_ Yuri C. Kofner, Economist, MIWI Institute. Munich, May 8, 2024.
Problems with the current Fiat-Euro
Walter Eucken emphasized monetary stability as the most important constitutive principle of the German competitive order.[1] However, the current fiat and minimum reserve currency system within the framework of the supranational Euro is one of the main reasons for inflation, the progressive impoverishment of the middle class, and the anti-social redistribution of wealth from bottom to top (Cantillon effect).
Since its introduction in 2022, the Euro has lost a third of its purchasing power and is now only worth a quarter of the D-Mark introduced in 1948.[2] Due to the negative real interest rate, German savers have lost almost 675 billion Euros since 2019, which corresponds to a loss of wealth of over 8,000 Euros per average household.[3] And since 2019, German real wages have shrunk by 5.1 percent, wiping out a decade’s worth of real wage increases.[4]
Advantages of Gold and Cryptocurrencies
In contrast, gold protects against inflation, supports wealth accumulation, and has repeatedly served as a guarantee for monetary stability within the framework of the gold standard. Since 2002, the value of one gram of gold has increased sevenfold from 10 to over 70 Euros and has increased 63-fold since 1948. The price of gold has doubled since 2019 alone.[5]
At the same time, digital cryptocurrencies offer decentralized, fast, and cheap transaction possibilities as well as increased security and anonymity. Tokenization allows assets to be traded more efficiently, increasing liquidity and giving investors access to previously hard-to-reach asset classes. As an improvement over cryptocurrencies, stablecoins offer price stability and risk reduction in volatile markets.[6]
Gold-based Crypto-Token as a National Parallel Currency to the Euro
As is well known, the Alternative for Germany (AfD) wants to leave the EU single currency in favor of a return to sovereign monetary policy.[7] Even in the event of government responsibility at the federal level, it will take time to politically enforce and organize the return to the D-Mark. Until then, it might be easier to introduce a parallel national currency in Germany that combines the best of both worlds – the stability and appreciation of gold and the efficiency of crypto tokens. This would protect citizens and businesses from inflation, offer them a new opportunity to build wealth, and restore confidence in the economic system.
Feasibility and Advantages of a National Gold-Based Crypto Token
For this purpose, the Deutsche Bundesbank can issue a national gold-based crypto token, which is secured as a stablecoin by the federal gold reserve. To protect the anonymity of citizens from illegitimate state control, this “crypto-mark” must be issued on the basis of blockchain technologies. All state institutions will be obliged to accept the gold-based crypto token as a means of payment. Private companies can voluntarily participate within the framework of a “gold pact”.
The introduction of a German crypto token based on gold would be feasible and advantageous for the following reasons:
With 3,353 tons of gold worth currently 234 billion Euros (over 5 percent of German GDP), the Deutsche Bundesbank has the second largest gold reserves in the world after the United States (8,133 tons).[8] In addition, German private households own more than 9,000 tons of gold assets.[9]
A consolidation of the federal budget, especially in the areas of asylum, energy transition, and climate, would provide sufficient funds for a further expansion of the national gold reserve. The AfD parliamentary group’s amendments to the 2024 budget plan foresee savings of over 106 billion Euros.[10]
Although there is currently no country with a gold standard – Switzerland was the last country to abandon it in 1973 after the end of the Bretton Woods gold conversion system – there are countries that have experience with the introduction of more stable parallel currencies, e.g. in South America. As recently as 2019, former Bundesbank economist and economic policy spokesman for the right-wing Lega, Claudio Borghi, proposed the introduction of the Mini-BOT (Buoni Ordinari del Tesoro) in Italy as a de facto parallel currency to the Euro.[11]
In Texas, a bill to introduce a gold- and silver-backed cryptocurrency at the state level was passed by the House of Representatives committee in May 2023 and is currently up for further discussion (TX HB4903).[12] At the same time, the privately issued Goldback is being marketed in five U.S. states and accepted as legal tender in Utah (Utah Legal Tender Act). Currently, 24.3 million Goldbacks worth 100 million Euros are in circulation.[13]
Cryptocurrencies are already accepted as a means of payment by many companies in Germany.[14] In addition to several thousand small businesses and operations, Lieferando, Expedia, and individual branches of Volksbank Raiffeisenbank are among the largest customers.[15]
Art. 128 of the Treaty on the Functioning of the European Union (TFEU) stipulates that the Euro is the only “legal tender” in the Union. However, the TFEU does not know a legal definition of “legal tender”. According to the Bundesbank homepage, legal tender is “the means of payment that no one can refuse to fulfill a money claim without suffering legal disadvantages”. This criterion would not apply to crypto tokens that can only be used for repayment of liabilities to the public hand.[16]
Interestingly, a written request by the AfD parliamentary group in the Bavarian state parliament revealed that the Free State could issue its own crypto token, which would have to be accepted by state carriers. And even if the intention behind the Bavarian eco-token was more than dubious, the state-led project of its introduction shows the legal and administrative feasibility of such a concept at least at the state level.[17]
Empirical studies by the American Institute for Economic Research[18] and the Institute for Economic Policy at the University of Leipzig[19] suggest that the introduction of a gold-backed crypto token would have a positive effect on lowering prices, growing real GDP per capita, and business confidence in Germany.
Sources
[1] Issing O. (2000). Walter Eucken: vom Primat der Währungspolitik. Deutsche Bundesbank. URL: https://www.ecb.europa.eu/press/key/date/2000/html/sp000317_2.de.html
[2] Deutsche Bundesbank (2024). Kaufkraftäquivalente historischer Beträge in deutschen Währungen. URL: https://www.bundesbank.de/resource/blob/615162/94b87ff6d25eceb84c9cfb801162b334/mL/kaufkraftaequivalente-historischer-betraege-in-deutschen-waehrungen-data.pdf
[3] Wertverlust des verzinsten Geldvermögens privater Haushalte für die Jahre 2020 bis 2023. Berechnungen von DZ Research.
[4] Destatis (2024). Entwicklung der Reallöhne, der Nominallöhne und Verbraucherpreise. URL: https://www.destatis.de/DE/Themen/Arbeit/Verdienste/_Grafik/_Interaktiv/real-nominallohnindex.html?nn=206840
[5] ADEOS MEDIA GmbH (2024). Goldpreis. URL: https://www.gold.de/kurse/goldpreis/
[6] ifo Institut (2019). ifo Schnelldienst 17/2019: Haben Bitcoin und Libra eine Zukunft? URL: https://www.ifo.de/publikationen/2019/zeitschrift-einzelheft/ifo-schnelldienst-172019-haben-bitcoin-und-libra-eine
[7] AfD (2016). AfD-Grundsatzprogramm. URL: https://www.afd.de/grundsatzprogramm/
[8] World Gold Council. (2023). Länder mit den größten Goldreserven (in Tonnen; Stand: Juni 2023). URL: https://de.statista.com/statistik/daten/studie/156673/umfrage/laender-mit-den-groessten-goldreserven/
[9] ReiseBank AG, Manager Magazin. (2024). Gesamter Goldbesitz der privaten Haushalte in Deutschland von 2010 bis 2024 (in Tonnen). URL: https://de.statista.com/statistik/daten/studie/1168551/umfrage/goldbesitz-der-privaten-haushalte-in-deutschland/
[10] Boehringer P. (2024). Einzig die AfD-Fraktion legt einen verfassungskonformen Alternativhaushalt vor. AfD-Fraktion im Deutschen Bundestag. URL: https://afdbundestag.de/peter-boehringer-einzig-die-afd-fraktion-legt-einen-verfassungskonformen-alternativhaushalt-vor/
[11] Meyer D. (2019). Minibots: Ein Liro als Parallelwährung für Italien? Helmut-Schmidt-Universität. URL: https://www.hsu-hh.de/ordnung/wp-content/uploads/sites/549/2019/02/EWUA_Italien-Liro_ZgesK_0319.pdf
[12] Maharrey M. (2023). Texas Committee Passes Bill to Create 100% Reserve Gold and Silver-Backed Transactional Currencies. SchiffGold LLC. URL: https://schiffgold.com/key-gold-news/texas-committee-passes-bill-to-create-100-reserve-gold-and-silver-backed-transactional-currencies/
[13] Goldback Inc. (2024). Goldbacks Produced. URL: https://www.goldback.com/
[14] Orlova A. (2024). Darf ich als Unternehmerin Deutschland Kryptowährung als Zahlungsmittel akzeptieren? Anwalt.de. Services GmbH. URL: https://www.anwalt.de/rechtstipps/darf-ich-als-unternehmerin-deutschland-kryptowaehrung-als-zahlungsmittel-akzeptieren-224246.html
[15] Ohl L. (2024). Mit Bitcoin einkaufen: Diese Läden akzeptieren die Kryptowährung. Chip. URL: https://praxistipps.chip.de/mit-bitcoin-einkaufen-diese-laeden-akzeptieren-die-kryptowaehrung_102476
[16] Dezernat Zukunft (2019). Mini-BOTs in Italien – Hintergrundbriefing. URL: https://www.dezernatzukunft.org/en/mini-bots-in-italien-hintergrundbriefing/
[17] Köhler F. (2024). Großer Sieg für die AfD! – Staatsregierung gibt Öko-Token auf. AfD-Fraktion im Bayerischen Landtag. URL: https://www.afd-landtag.bayern/2024/02/09/florian-koehler-grosser-sieg-fuer-die-afd-staatsregierung-gibt-oeko-token-auf/
[18] Hogan T.L. (2021). How Good Was the Gold Standard? AEIR. URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3919203
[19] Mousten Hansen K. (2020). The Universität Leipzig. URL: https://cdn.mises.org/jls_24_2_hansen.pdf