What Will You Use As Money If The Dollar Dies?

Authored by Jeffrey Tucker via The Epoch Times,

The U.S. dollar could someday go the way of all paper-currencies past and be consumed in a hyperinflationary fire. It seems unlikely but it is possible. In some ways, given the reckless policies of the past three years, we should be perhaps surprised that it hasn’t happened yet.

If the dollar loses its status as the international reserve currency – again, not likely anytime soon – that could provoke a massive repatriation of U.S. dollars which puts the end times in motion.

For many decades now, the United States has benefitted from the export of its dangerous policies but in a globe no longer dominated by the dollar, the costs would be quickly and painfully felt at home.

But these two scenarios are not the only beckoning threats.

What if under intensified digital surveillance and a Central Bank Digital Currency (CBDC), your ability to spend your own money – whether to get food, pay the rent, or flee the country—comes to be severely circumscribed? What will you do then?

This is worth thinking about right now. The critical question is: are there alternatives available out there that can perform a monetary function domestically that are untied from the dollar itself?

The most obvious example is precious metals, gold and silver in particular.

The other day, a nice person gave me a roll of old silver dimes. They are so wonderful, a great reminder of a time when money was independent of state control. The dime in those days was worth its value due not to the government stamp but to its actual value in specie. Today we cannot even imagine such a thing.

Gradually over many decades, the foundation of the dollar was removed, leaving nothing but paper and a memory of what it once did. Many people at the time predicted complete collapse but they underestimated the power of the price system and an entrenched habit. Once a money gets going, it benefits from the network effect and retains its purchasing power. The dollar has been a powerful currency even without specie backing.

Even now in the event of a widespread failure of money, silver has marketability. It would likely be accepted by many, perhaps not the utilities or the airlines but surely farmers’ markets and other small vendors. Obtaining a few bags of silver dimes does indeed seem like a very good idea these days.

Gold is also a great alternative but its high value makes transacting in it rather awkward. It’s still the best safe haven in the world, which is why central banks still hoard it.

If all else fails, gold will always be there.

And this brings to mind an interesting product I encountered at Porcfest last week. It’s called Goldback.

It’s a fascinating and innovative thing from a private company founded in Utah in 2019. It is made of gold itself and laminated for durability. It comes in five denominations: 1 (which is 1/1,000th troy ounce of gold), 5 (which is 1/200th troy ounce of gold), 10 (which is 1/100th troy ounce of gold), 25 (which is 1/40th troy ounce of gold), and 50 (which is 1/20th troy ounce of gold.

1–50 Utah Goldback Aurum 24kt gold foil notes 5-piece set. (Public Domain)

Yes, they sell at a premium. And yes you can use them. They circulate in four states at least. At the event I was at, most everyone took them. Are they legal? The company has been very scrupulous in not calling them money, not claiming legal tender, and not using any dollar denominations at all. There is absolutely nothing illegal about flattening and laminating gold and putting a number on it. That’s just a hobby, so nothing about this risks any legal issues.

At the same time, I had to laugh at the alarm when I pulled one out at the bank the other day. I simply asked if they had ever seen one. It was passed from hand to hand and then to a manager who marched over to me with great alarm.

“That is not money,” she said firmly and accusingly. I said I know that and explained that I just thought it was interesting. I asked if she wanted one. No, she said, and told everyone else not to take them either.

That was a lot of high dudgeon going on for a product that they themselves said is not money!

In any case, the value of this item has been rising since the day it was issued.

(Goldback.com)

It’s not completely crazy to think that this could be money at some point in the future. In a pinch, it might just work.

To be sure, it is not money for now. Not in an official sense. It functions more like script. Script is more like a coupon, a stand-in for money with limited uses. The old factory towns used to issue these in lieu of wages and workers could spend them at the stores owned by the issuer. They were an early version of Amazon points or SkyMiles in that sense.

These are not money. What is money? In the broadest sense, it is the good you acquire not to consume but to trade because you know that others accept. Economists generally add another proviso: it must be generally accepted. What is considered generally, however, is up for dispute.

In most prisons, something emerges as money so that people don’t constantly have to barter. It could be cigarettes, canned fish, soup packets, salt, or whatever. In some cities in the United States, things like detergents have taken on money properties for drug dealers who find it hard to launder cash. Indeed, many things can work as money, even items you least suspect. It could be candy bars or oil cans. The market finds a way regardless.

Goldback is interesting because one can easily imagine that under some conditions of monetary collapse, it could emerge as money just through informal trading.

And that is precisely the source of the demand for these items, which are available on eBay for about $5 each. At Porcfest, they were selling for $4 each.

You might be thinking: what about Bitcoin and crypto? In the mid 2010s, Bitcoin was the currency of choice for Porcfest. Everyone was using it and accepting it. But something went wrong. Because the currency would not scale, using it became slow and expensive. That’s when the new cryptos and Bitcoin forks came along, most of which are far faster in settlement and cheaper. At the same time, many lack the network that Bitcoin developed since 2010.

It’s one of the tragedies of our age that Bitcoin was throttled early on in its scaling. Adoption came to a screeching halt sometime around 2016. Now it seems more like a security held by a small group of early adopters. It is not a democratically available money as was originally intended.

Meanwhile, in the midst of this storm of crypto innovation, many other products for digital money use came into existence. Companies like Venmo, PayPal, Zelle, and so on, not to mention card readers for smartphones, saw the opportunity and created a full trust-based system for payments that harmed the market for crypto. And now we have central banks in on the act, making their own digital currencies and hoping that people will not see the difference between an open-source project and a proprietary product created by governments.

The modern history of Bitcoin is of a tragically missed opportunity. One does wonder how different history would have been had Bitcoin scaled when it was just getting going and was most needed. The people who tried to save it deserve credit. But today, the market is massively mired in regulations and restrictions, all designed to thwart the development of a private money.

All that aside, here we are today worrying about the future of money under a Central Bank Digital Currency and growing efforts by banks and governments to deplatform people based on their politics. It can happen to anyone, which is an alarming realization.

It makes sense that many people are starting to prepare for the worst.