https://no01.substack.com/p/reductio-ad-aurum
No1
Sep 29, 2026

Thanks Buffalo for a great idea!

Once upon a time, in a Greek town on the instep of Italy’s boot, a man called Hippasus picked a fight with a square.

He was a Pythagorean. As you might have guessed from the name, the Pythagoreans were half a maths club and half a religion, and their central article of faith was that everything in the universe could be written as a ratio of two whole numbers. (They also had very strong opinions about beans. But that’s for a different article.)

So Hippasus drew a square with sides of 1 and asked how long the diagonal was.

As (according to Pythagorean Faith) everything could be reduced to a fraction, he assumed that the diagonal was a over b, with a and b fully reduced.

Both the top and the bottom of his fraction turned out to be even.

Which is of course impossible in a fully reduced fraction.

So the assumption was wrong. And thus the concept of irrationality was born. Humanity has been refining it ever since…

Once upon a time, a king summoned his wisest advisers to a castle in the Maryland mountains. For three days and three nights, they conferred within the castle walls, their deliberations kept from prying ears.

On Sunday evening the king interrupted Bonanza to speak to his subjects.

Until that night, any foreign treasurer could hand the king 35 paper dollars and walk out with an ounce of gold.

But from now on, the king said, that window would be temporarily closed.

An ounce now costs around $4,150, and the window remains temporarily closed.

Ever since that Sunday, the dollar has rested on exactly one thing: good faith and trust. (ok ok, 2 things, No1 ever accused me of being particularly good at calculus.)

We all assume that fiat is losing value. As that is clearly impossible in our theorem, we’re going to define the dollar as a stable currency.
Step 1.

A dollar that holds its value buys tomorrow what it buys today. Prices, on average, stay flat. Inflation is zero, or close enough that nobody bothers to measure it.
source
Step 2.

If inflation is zero, nobody needs protection against it.

(Washington provides it anyway. By law, every single year. The IRS adjusts the tax brackets, as does Social Security. Also the Treasury has sold TIPS since 1997, which pay you extra when the dollar loses value.)

So even the issuer of the dollar sells insurance against the dollar.

And with “price stability” defined as 2% inflation a year (close enough to zero to not bother, right?), it halves your dollar in about 35 years.
Step 3.

If the dollar holds its value, gold is a terrible place to park your money.

A T-bill pays close to 4% (which under our assumption is 4% real).

Gold pays nothing and costs money to store and insure.

At this point Sam was looking over my shoulder at what I was tapping away at.

See, she said: Gold is around $4,150, down 23% while the dollar is stable at +5%. Gold is a terrible asset, and the dollar is having a great year. Just stop typing.
gold (top 2026) vs DXY

Fine, fine… I can cherry-pick too.
diesel (Jan 2026) vs DXY

Take that same dollar to a diesel pump. Diesel went up 112%, dollar 3%.

But central banks read the same charts as we do.

And between April and June, the keepers of the paper went shopping.
Image
source

They bought 289 tonnes of gold, the biggest second quarter on record. Poland took 51 tonnes, China 33.

They did that during gold’s worst quarter in over a decade. The cheaper it got, the more they bought. (novel concept, shopping at a discount!)
Figure 4. Central Bank Gold Purchases Highest in a Decade

So they preferred to buy a shiny rock that yields nothing and costs money to store, instead of a stable currency at 4% yield?

So, under our assumption, the government insures its taxpayers, its pensioners and its lenders against its own currency. The central bankers’ idea of stability halves a dollar in one career. And the reserve managers of the world pass up 4% a year to buy a metal that pays nothing.

Under our assumption that the dollar is a stable currency, every one of them is behaving irrationally.

Which, to be honest, is quite possible. (I’ve been watching them for a while now.)

But 55 temporary years of perfectly consistent irrationality is a lot to ask, even of them.

The Hippasus route is shorter. The assumption is false.

Fiat is losing value.