Gold, Fiat Dollars & Crypto

October 27, 2025 | The upsurge in the price of gold during 2025 has surpassed the rate of increase for stocks and crypto tokens, begging the question as to whether the world is headed back to the future in terms of money. Yet for most investors and nations, gold remains at the apex of value in terms of monetary assets, with fiat currencies next in line and crypto still occupying the periphery in terms of mediums of exchange.

Jack Dorsey, the founder of Block (XYZ), has frequently stated his belief that Bitcoin's ultimate success depends on it becoming "everyday money" for peer-to-peer transactions, rather than just a speculative store of value. He sees Bitcoin as the future "native currency of the internet," an open standard that can provide financial access and fast transactions for everyone. He argues that if Bitcoin isn't used for everyday payments, it will become increasingly irrelevant. 

Dorsey also said that "Bitcoin is not crypto" on the social media f/k/a as Twitter in mid-October 2025, arguing that Bitcoin is fundamentally different from other cryptocurrencies. Yet like most other crypto tokens, there is no visible market for bitcoin, one of the reasons that the dollar price of the leading token is so volatile. Traditional markets have longs and shorts which provide stability and information to investors, but bitcoin is opaque and more akin to buying a painting or other collectible in an art gallery.

Even as Americans dabble with crypto, the rest of the world is running back to gold, marking an end of a century-long effort to marginalize gold. In the progressive mythology of the New Deal, President Franklin Roosevelt ordered the confiscation of gold in 1933 to combat the Great Depression, this by gaining more control over the money supply and ending the alleged constraints of the gold standard. The government confiscated privately held gold “to prevent bank runs, stabilize the financial system, and allow the Federal Reserve to expand the money supply to stimulate the economy.” 

As we noted in “Inflated: Money, Debt and the American Dream,” none of the claims in the textbooks (which were mostly written by progressive authors) are true. In fact, the Federal Reserve Board was never constrained by the gold standard in terms of providing liquidity to banks. Rather, the members of the Fed in the run-up to the Great Crash of 1929 were afraid to lend to insolvent institutions for fear of ending up as a creditor in a state receivership.

Only the fact of a federal receiver with the creation of the FDIC in June 1933 changed this important dynamic. Of note, in 1930 the Federal Reserve Board included as ex-officio members Secretary of the Treasury A.W. Mellon and Comptroller of the Currency J.W. Pole, along with appointed members Eugene Meyer, Charles S. Hamlin, Adolph C. Miller, and George R. James. Meyer was the Governor of the Board. There was as yet no Fed Board of Governors in Washington.

FDR seized gold for political reasons and thereby made the banking crisis of 1933 far worse.  Roosevelt used the crisis to attack the political monopoly of the Republican Party and enshrine the Democrats in power for the next half century. President Herbert Hoover noted that FDR's gold seizures were an attempt to collectivize the nation through "emergencies" and propaganda, and that the New Deal did not solve the Great Depression.

In 1933, Congress passed a joint resolution that nullified the "gold clauses" in all private contracts. These clauses had allowed creditors to demand payment in gold, but the resolution made all public and private debts payable in fiat paper currency. Today eleven states have declared U.S.-minted gold and silver coins as legal tender within those states, but it does not yet mean contracts can be written in gold or that all gold ownership is recognized as legal tender.

For the next 75 years, the US and the world benefited from the fiat dollar, fueling a remarkable period of growth following WWII and the Bretton Woods Agreement. By basing the post-war world on the dollar and gold, the Allies sought to avoid competitive currency devaluations between nations and thereby sidestep the sharp swings in growth and reserve balances that had characterized the pre-WWII period.

By pretending that the fiat dollar was equal to gold, the nations of the world created a vast ecosystem of trade and financing that fostered the prosperity we all take for granted today. For a time, at least, the fiat paper dollar was the greatest invention in modern history, but it carried with it a cost – inflation – that is now destroying the prosperity achieved in earlier decades.  

As American politicians used debt rather than taxes to finance the wants and needs of the post-WWII generation known as “baby boomers,” the fiction of equating the paper dollar with gold became more and more tenuous. In August 1971, President Richard Nixon abandoned the gold standard. The dollar was no longer be convertible into gold for foreign governments in the London gold pool, cementing the U.S. dollar as a full fiat currency and providing fuel for the expansion of the progressive state.

In 1978, Congress passed the Humphrey-Hawkins Act, formally the Full Employment and Balanced Growth Act. Displaying the hubris of the time, Humphrey Hawkins set federal economic policy goals to reduce unemployment, control inflation, and achieve a balanced budget and trade surplus. It amended the post-WWII Employment Act of 1946 to require the government to actively pursue maximum employment and price stability, two obviously conflicting goals, neither of which has been achieved. 

“Currencies untethered from precious metals—which are inherently limited in supply—paved the way for free-spending governments to indulge in redistributive policies,” notes Suzanne Schneider in The New York Review of Books. “This much, at least, was consistent with the writings of Hayek’s teacher, Ludwig von Mises, who valued gold for “its ability to act as a brake on the tendency of democratic states to spend beyond their means.”

The explosion of COVID in 2020 and the subsequent inflation caused by the policy errors of the FOMC sharply increased inflation, most notably with a 50% increase in home prices in just five years. The re-election of President Donald Trump in 2024 and his embrace of crypto tokens in order to fuel the Republican landslide that year further muddied the waters in terms of money and inflation. The resurgence of gold in 2025 as it surpassed dollars as the primary reserve asset in the world essentially signals the end of the hegemony of the fiat dollar.

What lies ahead? The use of nonconvertible fiat currencies seems likely to continue, but other nations have already decided that gold is a superior reserve asset to the fiat dollar. In the US, for now, some citizens will try to convince the skeptical majority that crypto tokens are a valid replacement for depreciating fiat dollars, but gold seems to have already won that argument around the globe. Americans are the only people foolish enough to think that crypto, an inferior derivative of fiat paper dollars, is the ideal means of exchange.

As James Rickards told The IRA in September of last year (“Jim Rickards: The Treasury Should Buy Gold”): 

“The Treasury buying gold would restore confidence in the dollar and perhaps make people believe again that the currency has real value. The price of gold in dollars would clearly go up, but buying gold would be a statement to the world that we are not just going to go down the print-the-dollar rabbit hole.  This does not mean that we are going back to a gold standard, but it does say that we are going to honor our obligations. But to make it to 2076, we need to think really hard about whether we have lost the thread about what money really is for America.” 

The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.