the amount of electricity we could produce and the price of making aluminum fell to the point where we now wrap food in it in our fridge...

If you had all your long-term contracts, if you had all your long-term pricing agreements, if you had a 30-year mortgage that was based on aluminum, imagine how bad that would've been for your bank.

Your bank would've paid you the most expensive thing in the world, and you would've paid it back in aluminum foil and savers would've been destroyed.

The point is – a functioning economy needs stable 'stores of value'...

Gold, not aluminum, has been that for the industrial age... The "value" of an ounce of gold hasn't changed in more than 2,000 years despite immense increases to productivity.

The price of an ounce of gold has roughly tracked the price of a fine men's suit, Porter said last week. Why? The scarcity of gold has been maintained...

Sure, we got lots better at digging gold out of the ground. Sure, we got lots better at finding it, but as we did, it became more and more scarce – and it became more and more scarce because of the increased productivity.

Today, you can make a similar argument to be made for bitcoin...

"The same exact thing is true with bitcoin," Porter said during his presentation (which you can watch for free right here if you haven't already).

Bitcoin is getting more scarce because of a computer code that is designed to match the gains and productivity in computing. As a result, a bitcoin, even though it's had a soaring price, actually represents a stable amount of computing power.

Let's not forget bitcoin also represents a reaction to government mismanaging monetary policy. It was born out of the depths of the financial crisis over a decade ago. It is a form of currency that could circumvent government intervention.

That idea is baked into its computer code – down to how bitcoin is actually created by "miners" (humans using computers)... the maximum number of bitcoin that can be created (21 million)... and the underlying blockchain technology that powers bitcoin.

And as the Fed and central banks around the world keep interest rates near zero and continue to create trillions more dollars in debt with a few computer keystrokes, more and more folks are starting to realize the potential that bitcoin and cryptocurrencies have for everyday people.

We're talking about world reserve currency status. Imagine a world where the dollar still exists, but its real value is pegged to a currency that won't be artificially inflated.

We've written before about betting on 'the things that don't change'...

In this case, the thing that hasn't changed is the need for currency and a stable store of value, but the most effective and widely accepted types of money have changed relative to that constant over time.

Look at the history of the world's "reserve currencies" since the 15th century. (Not coincidentally, we used this same time frame in last Wednesday's Digest when describing the repeated 80- to 90-year "saeculums" of history.)

Fred Marion, the lead researcher of our Crypto Capital newsletter, wrote on this topic back in the November 13 Digest...

The U.S. dollar is, of course, the world's reserve currency. Central banks around the world hold more than $7 trillion in reserves, and it serves as the basis for almost all international trade.

But nowhere is it set in stone that the dollar must play that role. If the past 570 years of history are any indication, the dollar's days as the global standard may be numbered...

Since the world stopped using ancient Roman currencies around 1450, every subsequent shake-up in the global economic order has been caused by excessive debt. And by any possible metric, our debt in the U.S. is unprecedented...

Are we to believe that the above pattern will never change again? Or that this time is different?

Today, the case for an alternative 'reserve currency' to the U.S. dollar is strong...

The country's collective debt has never been greater and the Federal Reserve's balance sheet has never grown at a greater scale than it has this year... Inflation concerns are real.

At the same time, an emotionless system of code designed specifically to limit inflation and avoid political or any other motivations is becoming more and more widely in demand.

The price of bitcoin has jumped 30% in just the last month to nearly $12,000 today.

"Hard assets" like gold and silver have also been hitting new highs, as many of our editors have expected.

Our Gold Stock Analyst editor John Doody, for example, says he thinks the price of gold will rise to more than $3,000 per ounce. And importantly, the gold companies he recommends stand to profit exponentially, as they make more money as the price of an ounce of gold ticks higher.

And the same goes for silver. We wrote about that most recently in the July 23 Digest. In that issue, Silver Stock Analyst editor Garrett Goggin said silver could reach a new high near $100 per ounce.

We've beaten the drum for owning assets like gold and silver as the Fed turned up the speed on its money-printer this spring... And that's been a good trade so far.

At the same time, a lot of investors (including ones in our office) have been debating whether gold or bitcoin is a better "store of value." But based on the price action of the most popular precious metals and bitcoin lately, there's room for both.

And if you're worried about bitcoin's 80% crash back from its 2017 highs, or that it's too late to buy your first bitcoin (or part of one) tomorrow, consider that this is a long-term bet... against all the forces manipulating our markets today.

Our Director of Research Austin Root told subscribers as much in his latest Portfolio Solutions products this week...

It's true that bitcoin's price has been extremely volatile in the short term. And that restricts its use as a store of value for those funds you'd need to access sooner rather than later.

But time and again, it has proven itself as an excellent store of value over the longer run.

(Alliance members and Portfolio Solutions subscribers can read the full issue here. We suggest that you do for Austin's insightful perspective.)

Many of our editors, like Porter and our colleague Dan Ferris, suggest owning at least some bitcoin in your portfolio, in addition to gold.

For a long time, Porter has thought the U.S. dollar would lose its place as the world's reserve currency...

... primarily because of our "bankrupt" government. He just thought it would happen a different way, via gold. Porter said in his latest presentation...

I believe the way that would happen is when another nation, most likely China, suddenly announced that they had pegged their currency to gold. That would create a much more attractive large national currency.

But my mistake, of course, was thinking that the solution to the problems was something that we had used to solve them in the past, and of course gold has long been the last bastion of sound money.

But instead, what's happening is that people have discovered bitcoin and they are moving towards it in place of gold.

Now, even if you are on board with these big ideas and you see the case for bitcoin in our world today and in the future, you probably still have a lot of questions...

Most notably, why won't the government just ban bitcoin?...

Or confiscate it, similar to gold in the past?

Our Crypto Capital editor Eric Wade has addressed this question before – most recently in our May 21 Digest mailbag. The topic is worth revisiting today, given what we've written about bitcoin and cryptocurrencies over the last week or so.

In short, Eric says the idea of government intervention is the "single largest existential threat to bitcoin," but one that raises a lot of other practical questions...

How far would the governments be willing to go to enforce the illegality of bitcoin? Would they pass laws? Would they conduct house-to-house searches? Would they scour all Internet traffic looking for signs of cryptocurrency usage?

But, as Eric argues, let's say governments crack down on cryptocurrencies anyway. What happens next? Well, prices would become extremely volatile in countries where that happened. However, bitcoin has a few things going for it that make him optimistic...

First, governments have had more than a decade to ban bitcoin. And yet, most haven't.

Second, a government can ban the ownership of bitcoin, but there's simply no way for them to shut down the network. That would require coordination with every government on the planet. Attempting to seize your bitcoin or force you to "turn it in" would take an army.

The simple move of making bitcoin illegal would certainly be enough to discourage a lot of people and companies from owning it... but not everyone. Banning bitcoin would simply push it into the shadows similar to the bootleggers running bottles of booze during Prohibition.

Third, the countries that didn't ban bitcoin would attract all of the industry's entrepreneurs, businesses, and tax revenue. They would also accumulate the vast majority of what could become the world's largest and most valuable asset.

If anything, China's stance toward bitcoin and cryptocurrency today seems to indicate the opposite of "banning" in a way. The Chinese see the value and want to control it...

As Fred wrote in that Digest back in November...

Three weeks ago, Chinese President Xi Jinping announced the country's intention to dominate the blockchain – the technology underlying bitcoin and other crypto assets. The country must "gain an edge in the... emerging field," he said. To that end, China plans to dramatically increase its investments and research in the sector.

A few days later, China even banned any online comments calling blockchain technology a scam.

That's right, the Chinese government has banned speaking against bitcoin's technology.

Plus, if bitcoin (and blockchain) does reach global adoption, a ban would stifle innovation in the U.S., or anywhere that doesn't accept it, and ultimately put that country at a competitive disadvantage.

The battle for the 'soul of money'...

Beyond the practical concerns, Eric and Fred have a philosophical argument for bitcoin's staying power, too...

We believe bitcoin is fighting for the soul of money. Just like people fought for centuries to separate church and state, there is now a battle to separate money and state. The impacts will be just as far-reaching and will impact humanity for generations to come.

Central banks have done a fabulous PR job convincing the world that inflation is "good" for society. In reality, the fiat banking system is corrupt. The burden of inflation falls squarely on the shoulders of the poorest and most vulnerable (the ones making minimum wage who don't get annual pay increases).

Inflation is perhaps the single biggest contributor to the growing wealth gap in the U.S. We've given the state free reign over the printing presses for too long. Bitcoin is simply a fairer and more equitable form of money.

Still, Eric and Fred aren't calling bitcoin a "surefire bet." Rather, they say...

It's a radical technological innovation and a hedge against the collapse of a creaking, rickety fiat system. It will either become a historical footnote in manias and crashes, or it will be the greatest evolution in money since the birth of paper money.

This is precisely why Porter calls bitcoin the "ultimate asymmetric bet." Eric, Fred and Porter aren't saying you go "all in" on bitcoin today, far from it. Don't put in any more money in bitcoin than you can afford to lose.

But the long-term upside you may enjoy from owning at least some bitcoin or cryptocurrency is so big that it dwarfs the risks, according to Porter.

On a related note, to cover this and all the common questions about bitcoin that folks have, Eric and Fred are preparing a special Q&A for Crypto Capital subscribers at 5 p.m. Eastern time this Friday.

They plan to cover everything you need to know about bitcoin and cryptocurrencies, including how to simply buy your first bitcoin.

If you're a recent subscriber to Crypto Capital, don't miss it. And if you're not convinced yet about bitcoin's and crypto's potential and want to hear more, be sure to check out Porter's presentation that debuted last Thursday.

Eric joins Porter about halfway through the broadcast, and they make a compelling case for bitcoin's place in the global economy. Click here to watch the video right now.

Another Tailwind for Crypto

More U.S. banks are holding cryptocurrencies. Crypto Capital editor Eric Wade breaks down what this means for bank customers and crypto investors.

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and follow us on Facebook, Instagram, and Twitter.

New 52-week highs (as of 8/5/20): Agnico Eagle Mines (AEM), Amazon (AMZN), Alibaba (BABA), BlackLine (BL), Sprott Physical Gold and Silver Trust (CEF), Cognex (CGNX), Emergent BioSolutions (EBS), Equinox Gold (EQX), Fidelity Select Medical Technology and Devices Portfolio (FSMEX), VanEck Vectors Gold Miners Fund (GDX), SPDR Gold Shares (GLD), iShares U.S. Home Construction Fund (ITB), KraneShares MSCI All China Health Care Index Fund (KURE), Maxar Technologies (MAXR), Midas Gold (MAX.TO), Match Group (MTCH), Osisko Mining (OBNNF), Pan American Silver (PAAS), Palo Alto Networks (PANW), Flutter Entertainment (PDYPY), Sprott Physical Gold Trust (PHYS), Polymetal International (POLY.L), Sprott Physical Silver Trust (PSLV), Rollins (ROL), ProShares Ultra Technology Fund (ROM), Sea Limited (SE), Sabina Gold & Silver (SGSVF), Global X Silver Miners Fund (SIL), iShares Silver Trust (SLV), Silvercorp Metals (SVM), Trulieve Cannabis (TCNNF), TFI International (TFII), Torex Gold Resources (TORXF), The Trade Desk (TTD), Victoria Gold (VGCX.TO/VITFF), Vanguard Inflation-Protected Securities Fund (VIPSX), Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP), and Zebra Technologies (ZBRA).

In today's mailbag, a question from a new investor... Do you have a question or comment? E-mail us at feedback@stansberryresearch.com.

Also, one housekeeping note... Our "virtual" offices will be closed on Fridays in August. We'll keep to our regular publishing schedule, but if you are looking to get in touch with a customer service agent by phone tomorrow, please note they will not be in the office.

However, our self-service options will still be available after hours and on Fridays. And you can also visit our Help Center to find answers to frequently asked questions or leave a message, and we'll get back to you after 9 a.m. Eastern time Monday.

"I am very new to this and a little skeptical about the whole thing. Can I get some insight as to what I need to do to get started. Just recently retired and don't have a lot of capital to work with." – Stephen S.

Corey McLaughlin comment: Stephen, we can't provide individual investment advice. But in general, a good place to start is our Education Center. You'll find essays covering a variety of topics for the beginner, intermediate, and advanced investor, including the fundamentals of investing and how to get started.

It also sounds like you might want to consider giving our Retirement Millionaire editor Dr. David "Doc" Eifrig's newsletter a try. Click here for more information. You can get six issues for just $29 today. Doc's service consistently ranks at the top of our annual "Report Cards" and provides comprehensive guidance on how to make the most of your retirement nest egg.

All the best,

Corey McLaughlin
Baltimore, Maryland
August 6, 2020