Pantera: Separation of Government Coins and Currency and Credit

Source: Pantera Capital Blockchain Letter; Translated by AIMan@Jinse Finance

Separation of Money and State

The earliest separation of currency and government was gold.

The princes discovered that they could mint their own coins. Soon after, they began to devalue their currency using inferior metals. The government then realized that paper money was even cheaper than metal. Paper money!!!

Initially, it was fully backed by gold and could be exchanged for silver; in the United States, it could also be exchanged for silver. For example, the old $10 bill could be fully exchanged for silver (the text at the bottom center).

Then they started printing more paper money than gold and silver. Too easy!!!

Since two-thirds of the Earth's land is covered by trees, this is unstoppable.

The pound was obviously backed by one pound/pure silver that could be exchanged for one pound in the past. Now it takes 315 pounds to exchange for one pound of pound (silver). 315 pieces of state-issued paper currency are needed to exchange for one pound of old currency.

The history of a one cent coin in the United States is a typical example:

For a long time, its weight has been 13 grams of copper.

The government is faced with two choices: one difficult, one easy. They chose the easy one!

They use nickel to debase the coin... then tin... then zinc... and then each metal becomes less and less...

Until now, it has become a sad ghost of the past - it weighs only 2 grams and contains only 2% copper.

The intrinsic value of copper has depreciated by 99.5%.

By the way, according to the U.S. Bureau of Labor Statistics (BLS) data, the latest Consumer Price Index (CPI) data point for the United States is 321.465.

1/321.465 – 1 = -99.7% depreciation

This is not surprising. What truly changes is the value of paper currency.

But that's not enough - the Treasury Department stated that due to the government printing too much paper money, it costs 3.69 cents in hard assets to produce each one-cent coin, so the one-cent coin will be discontinued and no longer minted in 2026.

The intrinsic value of a penny (in grams) over time is as follows: 13.5...10.9...4.7...3.1...2.7...2.5...now...poof!...it's gone. Zero.

Today, a penny is merely a memorial to the loss of value of hard currency (weightless).

JPMorgan: "Everything else is credit"

This communication is really great:

Mr. Untermyer (Committee Legal Advisor): "Is this the basis of bank credit?"

Mr. Morgan: "It is not always so. That is evidence of banking, but not of money itself. Money is gold, and nothing else."

Mr. Untermyer: "Don't you know that credit is currency?"

Mr. Morgan: "No, credit is not currency."

Mr. Untermyer: "What is currency?"

Mr. Morgan: "Gold is money. Everything else is credit."

• JPMorgan Chase testified before the House Banking and Currency Committee in Washington, D.C. from December 18 to 19, 1912.

This is really great. Only things that cannot be devalued/printed/inflated are currency. Everything else is just credit/rubbish.

The 21st-century version of this sentence is:

Gold and Bitcoin/cryptocurrency are money. Everything else is credit.

JP Morgan made another very insightful comment at the end of his testimony, which resonated with the current crisis of market confidence:

Mr. Untermyer: "Is character important in banking?"

Mr. Morgan: "It is everything. After all, currency is built on trust and character."

Iknow that saying this might sound a bit selfish for Bitcoin people, but...

Buy Bitcoin

When the market's confidence in institutions like the Federal Reserve and the paper currency they print is in crisis, it truly becomes the best place to store wealth.

Everything else is just credit—"supported" by unsustainable policies.