What are we seeing when we look around us into the world of fiat and financial media?

The world is coming to an end, the Strait of Hormuz, is blocked, oil prices will moon (are mooning), a recession is coming, 70s style inflation is coming, there were oil shocks then, so we need to expect an inflation shock in the coming years, for years.

Graph 1: Looking at price per barrel of oil in the 70’s through to today shows a massive rise, even with a lot of volatility, but this is priced in dollars.

Graph 2: But let’s look at it from a slightly different perspective. The price of gold sky rocketed in the 70’s as the US came off a pseudo gold standard, meaning everything was going up  in dollars terms, fiat was inflating, but was this primarily the value of the dollar falling (all a school of thought thing), if we now look at the dollar value of gold during this period, it went wild in the 70’s and it is absolutely going wild now…….. or is that just the dollar losing value, as any peg to reality dies, as people realise it isn’t even backed by the full might of the US armed forces, it is formally no longer a “petrol dollar”.

Graph 3: So now, if the value of oil is increasing, and so is gold, is oil getting more expensive in terms of gold? Well the number of barrels of oil an ounce of gold will buy you is only a little behind the Black Swan values that were seen in 2020 when the price of oil tended negative. 

Graph 4: Now putting these graphs together, we can see that in comparison to the other two graphs, even if we normalise the graphs (have them all starting from 1), we can see that gold is really outpacing the other two, with Oil/Gold remaining relatively stable in comparison, maxing out at less than 10.

Graph 5: Now looking at the oil/gold graph in more detail, there is a lot of volatility, but overall, this is showing that overtime, you can buy more oil with a unit of gold. The process of extracting oil is getting cheaper when measured in gold. Technology is deflationary, it is not oil that is getting more expensive, it is the unit of account that is getting less valuable, unit of account being the dollar.

Graph 6: Now, how’s about the inverse of graph 5, showing the cost of oil in gold ounces. At the moment, oil has literally never been cheaper. If we were to denominate our lives in gold, we would not be interested in a terrifying, 70’s style inflationary crunch, rather a period of cheap abundant energy, with opportunities to grow your business, transform more raw materials, spend less time in the fiat mine, eat better food and expend more energy to make the world a better place.

Graph 7: This process has been taking place over the last 50 years and gold may be finally being seen at the new petro commodity. No one wants an asset someone else can print and someone else can seize (Biden footgun). This has not taken place for bitcoin, it is still monetising, even so, if you have been holding a while, you will be feeling, when denominated in bitcoin, life is getting much cheaper, and once more people realise this, the graphs above will play out at an even greater rate than, with energy getting ever cheaper when denominated in bitcoin. Since October, combined with the recent dollar increase in oil, things aren’t particularly rosy in the short term, but let’s be honest, not that far off the highs of 2020. Then, even with oil futures looking like $90 a barrel oil will still be on the card in December, I doubt bitcoin will still be these levels then.

While Iran said they would accept bitcoin for safe passage, bitcoin is simply not big enough to be used to replace to petrodollar or petrolyuan, but one day it will be, and we will be talking, initially, a few thousand sats for a barrel of oil. And let’s take a step back a consider these graphs together, yes, we may be moving into a regime of oil priced in gold, but absolutely no one wants to or can realistically trade in gold at volume or at a distance. Bitcoin represents the logical, sensible, low risk, hardest asset to use for trading the commodity the fuels progress.

Iran may have fired a shot across the bow (maybe a sensitive metaphor), by suggesting they’ll take their fees in bitcoin, but gradually, more countries and companies will appreciate that it is the better medium of exchange for trades in oil than traditional currencies. At which point, the bid for the dollar driven by the need for global trade will begin to faulter, bond yields will rise as people lose faith in it’s long term sustainability, at while point, gold could be north of 20, if not more thousand dollars and bitcoin will be difficult to purchase with dollars, because no one will be willing to sell their bitcoin for something with no value.

Once the dollar was backed by gold.

Then the dollar was backed by military might to facilitate countries to trade oil (also see allow the US to sustain their debt load).

Now, the dollar is backed by the need for more debt and the ability for the powers that be to print even more of it.

It is not debasement, it is not prices rises, it is simply a change in perspective and unit of account.