Inside vs Outside Money

Typology

Chor Pharn:

"The modern financial hierarchy is built on two kinds of claims.

Inside money is created within the private sector—bank deposits, money-market funds, repo credit. It expands liquidity but cannot settle on its own; every instrument depends on another balance sheet.

Outside money is issued or guaranteed by the state: central-bank reserves, sovereign bonds, or historically, gold. It settles obligations without reference to another promise.

For fifty years, inside money dominated. Private leverage multiplied credit, while the U.S. Treasury and Federal Reserve underwrote the entire structure. The architecture was efficient because it deferred settlement indefinitely.

That deferral is ending. Demographics, energy constraints, and political limits on leverage mean the world can no longer expand by adding promises faster than proof.

The search for outside-money anchors—collateral that clears without belief—is the essential story of the second half of the 2020s."

(https://thecuttingfloor.substack.com/p/the-gold-nerve)

Discussion

The Re-Anchoring of Monetary Value in Metabolic Realities

Chor Pharn:

"The new order is forming around settlement assets that cannot be fabricated by decree. Four conductors of trust have re-emerged: gold, energy, compute, and fiscal credit. Together they form the material backbone of the coming monetary regime.

1. Gold

Central banks have been net buyers for five consecutive years, purchasing well over a thousand tonnes annually. Through the Shanghai Gold Exchange International (SGEI), vaults in Hong Kong, Singapore, Dubai, and Zurich now clear trades that never touch Western custody. Roughly a fifth of global gold trade flows through this circuit. Metal has resumed its historical role as the ultimate settlement medium: the margin call that ends every argument. It is not nostalgia; it is accounting.

2. Energy

Energy transition has re-attached growth to conductance—the ability of money and credit to move through real assets without friction. Kilowatt-hours, not basis points, determine capacity. Carbon markets, power-purchase contracts, and strategic reserves are becoming fiscal-collateral instruments. Energy, compute, and credit form the production trinity of the next order: electrons replace promises as the unit of reliability.

3. Compute

Semiconductors and data centres are the new refineries. Compute capacity is financed and insured like energy infrastructure. Control of chips is now a reserve issue; compute power functions as collateral for national strategy.

4. Fiscal Credit

In China, fiscal spending has replaced property leverage as the main driver of demand. Empirical work from the China Finance 40 Forum shows the correlation between fiscal outlay and domestic demand has more than doubled since 2023, while monetary transmission has weakened. The state’s balance sheet has become a transmission grid: capital moves through budgets rather than through banks. Sovereign credit has turned into internal collateral—outside money created inside borders.

Together these four conductors constitute the gold nerve: a material nervous system for value after half a century of abstraction. They are measurable, auditable, finite. They turn trust from belief into balance-sheet discipline."

(https://thecuttingfloor.substack.com/p/the-gold-nerve)