Why Bitcoin will not be made illegal like gold in the 1930s
The first, and most important, thing to consider with this is why gold was made illegal. You may think it was because the government wanted to ban an alternative to their new federal reserve notes, however, this isn't the case.
During the roaring 20s, America was importing and exporting a large number of goods. The creation of the federal reserve note in 1913, meant that the government could pay its suppliers or any country it does business with these new notes. This made it easier to do business because there was no work in shipping the physical gold for payment. As such, the gold stayed in America but the notes were still redeemable for gold upon request of the holder. As countries continued to increase business with America they began to see themselves holding an increasing number of these new notes. Once the great depression started to take effect, countries wanted security and as a result, they wanted to cash in their notes and request their equivalent in gold. The problem for America is that they printed more federal reserve notes than the amount of gold they held in their reserves. They had multiple days of bank shutdowns, to stop a run on the banks, and in 1933 they made the possession of gold illegal... Why did they do this?
They simply didn't have enough gold to settle swaps for their notes, however, these new laws also made the export of gold illegal. By doing this they also wouldn't have to meet their obligation of providing gold to those requesting it. Below you can see a spike in US gold reserves as a result of these new confiscation laws.
The reason they were able to do this so easily and effectively is that most gold was stored in the banks. All banks had to do was give depositors notes equivalent to the gold they had in the bank.
Since Bitcoin is almost, if not, impossible to seize and recover, it stands to reason that America is most likely not going to try to outlaw the possession of Bitcoin on the basis it can be used as a competing currency.
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Hope you all found this helpful!
Submitted April 21, 2021 at 06:43PM by Expensive-Analyst-65 https://ift.tt/3veGqDn
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