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Category: Campfire

Around the Campfire: City of Gold

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I was in Dubai – the city of gold as it has become known – recently, speaking about Glint to an audience of hundreds at a family office event. Dubai has long been one of the honeypots for the wealthy (and those who aspire to be wealthy) but it’s astonishing how it has become the new home for many high net worth individuals in the past year, many of them I suspect are Russian and Ukrainian exiles fleeing the mortar bombs.

The speaker immediately before me was a cryptocurrency representative, who put up a big ‘cryptocurrency versus gold’ slide at the start. He gave a talk about the virtues of cryptocurrencies versus the supposed ‘drawbacks’ of gold. Cryptocurrency is superior he said because “you can’t buy gold in small amounts”, “you can’t send gold to other people” and you certainly “can’t spend gold”.

This was several red rags to a bull. Up next, it was a perfect moment to say how fed up I am with these myths about gold. I pointed out that with Glint it is possible to buy gold in much smaller amounts than a gram, that Glint has made it possible to send gold to others (in the UK and the rest of the world, and soon in the US), and that I had bought my air fare in gold on my Glint card, was going to pay for my hotel in gold, and had paid for my taxi to the event in gold. I didn’t take a vote but it seemed to me that the audience would have voted gold 1, cryptocurrencies 0.

I have sympathy for cryptocurrencies. I understand and respect the reasons for their existence – gold shares the same scepticism about government-issued fiat currencies and the need for a form of money which is not constantly being devalued by inflation.

In the UK and the US, we can count ourselves fortunate; our inflation is ‘only’ about 9% or 10% a year. In Argentina, its 100% a year, in Lebanon about 122% a year. But over a year that 10% inflation slices a tenth from the purchasing power of your Dollars or Pounds Sterling. At 10% a year the buying power of £1,000 or $1,000 is reduced to £621 or $621 over five years. New Zealand arbitrarily started targeting an inflation rate of 2%/year in 1989; after that more flocked to that 2%. There’s nothing magical about 2%. Indeed, as it proves increasingly tricky to get the inflation rate back to 2%, there’s a growing movement by central bankers to set a new target, of 4%.

And that’s a pretty odd way of dealing with your money – you can’t get to a ‘target’ so give up and just raise the threshold. Welcome to the world of central banking. You can see why cryptocurrencies were invented – it’s just that gold does a better job.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Very best wishes,

Jason Cozens, Glint CEO