The financial world is changing at a pace that is mind boggling. The problem for those living in the West is – the change is occurring well outside of the “global financial capital of the world,” which we naively consider to be New York City. Nope. It’s happening in of all places – Africa.

To claim that Africa is in any way on par with New York City when it comes to finance is considered laughable by most.  That is because we have become quite arrogant regarding the dominant position in finance that Western banking has attained over the past 70 years. That era however, is coming to an end.

Something interesting happened on the way to the bank.

A financial technological revolution was born. Now, countries like Kenya are ground zero for innovation. With a lack of legacy infrastructure to hold them back, FinTech adoption has flourished. M-Pesa is a revolutionary payment methodology that allows peer-to-peer payments using just your cell phone.

A recent article entitled, “IOT Meets DLT and Blockchain meets M-Pesa in Africa,” highlighted the massive social change that FinTech is bringing to Africa and beyond.

“M-Pesa completed its 10th anniversary this month. It is the firm that revolutionised financial services by providing a simple way of transferring money, and has crossed 30 Million users across 10 African nations (only 10). But the impact it has created has already highlighted it as a model to be used for the emerging world.  In 2016, according to Vodafone, M-Pesa was used in six billion transactions. Research by Digital Frontiers found a 22% drop in female-headed households living in poverty in areas with access to M-Pesa. The same study noted that the source of income for almost 200,000 women in rural areas shifted from the low-income, labour intensive agricultural sector to more prosperous small business creation.”

This article reveals a very important trend that goes well beyond technology in finance. People are awakening to how financial and monetary reform can help their fellow human beings. By simply providing access to financial services, such as a payment system on a phone, the lives of millions are being transformed.

What happens when the money and monetary systems that make up the value exchanged on those systems is dramatically improved?

The cat is out of the bag. The genie has been let out of the bottle. Use whatever metaphor you want.  People are learning by the hundreds of millions that we can do better – a lot better – when it comes to defining what money is and who has access to it.

Gold and silver will always play a role in the global monetary system. They cannot be separated from it. It is largely irrelevant whether they become money themselves again and are freely traded via a cell phone app, or if they are used as a check and balance against abuse of future monetary systems. The fact that they will play an important role is cast in stone by 5000 years of history. It might be a good idea to own some. 

It was announced today that fourteen large retailers besides J.C. Penney are closing many of their brick-and-mortar stores. What does that have to do with the future spot price of gold and silver? A lot. It comes down to one word.

Technology.

The world is undergoing nothing short of a major wave of technological innovation. Online retailing is literally eating up the traditional retail experience. Browsing online has replaced browsing the store aisle for everything from motor oil to designer jeans. The overhead associated with maintaining a physical infrastructure has reached a tipping point.

This phenomenon was foreseen in a book written in late 2013 called “Too Different for Comfort” (free PDF download). In it, Louis-Vincent Gave told of a coming “Robolution” that would transform the world economy and vastly disrupt the traditional employment structure. Following are some of the more interesting chapters in the book.  

Chapter 2 The Rise of the Robots – Or Pricing ‘Cheap Labor’ Out of the Market
Chapter 4 Will the Robolution End Up Eating Its Own Children?
Chapter 6 The asset-price centric monetary system
Chapter 11 The Dollar-Debt Standard
Chapter 17 Adapting

These are provocative to say the least. The one that will be our focus is, “The asset-price centric monetary system.”  A few excerpts from that chapter are very interesting:

“We have now moved from a world where money was at the center of the system and asset prices at the periphery, to a world where some specific asset prices are at the core of the system, while money has moved to its borders.”

“Economic thought has thus moved from the horizon of the labor theory of value, to the theory of subjective value, to the theory of never falling prices.”

“And this is where the next problem for investors may find its source as, if anything, the various central bank interventionist policies have probably had their biggest impact not on prices, but on the volatility of almost all assets.”

Gave’s contention is that price discovery of assets was due to money finding its way through the economy into those assets that the market valued.  Now, the monetary system is managed in a way to prop up certain asset classes so that they may never fall in price.

It seems logical then that the asset classes that are in most need of protection are those that are highly leveraged by debt, including global sovereign bond markets. After all, when push comes to shove, governments and their central banks will ultimately move to protect their assets from default over all others.

The question is, “Is this strategy sustainable?”

The role technology is playing in hastening the coming reform of the global monetary system cannot be underestimated. It is not only disrupting retail industries and the entire banking industry (via FinTech). Technology is also enabling (perhaps requiring) that we rethink how a future monetary system should be designed in order to accommodate massive changes to the very structure of the economy and labor markets.

Debt based and central government managed money on its own simply will not be able to support or adapt to the emerging economy. A value based currency system will. Such a system would naturally include gold and silver. The question is whether or not we will have the political will to consider, let alone implement, such a system. It’s a question we all need to be aware of, because if we do not adapt, our future may indeed be too different for comfort.