I wrote earlier that inflation is coming. So how can you hedge yourself? My usual answer to that is gold. But there's a group of people who tell me they have a better answer for me. Let's call them "bitbugs".
Bitcoin, they say, can't lose its purchasing power as a result of inflation (thanks to its apparently limited supply). It doesn't rely on governments for its value. It's transferable, liquid and private the perfect defence against the inflationary bias endlessly created by dim-witted central bankers (though their nerves will be jangling at the end of this week as cryptocurrency values plunge). It is, as one bitbug told me on Twitter last week, way better than gold as a hedge against governments and inflation: "Gold is old".
If I can dig out the tweet, I will be referring my sneerer to Mr Carney. While he doesn't like inflation measures that tell him what he doesn't want to hear, he really, really doesn't like the anonymous nature of bitcoin. "One doesn't have anonymity for bank account transactions", he says, "why would you for cryptocurrency transactions?"
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Why indeed? I mention this to make the point that cryptocurrencies are only transferable, liquid and private for as long as regulators allow them to be. You could say the same of gold, of course. Owning all but a small amount of gold coin was temporarily made illegal in the US in 1933.
But gold has a few things going for it that cryptocurrencies don't. The G20 doesn't waste much time these days talking about how to regulate people's gold holdings (Mr Carney says regulating cryptos is top of the list). It is universally accepted as a global and long-term store of value and one that doesn't demand a password when you want to dig it out from under your bed. It's pretty; it's useful; it's really hard to fake; it's easy to change into a fractional currency; and, crucially, it has history. An ounce of gold has, give or take, hung on to its purchasing power for thousands of years.
I'd be surprised if anyone was saying that about bitcoin in 4018. I hold gold as a hedge against shocks and in particular against inflation, precisely because gold is old.
A version of this article was first published in the Financial Times.
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