The economic turmoil the world is currently under is fascinating to watch. We have manipulated employment data that is being used to demonstrate the necessity of further Fed rate hikes, while many corporations are completing stock repurchase plan to further manipulate the markets. Which way is up?
Those who use the data to see how to further move the world forward through this economic turmoil have become so disconnected to the strife of their fellow man that their decision is causing the wealth disparity to expand.
And this is only the beginning……
As liquidity is further tightened and removed from the system, those who are privileged enough to still have liquidity will pursue some kind of return with their capital. Stock repurchasing can only be done by companies who have liquidity so this will cause a decline in many stocks while others become the new trend to flock into. The problem occurs when these corporation can no longer sustain their stock price and the rush occurs the other way.
We are already seeing those with large sums of capital jumping at any sign of economic improvement. The Bear Market Rally is just starting, and many are ready for it.
The problem occurs when all the money is spent, or at least the amount of capital allocated to stocks and people search for other assets to preserve wealth or increase their return on their investment.
Historically, Gold has been the preservation of wealth, as time and time again, people flock to gold when economic times become hard. This is somewhat true during the modern time, but things have changed.
If modern man acted like their forefathers, gold should be priced a lot higher then it is today. Many say that the price has been manipulated down so central banks and governments can purchase gold to prepare for the economic collapse, but what if this thinking is wrong? What if gold is not the safe haven?
As our world economy becomes more digital, why would anyone want to preserve their wealth in an illiquid asset that is difficult to move and sell? Why would this be an option if there was a better alternative?
One solution would be to make every gold bar an NFT and be tracked on the blockchain. This has been a possible solution to many business sectors but to use it as a preservation of wealth would be redundant as there is already a digital asset that preserves wealth.
Just choose any digital currency that is real and has not gone to zero during this downturn and you will see a viable option vs the archaic asset gold provides. Plus, if the economic downturn or hyperinflation occurs quickly, how can the whole world create a digital infrastructure overnight to help stop any economic destruction that occurs? There just wouldn’t be enough time.
If the economy swings rapidly either direction, toward economic depression or hyperinflation, the need for gold will diminish and another asset will rise as the store of value. This asset would need to be digital as our society is already established a new world that limits human interaction while stimulating digital interaction. It only makes sense money would move the same way.
This transfer from gold as the universal store of wealth to a digital asset that is the store of wealth would be a major change to the global economic structure. This change could happen rapidly and anyone who has not made the transfer to digital assets will be stuck in the same boat as gold. An old historical relic that sits on a shelf while the world rapidly changes around it.