History knows examples when in the XX century the authorities of large countries confiscated gold from private owners. Now the world is on the verge of a new economic shock, so there is a chance that the situation will happen again. Digital money will help save capital

With the onset of the pandemic, economic performance declined worldwide and money flooded the global market. Since March, the balance of the largest central banks in the world has increased by $ 5 trillion and continues to grow. The US Federal Reserve, the ECB, the Bank of England, the Bank of Japan and the Reserve Bank of Australia are trying by any means to save the financial systems of their countries, and at the same time - the whole world. In the United States alone, more than $ 3.5 trillion was printed. Experts consider the monetary policy of the United States the main factor in financial instability. Authorities may lose control of inflation triggered by the economic crisis and central bank interventions. In such a situation, the solution for states could be the demonetization of gold, which would make it illegal to store it by private individuals.


The bubble will continue to inflate


While the printing presses in the US and Europe continue to operate, it is already clear that current market performance does not reflect reality well. With unemployment rates in the United States almost at the level of the Great Depression, the stock market continues to grow and breaks through the highest levels recorded earlier this year.

The following picture is now visible: stock markets behave in exactly the opposite direction to the economy, but are derivative of it. Small businesses reacted first, medium-sized companies such as Hertz filed for bankruptcy one after another. Entire industries have undergone a forced reduction in volumes. Thus, the number of drilling rigs for shale oil in the United States has halved.

In such a situation, the soap bubble created by the Central Banks with each new printed bill is about to burst. The study showed that with the change in macroeconomics, more and more people see gold as a safe asset against the current troubled currency system.


Prohibition of gold ownership. History knows examples

London Hedge Fund Manager Odey European Inc. Crispin Audey believes central banks may prohibit private ownership of gold if they lose control of inflation in a crisis with coronavirus.

Many gold owners fear that governments may confiscate their gold, pointing to similar situations in the 20th century. The German Empire, the Soviet Union and the United States at different times carried out the confiscation of gold from the population. The outcome of such interventions is difficult to predict. After the First World War in Germany, for example, paper stamps received in exchange for gold turned to dust.

Audey added that in the current situation, governments "will only do this if they feel the need to create a stable accounting unit for world trade." He compared the current crisis to the Great Depression of the 1930s, arguing that central banks would not be able to contain inflation when the economy began to recover.

In such circumstances, stablecoins secured by gold through institutional organizations can become the main tool for hedging risks during high inflation in the global economy.


Stablecoins secured by gold are in great demand

Today, there are already more than 20 cryptocurrencies, the developers of which claim that they are provided with physical gold. This can inspire some optimism for both crypto and classic investors looking for access to safe assets. For crypto-investors, the main factor in crypto-gold is the withdrawal of an unsupported, algorithmic cryptocurrency into a physically tangible substance. Moreover, crypto gold gives owners the right to exchange currency for physical gold. There is also fractional ownership of one ounce, which is impossible in the classic market. All this can make stablecoins secured by gold a new spending currency.

Moreover, if the government decides to take the gold from the population, most likely, such institutional organizations as Tether and PAX will not stop offering crypto gold. Although without a possible exchange for a physical component, stablecoins will be a popular hedging tool in case of high inflation in the global economy.


Classic currency will not give way as a world standard

Total global debt exceeds 300% of global GDP, or roughly equal to $ 250 trillion. Most of the debt is denominated in the currencies of leading economies - these are the dollar, euro, pound, yen and yuan. Any debt must not only be repaid, but also serviced. To fulfill their obligations, countries must buy currency. Against this background, $ 5 trillion, which will be printed by the world Central Banks, looks like a drop in the ocean. Therefore, you should not expect higher inflation in the economies of leading countries in the near future. Of course, someday the next cycle of currency weakening will begin. It is hard to believe that one of the most powerful economic collapses will end with a monthly fall in the stock market and a short-term drop in oil prices. You can talk about when the next wave of crisis will come, but the market is extremely unstable, and there are many pitfalls, able to trigger a fall. Professional players understand this and it is not surprising that we are seeing a sharp jump in interest in gold, cryptocurrencies and, in particular, stablecoins, as part of a portfolio of safe assets.