History is littered with gold.
Wars have been fought over it, countries have been consumed by it, lives have been transformed by it.
It’s the original precious metal due to the simple fact that it’s (somewhat) rare and looks pretty cool when you shine it all up. But the value of gold has always been about more than what it’s “worth.”
Not long after it was first discovered by the ancients – Google is telling me that happened around 3,000 BCE in Egypt, so let’s go with that – gold became synonymous with wealth and power. It’s what the royals used to decorate their throne rooms and whatever else they had to show off. Just having it around meant you were someone with status and influence.
Think about King Tut in Egypt. Nothing but gold.
It’s no surprise, then, that it eventually transitioned into one of the first forms of currency.
But today, even though we still have gold, we actually have something even more powerful. We have the U.S. dollar.
The USD is now what gold used to be. In fact, it’s even bigger because gold doesn’t back up most currencies anymore. The dollar is the world’s backstop.
Everything that people need to do in the world, whatever transactions they need to make, requires currency to do it. We’re not exchanging promissory notes anymore. We’re not exchanging gold coins. We’re exchanging currency.
Gold used to be the final determining factor of value, but that’s changed. Now it’s essentially paper money.
And that’s going to change too. Something else will replace it…
…The world of money could be completely different in five years. If you think about it, gold’s just a thing in the ground, right? It has its value because it’s pretty, but it also has its value because there’s theoretically a limited supply.
But plenty of things have a limited supply.
What if, at the largest oil field in Saudi Arabia, we suddenly find out that we can’t get down to the rest of that oil. All of the supply that Saudi Arabia is sitting on will actually never happen. The price of oil would shoot through the roof because there won’t be enough of it anymore.
And then there’s bitcoin.
As people mine more and more of it, by design there’s a limited amount available. And if you can also spend that bitcoin to buy a house or spend it to buy stuff on Amazon, and there’s a limited supply, eventually people might have more faith in a limited supply of bitcoins that they have even in the power of the U.S. government to back its own currency.
That would be a big change. Massive.
We’re probably going to live through some of the most monumental changes in currency ever, and it’s all because of scarcity.
It’s crazy that since gold was discovered, there are now so many different types of currencies. That’s why the currency market is massive, but is the currency market the largest market in the world?
Do you know why? Find out why in my latest post.