Glint co-founder Ben Davies describes how the combination of gold and technology at a time of depreciating paper money represents the phenomenon of the ‘Monetary Singularity’
Seven years ago, I gave a speech in Sydney Australia in which I spoke about a concept I termed the ‘Monetary Singularity’: A unique event where technology and gold would merge. Technology would enable the transactional use of gold as money in the world because gold could, by free market forces, become the stabiliser to the global economy. This phenomenon would give us gold as ‘Transcendent Money’.
Transcendent because at the time it was a money system beyond our level of current belief and a money that transcended the corruptible money of a fiat currency system. A system by decree of the state.
Fast-forward to June 2018 and I was about to speak on a stage at the Asia Pacific Precious Metals Conference, in Singapore, about transformative changes in the precious metals and payments sector. I was going to give a synopsis of that same speech. I’d remastered the slides, updated my notes and was good to go.
But right then and there it dawned on me that at Glint, we had achieved the first phase of creating gold as money in the electronic payment system. We had been live since February 2018, with tens of thousands already on the platform spending and saving in gold everyday. Instead of talking about the theory why not show the audience the reality?
So instead of speaking to my notes I said:
“I was recently reminded that former US President, Lyndon B Johnson famously told the acclaimed depression economist J K Galbraith: ‘Did you ever think, Ken, that talking about economics is like pissing down your leg? It seems hot to you, but it never does to anyone else’.” With that in mind, I’m going to save you the economic theory and show you the reality.”
And then showed I them this video:
Glint has introduced gold into the global payments system and wherever the Mastercard sign is you can spend physical gold at the point-of-sale.
Why does this matter?
Well, to explain the significance of this it is worth explaining Glint via the concept the singularity. To start with, let me take you on a brief history of time (fortunately I still have the slides)…
What is a Singularity?…
In astrophysics, black holes are stars that have collapsed into one very small point. This small point is called a singularity. They are essentially impossibly small and impossibly dense at the same time.
The Big Bang explosion is considered the mother of all singularities, when a tiny dot ballooned to 200x the size of the sun and the ensuing blast spewed out material into the universe at 36 million kmph, apparently. Eventually, from this singular event, the dense materials of the universe were formed, of which gold was one.
(So gold actually began life from a singularity or what constitutes a rupture in the fabric of space and time!)
A singularity in maths is denoted as y= 1/x. This means that as X hits zero, the Y graph continues to infinity. However, it can never reach infinity because there is no number for infinity. Instead the Y value rises exponentially, multiplying by its previous value. It accelerates at everfaster rates of growth.
And all singularities if represented as a mathematical equation and graph would look like a parabola (an arc), exhibiting the exponential of the exponential.
A ‘Technological Singularity’ is the latest adoption of the term by the futurist Ray Kurzweil who denoted that, thanks to the exponential rise of Artificial Intelligence, humans and machines would become one and there would be no distinction.
Kurzweil in his book The Singularity is Near: When Humans Transcend Biology, explains that, like all singularities, the speed of technological change increases at the exponential of the exponential growth itself.
For example, because of the acceleration of the exponential, we won’t experience ‘100 years’ of progress in the 21stcentury but more like 20,000 years of progress (at today’s rate).
Also, the exponential trend is seductive, starting out slowly and virtually unnoticeably, but the beyond the turning point known as the ‘knee of the curve’ it turns explosive and profoundly transformative.
Man has always underestimated the power of future developments because we base them on our linear view of history, rather than an exponential view.
We all too often look at too short a data series which shows only the linear and masks the exponential trend – meaning our view is fore-shortened.
So, what does a technological singularity have to do with our monetary system?
Clearly this technological exponential has created improvement in productivity and progressive purchasing power:
The cost per unit level as well as the cost per unit size has fallen in an exponential way. Kurzweil himself credits real GDP growth with the technology productivity boon – part function of globalisation and export of cheap labour wages. But I believe excessive credit expansion, via the printing of money, has facilitated an illusion of growth. This means GDP has risen only nominally and has moved inversely to the drop in the value of the global numeraire: the dollar. Simply: GDP growth is an illusion because our money is worth less.
Furthermore, we are at the saturation point of credit in our financial system, whereby we are witnessing a negative feedback loop and not the positive one that comes with the law of accelerating returns.
This is termed the law of diminishing return, an exponential demise in the benefit of debt.
In the past 40 years since we moved onto a global paper money system (the dollar coming off the gold standard in 1971), we have witnessed the diminishing productivity of debt; for every given amount of debt creation the output or GDP of an economy rises at a proportionally slower rate. So, we have to issue more and more debt to maintain the status quo. This is not something that can continue infinitely without hitting some singular moment in time. This is leading us directly to a financial crisis.
Because of how much governments have spent – especially since the last financial crisis which they have tried to cure by printing money – the state has systematically enabled and encouraged the diminishing return of the worth of a day’s labour. It has become politically expedient to spend recklessly. Via ever growing amounts of debased ‘pseudo-capital’, political parties and individuals have gained re-election.
This pseudo-capital has manifested itself in the collapse of the value of money against gold on a logarithmic scale: i.e. at the exponential rate of the exponential. Individuals have experienced an ‘economic amnesia’ because remember the rate of the exponential in the knee of the curve is almost imperceptible – loss of purchasing power or inflation just creeps up on one over time until it is seen as the norm.
People have forgotten the rudiments of monetary supply and demand: Too much money creates a rise in the price of a stable supply of goods and services. They forget this is also concomitant with a loss in the value of their day’s earnings.
It’s pretty clear that this logarithmic scale – the exponential of the exponential – exhibits the collapse in the value of fiat money. The chart below shows how the dollar has fallen against gold.
Put another way, and remembering our mathematical singularity, as X approaches zero from right to left, 1/x, or ‘Y’ approaches infinity. So, as this slide below shows, as fiat money collapses, gold rises infinitely; in otherwords the purchasing power rises for gold relative to paper money.
The collapse in money due to too much credit has benefited the wealthy who have the ability to leverage and diversify their assets out of cash (i.e.: buying houses and stocks) whilst wage earners and savers have lost the value of the money they have been saving.
The Gini Coefficient, which measures an economy’s distribution of wealth, has moved nearer 1.0, the measure of perfect inequality of wealth. This is a failing not of capitalism but of government and a lurch to crony capitalism because money is unfettered.
In 2011 at Hinde Capital we wrote, “such malevolent forces will add to the heavy cocktail of social disquiet with the banks,” just as Occupy Wall Street protestors begin to realise that their ire should have been directed at the state sanctioned corruption of money.
We feared the rise of financial and personal oppression these past 5 years, as people were trapped with money that was worth less and less, but today I have hope for a better solution; a free market solution, and mercifully one that has begun already…
Glint: The Monetary Singularity
The current monetary system will suddenly reach a point where it needs to reinvent itself because its numeraire ceases to be fit for purpose. It will need to find new, honest currency that has value. From this a new money will be (re)born.
We will witness what I term a Monetary Singularity – a unique event. This is the point where technology and gold merge. Technology will enable the transactional use of gold as money in the world. To date, technological evolution by the paradigm known as the world wide web has begun to help create awareness of the diminishing value of paper money and the validity of alternatives.
The growth rate of this awareness will become exponential and equal and opposite to the exponential demise of the fiat currency system. The more awareness grows the faster the discarding of paper money occurs.
We consider this a positive feedback loop because this takes us nearer to the day we can begin a sound monetary system dictated by the fundamentals of supply and demand of money, not those of the artificial supply set by government, which destabilises and puts people’s savings perennially on a ‘slope’ of diminishing value.
The inverse function of this devaluation of paper money is the commensurate rise in the gold price, as we have depicted. This process of singularity, as one form of money withers another blooms, will seem almost imperceptible, but when we hit the “knee of the curve” in monetary failure and gold succession, the switch will seem immediate.
We believe the development of a singularity in technological terms is far more fascinating and mindboggling than the narrative for a monetary singularity. But even the technological singularity will remain hampered because it will be hard to measure it with the current amorphous and corruptible money system.
What is the true value of a piece of nanotechnology or IT software? How can we value it and plan production safely when we do not know the true worth of the unit of account that measures it – i.e. the worth of the numeraire.
Money is society’s measure of value and we know of no other matter which fits the prism for facilitating an exchange of goods, better than gold.
Gold was crucial in our history because it eradicated the age-old problem of a barter system dependent on a coincidence of wants. It can now free us from a system that has corrupted the value of its fiduciary media (paper) by continuous and exponential supply.
It is our intention at Glint to continue to pursue the availability of gold as money for everyone, independent from gold defined by a government standard, a concept which is no different to fiat paper money.
By combining gold with technology we can all benefit from the Monetary Singularity. Without Glint this event could still occur but gold would not necessarily be owned by the people – it could stay in the hands of the few while the majority suffered the loss of their paper savings. We hope that in Glint we have a tool that brings sound money back to the financial system and gives individuals financial fortitude and equal opportunity to prosperity.
Ben Davies is Co-founder and COO of Glint. Ben has 20 years’ experience in international financial markets, previously as head of trading at RBS Greenwich, before founding Hinde Capital, an alternative fund management company in equity and precious metals.