Sound Money

15. January 2024

Gesundes Geld muss mit realen, greifbaren Vermögenswerten gedeckt sein

Orginally published on claudiograss.ch / by Claudio Grass

Everything has become more expensive. The financial pressure on the average person has increased noticeably in recent months, have put the spotlight on money itself. Countless ordinary people who have otherwise never seriously pondered these questions, began to question basic principles like: what makes their paycheck shrink from month to month, what or who actually responsible of it and what, if anything, they can do to protect their savings themselves? In the interview that follows, the CEO of RealUnit Schweiz AG, Dani Stüssi, shares his own thoughts on the problems of the current system and outlines the solution that his company has developed.

The turmoil in the banking industry in spring 2023 also shook the faith of the public and raised serious and much wider concerns about the stability and the very future of the current system. Now more than ever, it is imperative to find solutions, “ways out” and establish back up plans. Individual savers must now be proactive and to plan ahead for themselves, by themselves.

This is why solutions like the RealUnit are so important to be aware of and to explore. The idea of investing in real, tangible assets, which the RealUnit is founded on, is a no-brainer, especially under the current economic conditions, but the way that this has been practically implemented in this case is also very interesting.

Claudio Grass (CG): The RealUnit was born out of a clear understanding of the many flaws and vulnerabilities of our current monetary and financial system. Before we get into the details of the company itself, I’d like to start by asking you to share your views on these inadequacies. In your opinion, what is wrong with our system and why should the average citizen care? 

Dani Stüssi (DS): The full answer to “what is wrong with our current system” would arguably require entire tomes to properly lay bare and to accurately expose. But I’ll try to put is as simply as possible and in a strictly practical sense.

In 1971, President Nixon’s landmark decision to announce the unilateral abandonment of the Bretton Woods system heralded the end of the U.S. dollar’s convertibility to physical gold and thus effectively and clearly marked the end of the “gold standard era”. Since that momentous point in our history and within those 5 decades that followed it, fiat currencies, not only the USD, have mostly been clearly and disturbingly debased and devalued. The money supply has exploded, thanks to loose monetary policies that were only possible because of the fiat money system and the blatant market distortions it facilitated and incentivized.

Personally, I believe that anyone who works hard for their money, who manages their hard-earned rewards in a responsible and prudent way and who appreciates the value of a low time preference, should be able to see their savings retain their value in the long run. Today, however, the exact opposite is the case. Leaving your savings sitting in a “safe” bank account would most likely prove to be a big mistake –  perhaps even a defining choice.

For one thing, in that scenario, your purchasing power diminishes dramatically over the years. By keeping idle cash on a bank account, not only do you fail to “make your money work for you”, but you actually often guarantee that it will work against you. Inflation, aka “the silent thief” or the “hidden tax”, will make sure of that.

CG: One the focal points of the RealUnit concept is the idea of preserving purchasing power. Of course, inflation is a threat that is on most people’s minds today, as prices have been relentlessly on the rise for the last couple of years. Before that, however, it was not a major concern for the public or for investors: for years, central banks were sticking to their “2%” target and inflation was seen as a thing of the past. How and why did the RealUnit benefit investors even before this current inflationary wave?

DS: The blunt answer is quite straightforward: Neither me nor anyone in the RealUnit team ever took seriously the assessments or projections of central bankers, the “outlooks” and forecasts of international institutions or the narrative of governments and politicians. Official statements, press releases, or even “forward guidance” announcements, these are all still words – and as we all know, actions speak much louder that words.

It really pays to take the time and to put in the effort to form your own opinion. Especially when the evidence of your own eyes flagrantly contradicts these “expert opinions”, just as it did so many times before (and accurately so). For instance, when virtually all central banks vehemently insisted a year ago that inflation was “transitory”, “under control” and generally nothing to worry about, it was obvious to any sane, observant and reasonable person that this was patently untrue. The rampant money printing of the last decade, and especially its crescendo during the pandemic, could not possibly be without consequences. This is why it is essential that every citizen, saver, or investor recognize this as a moment to rethink, reevaluate, and maybe recalibrate their plans – to take all necessary steps to be adequately prepared for what lies ahead.

Asset price inflation has made tangible assets such as real estate and precious metals significantly more expensive since the last financial crisis in 2008. Savers have been the big losers since then, partly because of the absurd negative interest rate policies. Those who invested in our RealUnit investment strategy from 2010 onwards were able to benefit from the increase in the value of real assets.

The RealUnit concept has been continuously tested, adapted and optimized since its inception – 22 years ago. Since then, it achieved an average annual return of 2.6% per year.

CG: This kind of dependable crisis resistance and sustainable stability are features that most long-term, sensible investors and ordinary savers perpetually seek. That is what the RealUnit aims to deliver, but how did it actually emerge and how did it get where it is now?  How is it structured and what are the principles behind it?

DS: One of the main problems of our current economic and monetary structure is that the real economy and the monetary system have effectively decoupled, purposefully dissociated and unequivocally separated for quite some time now. Consequently, the obvious solution is to bring them back together – a proposition which surely is easier to say than to actually do.

In my opinion, sound money must be anchored to and backed by real, tangible assets that have a clear, direct connection to the real economy, if its core functions are to be reliably restored, permanently preserved and if all the terminal defects and crippling shortcomings of today’s system are to be corrected.

The original founders of the RealUnit gave a great deal of thought to all the possible practical, efficient, fair, ethical, and sensible ways of backing a currency. This is no easy task: after all, what is fair might not be practical, what is ethical might not be efficient and what is sensible might not be practical.

These considerations, and many more like them, gave rise to the RealUnit. After long and heated debates, doubts and disputes, the founders eventually came to the conclusion that an optimal currency should not only be backed by physical gold alone. It would also need strategic, sound investments in healthy, solid companies that are important to the underlying economy.

The vision of the RealUnit is therefore based on the idea that a stable currency should be backed by real, physical, objectively valuable, and productive assets that ideally move in lockstep with the Swiss economy. A currency based on these principles and conforming to these parameters would surely provide a more stable monetary base in terms of value and a smoother transition between business cycles – both developments being in the interest of the general public.

CG: The advantage of focusing on real assets is clear and the idea of a stake that’s 100% backed by tangible assets is obviously attractive to seasoned and prudent investors. But doesn’t the required physical storage and logistics translate into much higher expenses and fees? What guarantees do investors have regarding these underlying real assets?

DS: Actually, our costs are only about 25% of what a precious metal ETF pays. We want to be as independent as possible from the banking system. Thanks to the direct access to our precious metal holdings, we eliminate counterparty risk and increase our crisis resistance.

As for the guarantees, we are a listed public company. As part of our regular audit, an independent auditing company reviews all holdings annually and confirms this in the annual report.

 

CG: What is especially appealing to me is the heavy allocation to physical precious metals. I could be biased of course, but I see physical gold and silver as the best stabilizers and the most solid insurance any investor can have. I’m guessing that’s why the RealUnit strategy also relies so heavily on them too. In practice, however, and in your own experience with RealUnit, what role did your precious metals position play during crises and market meltdowns?

DS: I suspect we likely have the same “bias” when it comes to physical gold and silver. Obviously there is a reason why we chose to not just allocate such a high portion of our portfolio to precious metals, but also to hold our position physically, outside the banking system and in high security vaults in Switzerland. We currently hold around 25% gold, 10% silver and 3% industrial metals – all physically allocated and stored securely in Switzerland.

In 2022, savers in Switzerland lost around 3% in value due to inflation, bond holders around 10% and holders of Swiss shares around 15%. Our listed shares only dropped by 0.92% last year. This is mainly thanks to our tried and tested investment strategy, the protection against falling stock markets and our heavy physical metals allocation. Throughout the past year and up until today, we’ve been receiving a lot of positive feedback from investors, as the RealUnit was an important “stabilizer” in a lot of securities portfolios.

CG: Another feature that I personally found uniquely interesting was the choice that is given to RealUnit investors between traditional shares and share tokens. Could you explain the distinction and why you chose to offer both options?

DS: Indeed, this is one of the things that clearly sets us apart, and it’s something we’re very proud of. In June 2022, we became the first listed company in Switzerland to offer share tokens on our online marketplace.

Of course, we still offer traditional shares, held in a conventional securities account at a bank, but we also provide the choice of share tokens, held in a digital wallet. The tokens grant the exact same property rights and voting rights as the conventional shares, i.e. token holders are invited to our general meeting and can vote on important decisions just like “traditional” shareholders do.

The difference lies in the custody of the shares. The traditional share is listed on the BX Swiss stock exchange and is part of the traditional banking system. It can be conveniently traded via online banking, like any stock, over the course of a normal business day. The share token is a registered asset on the blockchain and can be stored in your own wallet without a financial intermediary and can therefore be traded around the clock through our website. Although self-custody clearly requires some know-how, experience and understanding of (at least) elementary concepts, tools and processes, the token holders are more independent and enjoy additional financial sovereignty.

CG: RealUnit seems to be a product that merges the “old with the new”… It is appealing to conservative, “no-nonsense”, real value oriented investors, but it is also catering to the younger generation of tech savvy, privacy-minded ones who understand the need for independence and autonomy. What about the ordinary saver, though? How attractive and how accessible is it to the “average Joe”? And why should he take the savings he has sitting in his bank account and put them in RealUnit instead?

DS: The RealUnit has been designed precisely for this ordinary citizen you referred to, that “normal person” that does not want to actively, personally manage their savings or perhaps a larger sum that they wish to protect and preserve for the next generation. Maybe they don’t want to be directly involved because they feel they don’t have enough experience with investments, or maybe simply because they don’t have the time.

Whatever the case might be, it is wiser, more efficient and safer to leave these decisions to the experts – our team of finance specialists actively manages our clients’ investments, so that they can relax, devote their free time to something they actually enjoy and sleep peacefully, knowing that their savings are in competent, professional hands. The minimum investment is only CHF 1.03 – the current price of a single share on the stock exchange – which makes the RealUnit an extraordinarily accessible, affordable and sensible option for any prudent individual investor and any responsible ordinary saver.

In contrast to most bank products, we do not aim for a maximum return by encouraging our clients to take correspondingly higher risks. As opposed to most banks, our incentives are aligned with the best interests of our clients and we have no interest in securing short term profits at the expense of the individual who trusts us with their hard- earned money. The RealUnit itself is not designed as a speculative vehicle or as a product that promises outrageous returns within an improbable amount of time.

In fact, our approach is the exact opposite: we aim to match or (modestly, but consistently) outperform Switzerland’s GDP growth each year and thereby maintain the purchasing power of our investors over the long term. In addition, we hold more than half of our assets outside the banking system, which increases our resistance to crises. Moreover, by holding our shares as tokens on the blockchain, our investors are also guaranteed direct access to their holdings at any time and independence from the banking system, its limitations and its risks.

CG: There is a special edge to the RealUnit concept as an investment option, but there is also a different dimension to it, a vision that has been there since its inception: The idea of it eventually becoming an alternative, private currency. It was an element that was “baked in” since the beginning, but do you still see it as part of the company’s mission today?

DS: Absolutely. Our vision is for the RealUnit to become a popular store of value and also a means of payment, due to its stability, security and tradability. This has not changed.

Currencies have three tasks to fulfill. As a store of value, we are already doing a better job than fiat money. But to be more widely adopted as a medium of exchange/payment, the RealUnit must become better known and traders must recognize the RealUnit’s true value. To properly accomplish the third task, i.e. to see the RealUnit function as a “unit of account”, more time will be needed – it might take years, or even perhaps decades, for people to calculate and to think in RealUnit terms instead of CHF. This is why at this point we focus primarily on growing our investor base, on increasing RealUnit’s product awareness and recognition and on educating and helping ordinary citizens understand the true value of their work, money and time.

CG: Its built-in stability and incorruptibility certainly make it an objectively better option than our current fiat money. But the implicit and near-universal trust (misplaced as it might be) that state currencies still enjoy today would seem to be an unbeatable advantage. How do you envision RealUnit breaking that barrier and competing with the CHF or the USD?

DS: We are already seeing a lot of demand from people who want to flee the EUR. Confidence in our own currency will only come to a head with a recession and possible deflation. I am almost positively convinced that the next financial meltdown will bring with it a crisis of confidence in the old monetary system. In such an environment, people will have more faith in a private currency, backed by tangible assets like the RealUnit, than in the empty promises of central bankers and politicians.

About the author
Claudio Grass Gastautor RealUnit

Guest Author

Claudio Grass

Claudio Grass is a Mises Ambassador and an independent precious metals advisor based out of Switzerland. He is recognized as an expert on monetary history, economics, and precious metals. He writes about global markets, international finance, geopolitics, history and economics. Claudio is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics, he is convinced that sound money and human freedom are inextricably linked to each other.
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