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What Is A Gold Standard?

Tyler Durden's picture


Before 1971, U.S. dollars were backed by gold. This meant that the federal government could not print more money than it could redeem for gold. While this constrained the federal government, it also provided citizens with a relatively stable purchasing power for goods and services. As Learn Liberty explains in this simple 4 minute clip, today's paper currency has no intrinsic value; it is not based on the value of gold or anything else. Under a gold standard, inflation was really limited. With floating value, or fiat, currency, however, some countries have seen inflation reach extremely high levels - sometimes enough to lead to economic collapse. Gold standards have historically provided more stable currencies with lower inflation than fiat currency. Of course, this leaves the question open of whether the United States return to a gold standard? But does provide some hints.



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Mon, 05/06/2013 - 20:54 | 3536151 Triggernometry
Triggernometry's picture

Au, Ag, and Cu coated Pb

Mon, 05/06/2013 - 21:02 | 3536179 knukles
knukles's picture

Answer:  A Gold Standard is a Good Standard.

Mon, 05/06/2013 - 21:05 | 3536199 Stackers
Stackers's picture

I wonder how much gold VISA and Mastercard would have to hold to cover their money credit money creation businesses if we went back to a gold standard ?

Mon, 05/06/2013 - 21:11 | 3536220 philipat
philipat's picture

But does The US actually own any Gold to back anything with?

Mon, 05/06/2013 - 21:19 | 3536246 Antifederalist
Antifederalist's picture

Are you Germany?

Funny, they have a similar concern.

Mon, 05/06/2013 - 21:30 | 3536278 flacon
flacon's picture

Not a bad video. The video should have talked about fractional reserve lending as well since even with a gold standard the "gold" part would be mostly irrelivant. 

Mon, 05/06/2013 - 21:55 | 3536351 markmotive
markmotive's picture

A gold standard only works if you can maintain your gold reserves (i.e. they don't leave the country). Some say a gold standard only creates a new set of problems.

Ellen Brown's book "Web of Debt" discusses many of these issues.

Mon, 05/06/2013 - 23:45 | 3536504 TwoShortPlanks
TwoShortPlanks's picture

“What is a Gold Standard?”

Well, a ‘Gold Standard’ is an extinct concept which prevents Banks from excessive leverage, prevents Central Banks from excess Balance Sheet expansion thus curbing Inflation, and as such, prevents Governments from excessive borrowing. In essence, a Gold Standard prevents future wealth from being brought into existence, to today, and it forces us to live within our means by stitching together physical reality with economic flexibility…..pretty evil shit!

Also, it’s the only thing which will heal this completely up-side-down, inside-out, fucked up global economy, and it’s coming back in some shape or form….soon.

So, if you haven't got any you had better get some stat, or risk receiving the mathematical enema of inevitability.

And my figures price the global Band Aid at $134,000/oz.....please!

Tue, 05/07/2013 - 00:08 | 3536594 TwoShortPlanks
TwoShortPlanks's picture

The ugliest [possible] truth about US Gold.

(Better get your Air Sick Bag at the ready)

From my understanding, it may well be possible that….

Before anyone asks if there’s any Gold left in Ft Knox I want you to ask yourself a question; does it even matter????

Think about this for a moment:
If the US Federal Reserve System, which is a privately owned entity, printed up as much Federal Reserve Notes as required, to facilitate a Currency for Gold swap, in order for those countries who swapped Gold to have access to Federal Reserve Notes (AKA The US Dollar) as a Global Reserve Currency (Bretton Woods 1944 conference).

If you think that the
Federal Reserve Note is US Government property, or property of the US citizen, you’re wrong. If you think the majority of the Gold which is stored (probably at the expense of the US taxpayer) is owned by the US Government or US citizen, you’re wrong again. Both the Note and the Gold held under security are owned by the private entity which goes under the guise of the ‘United States Federal Reserve System’. So any Gold stored in Ft Knox, under the NY FED, or elsewhere, which is connected to the Gold-Currency swap, is privately owned through the Gold-Currency securitization swap.

Then you must consider this possibility:
And here’s the really, really ugly part. If that Gold, under authorisation of the US Treasury (a US Government agency owned by US citizens) was leased to Bullion Banks (private entities), who in turn on-sold it into the open market, of which it cannot be return upon lease maturation due to physical shortage, then the US citizen may well be liable for all Gold Leases outstanding, regardless of the solvency of the Bullion Banks.

Let’s go a step further while we’re still dizzy…what if the owners of the foreign Central Banks which supplied the Gold to the US for currency swap, the US Fed, the owners of the Bullion Banks, and the investors who bought the physical Gold from the open market since 1971, were one the same? This would still suppress the Gold price, boost the US FED Note as Gold’s Spot Price is in USD (Fed Notes)…how fucking scary is that?

That would mean that the Gold holders have the asset and are owed the liability, and that the US citizen is liable for any outstanding Gold, AT MARKET VALUE!

Game. Set. Match…..slaves!

If that doesn’t make you feel sick, you’re either a Billy Goat or in desperate need of some reading.

This all links back to my previous suggestions:

Tue, 05/07/2013 - 00:11 | 3536617 DoChenRollingBearing
DoChenRollingBearing's picture

Possession being 9/10ths of the law (here, probably where you are as well) of my paid-for gold, allows me to say to the .gov bitchez: Molon Labe!

Tue, 05/07/2013 - 00:15 | 3536631 TwoShortPlanks
TwoShortPlanks's picture

That's exactly right. You hold it, therefore you own it.

The future paper market losses are only part of the equation....which will be saddled onto the US Taxpayer like an Indian Debt Slave.

Tue, 05/07/2013 - 00:32 | 3536660 Pinto Currency
Pinto Currency's picture



A gold standard is a fiat money regime with a promise not to print more paper money than the gold you hold.

It is always abused and always fails as governments will always print more money than the gold that is held in treasury.

The gold standard does not work.

Only gold money and silver money works.

Tue, 05/07/2013 - 01:56 | 3536725 TwoShortPlanks
Tue, 05/07/2013 - 05:53 | 3536826 Gunga
Gunga's picture

We the people are not morally or Constitutionally liable for debt contracted by corrupt politicians and criminal banking institutions. The Feral government confiscates the fruits of our labor by threat of imprisonment and often by armed force to finance the odious debt it contracted.
Our standard of living will continue to decline until a large enough percentage of Americans are willing to put forth the effort to sustain the Constitutional Republic with limited federal powers our countries founders gave us.

Tue, 05/07/2013 - 00:33 | 3536656 Pinto Currency
Pinto Currency's picture


Tue, 05/07/2013 - 01:40 | 3536711 TwoShortPlanks
TwoShortPlanks's picture

“Mighty Goldman Sachs even got into the act by predicting publicly that gold was headed lower, and hinting that gold might even be a short candidate. The newspapers and the media in general jumped on the ‘we hate gold’ bandwagon.. ‘Gold is a worthless relic of prehistoric times. If you own it, get rid of it, before you lose your shirt.’ But after the crash Goldman suddenly rescinded its bearish forecast on gold, and the gold-hating propaganda calmed down. … Actually when Goldman dropped their bearish forecast on gold, I assumed that Goldman had bought all the gold that they wanted. Net result, a good many of the big boys plus many central banks grabbed all the gold they desired at bargain prices. The great gold panic ended with a thud, and the big money got what they wanted—all at fire sale prices. –Richard Russell in DOW THEORY LETTERS(May 1)”

So, ask yourself, why would Goldman Sachs be interested in physical Gold all of a sudden...Executive Life Boats?

Or....As seen here on ZH:

Can Goldman smell a Euro Break-up?

Has Goldman been asked (by Greece perhaps) to assist in a Drachma Re-Bonding?

Could Goldman have been asked to get additional Gold Reserves for Greece (Bond security)?

Is Mr Panos a Goldman Sachs Greek executive?

Tue, 05/07/2013 - 07:22 | 3536917 Offthebeach
Offthebeach's picture

In defense of John Law printing, gov backed paper is supported by the lives, future children lives, souls, hovels, used cars, abandoned factories, young men willing to mercenary, and young women to porn and whore, and amoral elite to sell us Muppets out, morning, noon and night.
Now, combine the two with debt serf/slave Muppets( nominally " free" ), and an elite with you're talking!
All hail our Overlords!

Tue, 05/07/2013 - 00:16 | 3536633 Gandalf_the_White
Gandalf_the_White's picture

@markmotive - Given your reference to Ellen Brown, your choice of hammer/sickle for your picture is appropo.  She is an even more wacky leftist than Krugman.  For example, the trillion dollar coin  More generally she thinks we can simply print our way to prosperity, except that instead of basically getting the money into the economy via the financial sector she says give it directly to the people.  "Hey everyone, free money for the common man!  QE to infinity and beyond for the people!  Wow!  Our problems are solved!"  Oh brother.

Changing the direction of the QE dollar fire hose from the financial sector to the people is not the answer.  Either way it'll eventially lead to massive inflation, and ultimately economic collapse. One way or another we WILL have austerity; either sooner by choice or later by collapse.

Tue, 05/07/2013 - 01:07 | 3536697 Freewheelin Franklin
Freewheelin Franklin's picture

Ellen Brown's book "Web of Debt" discusses many of these issues.




Tue, 05/07/2013 - 06:17 | 3536814 Urban Redneck
Urban Redneck's picture

Regardless of what the book says or proposes, even in a vacuum, a gold standard will not function if there is a permanent negative trade balance, or consumption continually exceeds production (which also leads to the rich getting richer).  At both the individual and national level, one must produce if they want (or want to keep) a gold standard.

Specific to the US- one can't be the global reserve currency, or even one of several reserve currencies, under a gold standard unless one has a massive export surplus, which the US possessed by means of a massive productive advantage in the early Bretton Woods era .  The Triffen Paradox is a paradox- not a dilemma with a solution.  One can export debt in the absence of goods or materials, but that debt will mature and the borrower will want gold.  Reserve currency status confers on the State influence and control over trade (wealth) and for its citizens it increases their purchasing power (and borrowing power), the loss of reserve currency status would cost both TPTB in Washington, as well as their debt serfs, more than most would be willing to pay if they understood the associated costs.

Rights and Responsibilities, Privileges and Immunities, THERE IS NO FREE LUNCH, which is hard sell in a land of sheeple clamoring for MOAR government cheese, and economists fascinated with increasing consumption (demand).

Kill the useless eaters, the Keynesians, and the government regulation that stifles productive business, build a fuck-ton of factories and mines --then the US can talk about a gold standard.

Tue, 05/07/2013 - 00:37 | 3536668 Professorlocknload
Professorlocknload's picture

Awe, man, you mean Germany still hasn't received it's tungsten shipment?

Mon, 05/06/2013 - 21:33 | 3536286 knukles
knukles's picture

Is Ft Knox as empty as Tsarnaev's grave?

Mon, 05/06/2013 - 21:36 | 3536300 Hulk
Hulk's picture

Is Banacek Polish ???

Tue, 05/07/2013 - 03:27 | 3536755 Fuh Querada
Fuh Querada's picture

can you make a bull shot?

Mon, 05/06/2013 - 21:45 | 3536321 PiratePawpaw
PiratePawpaw's picture

No. the only things the US currently has ENOUGH of to back its currency are:



sense of entitlement

...How would you redeem your currency, and why would you want to?

Mon, 05/06/2013 - 23:40 | 3536578 hmmtellmemore
hmmtellmemore's picture

And yet the average Zero Hedger still opposes bitcoin, which doesn't need to be backed by anything.  Oh well, keep fighting for a gold standard guys.

Tue, 05/07/2013 - 05:40 | 3536820 dark pools of soros
dark pools of soros's picture

Not sure why they are even on this site.. most do not read the articles and just rush to post..'you don't hold it, you don't own it'. 'keep stacking!'. 'boating accident'

Makes you want to train a parrot to say these things and then shoot it

Tue, 05/07/2013 - 07:44 | 3536947 DanDaley
DanDaley's picture

I don't know what you mean...I used to own it, and hold it, but I kept stacking it on my boat, and then it sank...aaawwkkk. Polly want a ...

Mon, 05/06/2013 - 22:14 | 3536394 Antifaschistische
Antifaschistische's picture

He's wrong here...

"the only thing you can get if you take your Federal Reserve Note to the bank is other FRNs"

wrong, wrong, wrong..

You can take a $20 FRN to the bank and get back over $18 in copper/nickel by asking for nickels.  And as much as I don't like storing nickels...I do this every single time I go to the bank just because I know the US Treasury hates it when we hoard real money.   The nickel is the only real money left.  Don't expect it to last long.

Mon, 05/06/2013 - 22:59 | 3536506 RaceToTheBottom
RaceToTheBottom's picture

Any $/ft2 estimates?  How volatile is nickel?


Tue, 05/07/2013 - 00:28 | 3536650 Antifaschistische
Antifaschistische's picture

I'd say $1,000/ft2.   And if you've got something solid to keep it in, you don't have to worry about a crackhead ever walking off with it...just too heavy.   I recommend every one stash $1,000 worth of nickels just to annoy the treasury.

How volatile?   0% volatility.   It will always be worth 5 cents, so the risk of copper/nickel devaluation still leaves you with a nickel....and today, you can still exchange fiat for nickels with zero premium.   I wouldn't expect this to last forever.   However, they'll debase the nickel (i'm guessing) before they start to charge a premium at the banks.

You'll feel good when you sell your $1,000 worth of nickels in 10 years.

Tue, 05/07/2013 - 00:32 | 3536661 Antifaschistische
Antifaschistische's picture

Nickel volatility...historical price charts.  At one point, the melt value of a nickel approached 7 cents.  Mexi-preneurs were taking truckloads of nickels into Mexico and melting them down.  Then, legislation outlawed these mass exporter/scrappers from taking nickels outside of the US.   Which will probably happen with US Gold/Silver coinage eventually.


Mon, 05/06/2013 - 23:39 | 3536571 cynicalskeptic
cynicalskeptic's picture

Funny thing about coins - even the'base metal' ones.  

When a currency enters hyperinflation, coins disappear. The value of the metal - even base metals - exceeds their monetary value.   And while nations can print paper currency easily, revalue and reissue new issues,  it is far more difficult to coin the vas amounts of coinage tyupically used in any economy.  In Zimbabwe, even though you saw three differnt issues of paper currency - first lopping off 3 zeros and then 12 zeros (with $Zim 100 Trillion revalued at $ZimNew 1) NO NEW ISSUES OF COINS WERE EVER ISSUED. Old coins were valued at close to their original value (when exchanged) in comparison to paper notes.

The US might be better off following Canada's lead in issuing $US1 and $US2 COINS to replace paper notes.  Those coins would likely hold value better than the paper money. 

'Money' has been debased throughout history.  The longest run of ANY money was that of the Eastern Roman Empire but even that was debased over time.  A coin made of silver or gold has less and less of that metal over time until eventually it is made completely of some base metal.  BUT as that happens, the 'good' coins disappear from circulation (the ones that are real gold and silver are hoarded to preserve 'savings' - the 'good' moeny being driven out by the new 'bad').  It was far more difficult to keep an adequate amount of coinage in circulation to facilitate trade.  Today, money is created electronically - or to a far lesser degree, printed.

The US already debased its coinage withthe cessation of 90% silver coins in 1964 - and the eventual withdrawl fom circulation of those that remained (though some do remain in circulation, they are quickly removed and hoarded by those aware of the true value of these coins).  I know someone working for the NYFed when tey started removing silver coins from circulation.  He went out and emptied coin changers, got coins from banks and did all he could to hoard the 'old' coins.  Even with the marginal run up in the price of silver (this before the Hunt Bros) he managed to have a downpayment for a house in a short time.  (I expect he could have paid for it outright had he waited a few more years). 

As for the nickel - they're already looking for a way to eliminate the (relatively) costly nickel content.  Metal content is close to face (and has exceeded it in the past with higher prices).  It costs more than 5 cents to produce.  They pretty much eliminated most of the coper in pennies in the 80's but even the current metal content is close to face value (with total cost of production exceeding the face value).

Tue, 05/07/2013 - 00:43 | 3536679 Antifaschistische
Antifaschistische's picture

Here's a double whammy for you trouble makers..

If you have some space...pick up $1,000 worth of pre-1982 pennies from these "sorter" dudes.   US Treasury HATES these guys.  These are the guys that operation the coinstar like machines.  Figure $1,000 in all copper pennies will consume the space of 12 large shoe boxes. 

Then, they ship these super heavy loads to you via US Postal Service boxes.   So, you weigh down the Postal Service....AND you force the Treasury to replace the copper pennies you've helped suck out of circulation., I don't know the dude at pennybullion but I did buy some pennies from him off of ebay...

ps #2...I tipped the postman and he really appreciated it.  I'm sure that's a violation of something.....good.


Tue, 05/07/2013 - 02:15 | 3536732 ebear
ebear's picture

I still have some aluminum coins from a trip  to China in the 80's.  

They even float on water!  Well.... almost.

Mon, 05/06/2013 - 22:34 | 3536449 helping_friendl...
helping_friendly_book's picture

Summary Fine Troy Ounces Book Value       Gold Bullion 258,641,878.074 $10,920,429,098.79 Gold Coins, Blanks, Miscellaneous 2,857,048.173 120,645,943.46       Total 261,498,926.247 11,041,075,042.25  
Mon, 05/06/2013 - 23:37 | 3536567 Vooter
Vooter's picture

Those sure are some purty numbers on that page...typed up all perfessional like!

Tue, 05/07/2013 - 00:21 | 3536645 helping_friendl...
helping_friendly_book's picture

Did you even look at the link? What a douche!


There is no wonder, for myself, why this nation is failing! You who can't even read or write trying to challenge us who have spent our lives reading the newspaper to, actually, render a lucit opinion while you fart catchers wonder why the sheriff's deputies place your fnanced posessions on your front lawn! I don't pity you!!!! I blame you for not reading news papers when np, actually, had real reporting.

I pity you who are about to be living in cardboard boxes.

Not in my neighbohhood; thank my maker; since a pass is required.


Here it is again:

Summary Fine Troy Ounces Book Value       Gold Bullion 258,641,878.074 $10,920,429,098.79 Gold Coins, Blanks, Miscellaneous 2,857,048.173 120,645,943.46       Total 261,498,926.247 11,041,075,042.25  
Tue, 05/07/2013 - 00:34 | 3536662 TwoShortPlanks
TwoShortPlanks's picture

"since a pass is required"....San Quentin or worse, Johannesburg?

Tue, 05/07/2013 - 08:11 | 3537005 Vooter
Vooter's picture

In fact, I DID look at the link. What don't you get about my response?

Tue, 05/07/2013 - 10:03 | 3537366 helping_friendl...
helping_friendly_book's picture

I was merely answering philipats question with the information on the official U.S. Treasury. he asked and I answered.

What ? You don't trust our gov't? Of course the gold is there as they say! Why would they lie?

Mon, 05/06/2013 - 21:17 | 3536237 RebelDevil
RebelDevil's picture

There is A VERY GOOD REASON why the gold standard restricts government spending.
"Can't spend what you don't have, right?"
Well Nixon changed that in order to fund the Vietnam War, and it fucked us up with debt and money printing gallore!

Mon, 05/06/2013 - 21:28 | 3536269 JoeSexPack
JoeSexPack's picture

Purpose of 'Nam may have been exactly that, break US from gold standard to force world on 100% fiat.


Banksters like that.


JFK wanted silver notes & no war in Nam, so he had to go.


Throw in Immigration Act of 1965 & affirmative action to replace America's problematic (independent) white males with a more easily misled 3rd World polyglot & we see the Banksters' endgame strategy.


Mon, 05/06/2013 - 23:15 | 3536540 Kirk2NCC1701
Kirk2NCC1701's picture

Good analysis. You sure seem more insightful than your unassuming name suggests.

Tue, 05/07/2013 - 01:50 | 3536723 JoeSexPack
JoeSexPack's picture

Sex sells, so I put that in my screen name to catch attention, & used a funny photo from a Croatian vacation.


No bikinis allowed in oldtown Hvar.


Will post more analysis in future.

Tue, 05/07/2013 - 00:13 | 3536624 newworldorder
newworldorder's picture

The events you identified as well as numerous others since 1960 cannot be accidental. They have to be by designg and enacted in plain site over the last 50 years. Unfortunatly, we have been at the point of no return for at least 10 years. As the older demographic dies off, the institutional memory of what this country was prior to the 1960's will only be a footprint in history books to be interpeted by the new elite and their economic serfs - as they see fit.

Tue, 05/07/2013 - 07:15 | 3536902 jeebus
jeebus's picture

A Gold AND SILVER STANDARD is a good standard.

There are only 2 swimming pools full of gold in the whole world. The gold market was small enough to be manipulated 50, 100 years ago:


Gold is simply not plentiful enough. You need to incorporate silver. Especially in today's world of over 7 billion people. 

Tue, 05/07/2013 - 07:50 | 3536965 DanDaley
DanDaley's picture

The problem is equal parts lack of gold standard and lack of honest politicians (honest politician generally being an oxymoron).

Mon, 05/06/2013 - 21:03 | 3536185 Burt Gummer
Burt Gummer's picture

"Au, Ag, and Cu coated Pb"


That sounds like a fantastic tradition, almost like barbarous relics from the ancient past. I'll trade you an up vote for an ounce of Ag, how does that sound?





Mon, 05/06/2013 - 21:10 | 3536212 Alpo for Granny
Alpo for Granny's picture

Answer: A prophylactic for when the government fucks us via profligate spending.

Mon, 05/06/2013 - 21:02 | 3536180 OutLookingIn
OutLookingIn's picture

A currency "gold standard" is only half the solution. The simple half.

The other being, remove the power to create currency from the banks and return it to the people.

Accompanied by legal, water tight laws, governing the creation of currency.

A common argument against this is; "There's not enough gold." Poppycock!

If the present amount of dollars were to valued against gold, then the price of gold would be north of $20,000 per ounce. Then you would have enough gold.

Will the above ever happen? No f-----g way! The powers that be don't want that.

Mon, 05/06/2013 - 21:15 | 3536228 FreeMktFisherMN
FreeMktFisherMN's picture

Let currencies themselves compete. I don't want some bureaucrat having the monopoly to arbitrarily decide the 'value' of gold. 

Mon, 05/06/2013 - 21:25 | 3536264 OutLookingIn
OutLookingIn's picture

The "value" of gold is set by the free market. Supply & demand. Simple.

Mon, 05/06/2013 - 23:05 | 3536519 StychoKiller
StychoKiller's picture

The daze of $-reserve currency status are numbered.

Mon, 05/06/2013 - 23:21 | 3536550 Kirk2NCC1701
Kirk2NCC1701's picture

That would be far, far, far better. - Talking Heads.

Mon, 05/06/2013 - 21:06 | 3536201 Son of Loki
Son of Loki's picture
U.S. Dollar to Become the Next Yen?



In its latest meeting minutes, the Federal Reserve said it will continue with quantitative easing, creating $85.0 billion in new money monthly, in order to bring economic growth to the U.S. economy. (Source: Federal Reserve, May 1, 2013.)


full story:

Mon, 05/06/2013 - 21:07 | 3536204 ziggy59
ziggy59's picture

'71, wasnt it?

Mon, 05/06/2013 - 21:13 | 3536226 JustObserving
JustObserving's picture

August 15th of that year

Mon, 05/06/2013 - 21:31 | 3536280 D-2
D-2's picture

'74 was when Ford gave us the ok to own gold again.

Mon, 05/06/2013 - 23:25 | 3536555 Kirk2NCC1701
Kirk2NCC1701's picture

That was the only decent thing I recall him doing. After his part in the Warren Commission. No wonder his wife Betty turned into an alki... they both knew what they did to Kennedy.

Tue, 05/07/2013 - 08:26 | 3537054 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"After his part in the Warren Commission. No wonder his wife Betty turned into an alki... they both knew what they did to Kennedy."

I've always seen G. Ford's becoming VP then POTUS as a reward for his Warren Commission "work".

Mon, 05/06/2013 - 21:08 | 3536205 RebelDevil
RebelDevil's picture

Hahaha nice Tyler! LearnLiberty always has great clips like these.

Foward this to the newbies and the naive economics students!

Tue, 05/07/2013 - 09:12 | 3537186 TheMeatTrapper
TheMeatTrapper's picture

Don't forget to send a copy to Krugman and Million Dollar Bonehead.

Mon, 05/06/2013 - 21:11 | 3536216 caimen garou
caimen garou's picture

ya gots to have some gold before you even start a conversation about a gold standard in the U.S.

Mon, 05/06/2013 - 21:13 | 3536225 RebelDevil
RebelDevil's picture

Private ownership (from ZH'ers like us!) will provide a de facto gold-standard starting when the SHTF with the bond/dollar market.

Mon, 05/06/2013 - 21:29 | 3536274 lunaticfringe
lunaticfringe's picture

No shit. The treasury would have to prove they have 8300 tons and they don't. They can't even give England back their gold.

Mon, 05/06/2013 - 21:43 | 3536317 ltsgt1
ltsgt1's picture

I suspect most of that 8300 tons are either leased to JPM or GLD. The Fed probably doesn't even know how much of that has been sold in the form of paper claim or physical delivery.

Mon, 05/06/2013 - 21:10 | 3536217 Freebird
Freebird's picture

just let gold & silver be free, unmanipulated, paperless, full disclosure from bullion banks & CBs & enforce a quasi standard 5:1 for the reckless printers. If many things goes tits up fine as we & they are on borrowed time...reset bitchez

Mon, 05/06/2013 - 21:14 | 3536229 Ignatius
Ignatius's picture

Save in physical gold, transact in the common currency.

Mon, 05/06/2013 - 21:16 | 3536235 knukles
knukles's picture

"That would never work.  There's not enough gold to go around.  But a great currency could be backed by stawks.  And happy CInco de Mayo on the 6th to my gardner and maid.  Hi Jose! Hi Consuela!"
          -Maria Bodyaroma

Mon, 05/06/2013 - 21:36 | 3536301 Peter Pan
Peter Pan's picture

This statement makes you wonder how ancient peoples managed to exist AND flourish when gold and silver holdings were far fewer albeit with a smaller population.

Tue, 05/07/2013 - 00:43 | 3536676 Manipuflation
Manipuflation's picture

knukles, you are one hell of a good writer Sir.  You would be a great fit on a certain website that some asshole dreamed up.  I saw the post you made here on ZH that the Tylers posted and it was excellent.  There's MOAR where that came from I just know it.  I just want you and everyone else to know that I only post links to that site on ZH and no where else.  Six times in three months to be precise and ZH'ers are liking it so far seems.  Are Zh'ers starting to figure out that I financed the site, maintained contact with some very good technical people over the years and eventually built a site that is, get this, for ZH'ers that need to write really long posts to get their points across.(like me) 

I think I have said this just shy of one thousand times now, but I am no fan of censorship.  We all know knukles is talented but there are a lot of others out there who are short selling themselves.  The site was built for the purpose.  I know that I am not wrong about the talent that ZH'ers possess.  Let's kick their asses with our keyboards to an even greater degree.  We are always going to love ZeroHedge but we can do even moar intellectual and visceral damage if we try hard enough. 


Ask me whatever.

Mon, 05/06/2013 - 21:24 | 3536262 earleflorida
earleflorida's picture

keepin it simple


Mon, 05/06/2013 - 21:25 | 3536265 Shell Game
Shell Game's picture

Silver kills werewolves, gold kills Statists. 'nuf said...

Mon, 05/06/2013 - 22:32 | 3536444 rehypothecator
rehypothecator's picture

You have to actually drive the silver stake through the beast's heart to kill it, but with Statists, it's enough for you to merely own gold, to kill them.  But, unlike driving silver stakes through hearts, owning gold sure does take a while to take effect.  

Mon, 05/06/2013 - 23:28 | 3536560 Kirk2NCC1701
Kirk2NCC1701's picture

Which metal kills Banksters? Rhetorical question.

Mon, 05/06/2013 - 21:32 | 3536267 Freebird
Freebird's picture

yup maybe just too much paper & inflated asset prices together with systematic fraud, so let paper & the criminals burn & allow true price discovery on precious metals

Mon, 05/06/2013 - 21:29 | 3536277 Stinko da Munk
Stinko da Munk's picture

Given how low my standards are, gold might be an improvement.

Mon, 05/06/2013 - 21:33 | 3536281 essence
essence's picture

The term "Gold Standard" is a wide umbrella. In the past there have been different versions.
Invariably, there were political constraints that affected the implementation. The common denominator is that once government sticks its nose into it ...corruption follows (government=force=corruption).

Beware anyone who uses the term without laying out exactly what they envision.

My own thoughts are that competing 'money' outside the sphere of influence of government  is the best option.

Bitcoin, PMs, paper fiat ..... why not let them all compete and let the public choose which to embrace. Both physical and digital models have a place in this world.




Mon, 05/06/2013 - 23:39 | 3536570 Kirk2NCC1701
Kirk2NCC1701's picture

I like to liken gold an silver to rigid distance markers. What unit you use in between can be arbitrary, but must be indexed to the markers.

Both paper or cyber money can serve as currencies, but the crypto-cyber version is more portable in a cyber age, and not under the control of Central Banksters.

Ideally I'd like to see BTC backed by tons of gold, silver and platinum -- as purchased by the users. Then it'd be a global currency, but not under central control.

Mon, 05/06/2013 - 21:34 | 3536292 Peter Pan
Peter Pan's picture

What people do not realise is that a de facto gold standard would exist if money printing exceeding population growth ceased. The problem is that governments are hard to control.

Mon, 05/06/2013 - 21:38 | 3536296 lunaticfringe
lunaticfringe's picture

At one time in our history, the United States had over 20,000 tons of gold. Twelve thousand tons of that was sold and virtually nobody noticed.

The treasury does not need congressional approval or any approval to sell gold nor do they have to report sales. Since there has been no audit of our gold reserves ever- what we have left is anybody's guess. i would not be shocked to learn we have nothing left or that Fort Knox is just an empty as those storefronts in my town. 

Anybody trusting anything this government a complete idiot.

Mon, 05/06/2013 - 21:45 | 3536322 JJ McApe
JJ McApe's picture

The fed should just do their work properly and not only print cheap money. no goldstandard needed for all of that. stop this QE madness, raise interest rates and let the economy crash & HEAL for a few years. thats better than keeping it artificially intact while the real economy not healing at all. it makes no difference in the long run. it makes it only worse.

government and banks need some ethics and morale - and not only greed. no company nor bank should ever be bailed out. let them go belly up and then look - they will learn to behave. without consequences they just keep going...

this is no real economy anymore. this is just a giant farce, and they call it free markets. what is free??? nothing. everything is run by cheap money. hilarious isn't it.

Mon, 05/06/2013 - 22:09 | 3536379 bluskyes
bluskyes's picture

This doesn't address the interest charged by the Fed for the initial issuance of the currency. This amount is un-repayable, and is an ever-tightening rope around America's neck.

The Treasury needs to take back the issuance of the currency, or change the Fed's mandate and corporate charter - forbidding the charging of interest to the Treasury.

IMO the Fed does more harm than good, and should be completely disbanded

Mon, 05/06/2013 - 21:58 | 3536336 Supernova Born
Supernova Born's picture

Jim Grant is amazing on the subject.

Mon, 05/06/2013 - 21:53 | 3536337 Aquarius
Aquarius's picture

Bottom Line:

The World's Global Community is on a Gold Standard, naturally.

When all is lost and the 'no confidence possible' principle in government and "leadership" elites is finally validated (again),

the inflated market values of mostly rather useless and meaningless asset classes and services collapse to reality,

for all to see, and those of the ruling Belief System of exceptionalism and consensuality bear down on the rising masses that feel - hear and see the

frauds, theft, murder and lies in open sunlight, - these power merchants [of death] of the Status Quo, aka the Dead, erect barricades and bring murder, genocide, incarceration and torture and scream out over the sounds of gunfires and cries for mercy, 'kill the Terrorists and Militants for the sake of "National Security"'; indeed when this happens,

all is to be measured to Gold. There is nought else.

Gold is our only Standard; it is Natural Law. Gold sterilizes the filth and sins of those that would be kings.

Gold is God's Standard on Earth.

When all else is lost, Gold stimulates growth in integrity.

Pallas Athena

P.S. Expect, a priori, any "Gold Standard" devised, introduced and managed manipulated by the Richard Craniums of the elites, to be fixed in their favour.

Ho hum

Tue, 05/07/2013 - 10:45 | 3536367 bluskyes
bluskyes's picture


The problem with a lot of the talk around "gold standards" is that we use a "dollar" denomination which gave the government an angle to come in, and arbitrarily change what quantity of gold a dollar represented.

What is really needed is a true "gold standard" where each note acts like a storage receipt - it represents a specific mass, and purity of gold in a vault. Such a system would be easy to maintain. Use ozt as the unit of measurement, and have notes denominated in 1ozt, 5ozt, .10 ozt, .01ozt, and so forth.

I think such a system would go a long way in establishing a trustworthy money system.

Mon, 05/06/2013 - 22:07 | 3536376 tony bonn
tony bonn's picture

"'s paper currency has no intrinsic value..."

that statement is not correct. paper money is a consol and has value as long as the underlying debt has value. however, debt, like cotton candy, can be manufactured by the barge load with little in the way of substantive ingredients....monsters like bernankula mount a skittle shitting unicorn and drop the cotton candy like boll weavil infested cotton and claim that we have arrived at our celestial reward...

Mon, 05/06/2013 - 22:08 | 3536380 Magnum
Magnum's picture

Martin Armstrong has a terrific blog and he's been writing on the subject.  A few days ago his relatively long post about his disgust of the people who claim the fort knox situation is a dire problem for gold, is an interesting read.  He says the fort knox rumors drive average investors away from gold ownership.  Very insightful from a guy who has seen a Lot in his days. I am not sure what to think about it but common sense suggests gold prices will trend up in coming years.

Mon, 05/06/2013 - 23:03 | 3536515 XitSam
XitSam's picture

I don't follow the logic. If Ft. Knox was empty, wouldn't that drive people to own gold?

Mon, 05/06/2013 - 23:49 | 3536590 Magnum
Magnum's picture

Read here from the horse's mouth, it's a unique perspective:

Martin Armstrong has an interesting history and he made his first fortune as a kid working in a gold shop.  He's been writing a lot on the subject of gold, and (I think) he says gold needs to be above $2300 to really take off after that, and much depends on individual people desiring to own it.  

Mon, 05/06/2013 - 22:18 | 3536404 el-greco
el-greco's picture

If US ever decides to cease waging wars around the world, it could adopt a type of gold standard, but impossible for now given the agenda.

Mon, 05/06/2013 - 22:31 | 3536440 Kirk2NCC1701
Kirk2NCC1701's picture

My Golden Rule: Pay others the way you want to be paid. In Gold.

Mon, 05/06/2013 - 22:32 | 3536442 bubblemania
bubblemania's picture

A basket composed of gold, silver, palladium, copper, zinc and a US energy unit (gas, oil or coal) should be used to back the dollar. You should be able to exchange your dollars at a clearing house for a basket of these goods. 

Mon, 05/06/2013 - 22:35 | 3536456 bluskyes
bluskyes's picture

How could that be accomplished. I would view a move in that direction to be a step toward nationalization of those producers.

Mon, 05/06/2013 - 22:41 | 3536474 Cabreado
Cabreado's picture

If you think there are those chomping at the bit to Control-by-Gold, I believe you are mistaken.

False leadership is the wrench in the spokes, no matter what your expectations are from here, and no matter how rich, destitute, or disillusioned you have become on the way.

Gold is Gold (I failed the boating safety course, too), but

Control is Control... and it comes from the psyche -- not "precious metals."

Tue, 05/07/2013 - 00:09 | 3536614 toadold
toadold's picture

Looking at the various institutions and individuals aquiring gold and recent moves by various US states to recognize gold coins as legitimate currency the US may end up with a de facto gold standard instead of a de jure standard if a fit hits the Shan.

As one ot fht Bitcoin systems managers has said, right now Bitcoin is just an experiment. Don't put money or time into it that you can't afford to lose.  It is fun watching some bankers sweat the possible loss of the 3% credit card fees by businesses using Bitcoins. 

Tue, 05/07/2013 - 00:44 | 3536659 Radical Marijuana
Radical Marijuana's picture

There is only one universal basic money standard, which is the murder standard.

All other possessions of commodities depended upon robbery, backed by murder.

Gold or silver are only better because they are closer to the laws of nature, in the sense of the conservation of matter. However, those notions have been utterly overwhelmed and superseded in every way by the discovery and proof that matter is a form of energy.

Videos like this one are nice historical reviews, but they have nothing serious to offer as solutions, except to recommend that we go backwards, which is always impossible. It is completely goofy to recommend that the USA, or any other place, go back to a gold standard. What we need is a truth standard in our money. Gold had the "Ring of Truth" due to the way it exemplified the conservation of matter, but the conservation of matter is itself an old-fashioned idea, that can not be returned to, no more than we can erase the special theory of relativity, and the ability to make atomic bombs that came from the special theory of relativity.

The profound problems are that money is backed by murder, and therefore, "honest money" is as difficult as "honest murder." The almost infinitely paradoxical problem of an "honest murder system" is the context in which the deeper dilemmas regarding any efforts towards an "honest money system" manifest.

A gold standard does NOTHING to fix up the problems that triumphant frauds in the past have already robbed everything worth robbing, and therefore, the world is already extremely unbalanced. While the current fiat money fraud system continues, the disequilibria are automatically getting worse, depending on which groups are benefiting, or being screwed, by the effects of the runaway frauds empowered by fiat money, made out of nothing, as debts. Those extremely unbalanced situations could never be rectified by a reified return to a gold standard, that simply froze the previous systems of social robbery into place.

Human realities are always organized lies, operating organized robberies, and therefore, monetary systems are always symbolic expressions of those basic realities. Basing money upon a commodity never can do anything but displace the issues over frauds and robberies into other venues. There are no easy way out. Instead, the real problems have been getting trillions of times more difficult and dangerous during the last Century or so ...

The REAL world system today is a global, privatized, fiat money fraud, which is operating electronically, while that is backed up by force, with the threat of weapons of mass destruction, like atomic bombs, being the only thing that provide the "collateral" for having created 100 times as much paper gold as there is real physical gold. (Furthermore, that degree of insane leverage regarding the ratios of fiat money, as force backed frauds, in the rest of the physical world of goods and services, is constantly increasing.)

Therefore, the REAL world is already 100 times too insane to go back to any feasible gold standard ... Indeed, instead of that insanely imbalanced situation being brought back into balance, rather, it is automatically getting worse, faster ...

Sure, it would have been BETTER if the American system had stayed bimetallic, always, from the beginning up until now. It would have been BETTER if silver had not been demonetized back in 1874, and it would have been BETTER if the Federal Reserve Board had never been created, and it would have been BETTER if America finally never went off the gold standard in the first place.

However, all those things actually happened because the murder standard is the ultimate standard, while militarism is the supreme ideology. America abandoned its constitutionally correct gold and silver based money bit by bit, due to the triumphant application of the methods of organized crime applied to take control of the government, in order to legalize lies, and back those up with legalized violence.

THAT HAS ALWAYS BEEN THE REAL SYSTEM: LEGALIZED LIES, BACKED BY LEGALIZED VIOLENCE. The gold and silver standards have always been pie in the sky impossible ideals, which never worked, since the murder standard was always the reality in the background, which tended gradually to be able to take over more and more control, until it became manifested blatantly in the foreground, as it is today.

Therefore, in every way, from the short-term, through the medium-term, to the long-term, there is only one true and lasting money standard, and that is the murder standard. From a practical point of view, the history of the American monetary system is clearly the history of organized crime taking control over the government, in order to legalize frauds, which would be enforced by the government, However, the deeper longer term issues are even more theoretically important.

Any kind of longer term human ecology must have its murder controls as the central issue to hold everything together. That would also be true about any possible industrial ecology as well. Without enough of those kinds of viable human and industrial ecologies, then there can not possibly be any way to stop the natural ecologies from continuing to be destroyed, which then puts even more pressure on the imperatives to develop human and industrial ecologies ...

The plainly obvious facts are staring us in the face. Recommending impossible ideals as solutions to those problems is always disingenuous! The plainly obvious problem is that there is a world dominated by the American Money/Murder system, because money is backed by murder.  There is no way to actually implement the fantasy of going backwards, to old-fashioned ideals about gold or silver backed money, as a way to perhaps have a more honest government.

The only way to have a more honest government would be to have a more honest murder system. The only way to have sound money would be to have a sound murder system.

Of course, that is why those problems are runaway social insanities, which are being amplified by many orders of magnitude, while any solutions are being left behind in the dust. We routinely have goof ball videos, and articles, like this one above, recommending the uselessly impossible goals of going backwards, by returning to a basic commodity backed currency.

Sorry, but unless murder is a commodity, then money cannot be a commodity. In many real ways, murder is already a commodity. However, those social facts are the most denied and suppressed of all social facts. We are all trapped in the runaway political paradoxes caused by success in warfare being based on deceits, which then enabled sovereign states to be covertly taken over by Fraud Kings, i.e., the current central banking systems, to dominate our world, through their debt controls being actually backed up by death controls.

In the end, this discussion is all just another perpetual propaganda war, stuck in the same old doldrums. Bla, bla, blah ... gold standard ...

Tue, 05/07/2013 - 00:57 | 3536691 Aquarius
Aquarius's picture

Indeed @RM

And this is why it must burn - the whole damned thing, leaving the only question as to when. This cannot be forecast.

I like Natural Justice, Natural Law and Natural Physics (physis): Que sera, sera.

Man cannot govern as he is too eagerly corruptable.

"Terrorists"are all that do not agree with "government".

"Militants" are all those people that government kills (intentionally or out of incompetence).

"Excellence" is dogmatized mediocrity.

The enemy of the Statists, is Risk.

Kali comes; Kali rules; Long live Kali.

ho hum

Tue, 05/07/2013 - 01:46 | 3536721 Manipuflation
Manipuflation's picture

Good post RM.  Speaking of murder, I have written a draft post on predator drones.  That one sits for a day or so though if not a month. 

Tue, 05/07/2013 - 00:44 | 3536673 silverserfer
silverserfer's picture

Shit, we live in a global gold standard now its just that the central banks and nations are such murderous sociopaths that the gold bricks are only traded amongst the elites and by force. paper is flying everywhere because there are so many idiots out there willing to accept it. Gold standard amongst the powerful, paper and just tiny bits of shiny for the sheeps

Tue, 05/07/2013 - 01:23 | 3536699 cynicalskeptic
cynicalskeptic's picture

The whole issue of a gold and or silver standard is an interesting one - but do not forget that it was the BANKERS who preferred a gold standard - though they implemented it in a fractional reserve system. But as long as they could control the money supply it amttered little what form it took.  They profited handsomely even before the establishment of the Federal Reserve.

Though the Constitution originally defined the dollar in terms of SILVER it made a mistake in setting a fixed ratio of silver to gold so that when silver became plentiful with the Nevada strikes, Bankers and business forced through the 'Crime of 1873' demonetizing silver.  The 'Free Silver' movement was really all about INCREASING INFLATION - to the benefit of farmers and others in debt.  The value of their commodities would increase with inflation (though subject to the vageries of weather and overproduction) but inflation masde it easier for farmers and others in debt to pay off that debt.

The truth is that A GOLD STANDARD WAS BAD FOR BUSINESS in the rapidly expanding US.

 There was never enough money in circulation in the form of gold and silver to support the rapidly growing and expanding US.  Much of the gold in circulation in the US was sent overseas to pay for IMPORTED materials and manufacturers (we forget how much the US imported in the 1800's).  The vast expansion of manufacturing and transportation in the expanding US required IMMENSE amounts of capital - much of it BORROWED from Europe (debt which had to be repaid in gold).

This problem (not enoughmoney to conduct necessary commerce)  existed in Colonial America as well.  Pennsylvania (through Franklin's efforts) found a way to address this problem by issuing STRICTLY CONTROLLED amounts of paper banknotes - in proportion to the increase in productive economic activity.   One of the often ignored reasons ofr the American Revolution was Britain's outlawing of this practice and imposition of Mercantile policies onthe colonies where economic activity was to benefit England directly and not the colonies.  Any 'manufacturing' was limited and Colonies forced to import such goods from the mother country (and pay for it in exported goods needed by England or in gold or silver - usually in short supply).    The Isle of Man went through a similar problem after the Napoleonic Wars and came up with a similar solution in the 1800's.  They had materials, labor and goods but no ready measns of exchange .  They issued their own paper money to facilitate commerce, limiting the issuance to the level of productive activity and goods produced.   'Money' represented a measure of labor - direclty or in the form of labor used to produce goods like food or materials.

Without enough money to support the level of economic activity in an economy, that economy remains throttled and constrained.

In the US the solution - after the closure of the Second National Bank - was a patchwork of STATE chartered banks (some beginning their existence not as banks but as other entities - a water copmpany in Manhattan for example)  These banks all printed THEIR OWN bank 'notes' (promises tyo pay) - which were supposed to be backed (eventually only partially) by GOLD.  However there are numerous stories of the same chest of gold arriving at various banks just before the state bank examiner.

Bank Notes were not in standard form until after the Civil War when the Treasury sought to impose some order and control on this mess (and sought to hold the gold that supposedly backed these STILL PRIVATELY ISSUED 'National' Bank Notes.  EACH Bank still issued notes baned on their gold reserves - held by the Treasury.   Not until the creation of the Federal Reserve Bank did you have ONE issuing authority for bank notes.

Throughout the forst part of the 1800's - under the system of privately printed bank notes there was a large problem with counterfeit and fraudulent bank notes - prompting the development of 'security printing' - engraved intaglio printed notes over a litho print background.  A bank note was discounted the farther you got from the issuing bank.  Some were printed for totally fictitous (never existed) 'wildcat banks.'  Some people earned a living buying up discounted bank notes and traveling to the issuing banks to redeem them for gold.  There is an account of a man who traveled to the (then) wilds of Indiania lookign for a bank - finding only a General Store in the small town.  The man said he would tell him the location of the bank the next day (after charging the man to stay the night).  Next day the store owner exchanged the notes with gold coin taken out of the pickel barrel - on the condition the man not tell anyone else where 'The Bank' was.    While some people simply ordered notes made up for banks that never existed, others specialized in passing notes on failed banks,  and a few - in one notabble case- managed to order additional printings of notes for an existing bank though they themselves had no relationship with that bank. Despite the useof security printing, counterfeits continued - at times facilitated by the use of 'standard' components on plates that could be compiled from plates made for now defunct banks (you could buy such plats at a bankruptcy sale until printers began ito insist on maintaining possession of plates as a way to insure the 'integrity' of their product.

Large 'bank note guide' journals were issued regularly to identify bank notes in circulation - real, fake and counterfeit - and would be found at any retail establishment and local bank.  Some banks had a good reputation and others had bad reputations.  You had the absurd situation where counterfeits on 'good' banks would be accepted and exchanged while real notes on 'bad' banks would be refused.

But financial 'panics' - sometimes engineered by 'strong' banks would periodically send people to banks demanding exchange of their paper bank notes for real gold.  There was NEVER enough gold on hand in a vault to redeem all the outstanding bank notes (fractional reserve banking - 40% was the minimum you had to hold, though many banks held less).   When such a run began, banks would then be forced to call in loans - payable in GOLD, forcing debtor farmers and businesses into bankruptcy (or new ownershio of that creditor bank).

THERE WAS NEVER ENOUGH GOLD AVAILABLE IN THE US DURING HIGH GROWTH TIMES - though the discovery of gold in California helped,  the time lag between extraction, coinage and shipment to the East was substantial and shipwrecks like the Central America could play havoc with financial markets.    The economy was expanding and needed infusions of 'real ' moeny - e.g. GOLD  - to back teh expanded amount of bank notes or credit issued.  WHen a large amount of expected gold did not arrive and bank reserves got dangerously low, it could set off a panic.

NOTE - the huge expansion of industry and government spending on materials and men during the Civil War COULD NOT HAPPEN UNDER THE CONSTRAINTS OF A GOLD STANDARD - there was simply not enough gold available.  hence Lincoln's 'Greenbacks'.  The South could hold out ONLY for as long as they could export cotton paid for with gold in England whihc was used to pay for imported armaments.

In the past, Kings short of gold in their treasury had to tax their own populace or BORROW GOLD from bankers to fund wars - counting on the spoils to repay those loans.  There was always the risk of losing hence high interest rates n such loans charged by the bankers.  If you could not obtain adequate funding - through taxing or loans or looting your own populace, odds were you would not be at war long.  Unpaid troops are not likely to continue fighting.


IF THE MONEY SUPPLY OF ANY ECONOMY EXPANDS IN PROPORTION TO THE LEVEL OF ECONOMIC ACTIVITY (AND CONTRACTS WHEN ECONOMIC ACTIVITY CONTRACTS) YOU WILL NOT HAVE MONETARY INFLATION AND WILL HAVE PRESERVATION OF SAVINGS.  Inflation benefits those in debt - hence it is welcomed by the masses who are usually in debt to varying degrees BUT those who already have a large amount of wealth also now hold large amounts of debt themsleves and so benefit disporportionately.  When BANKS loan out their own money - the money ion deposit in their banks -  they do not want inflation. The value of the capital they hold and the debts teh hold goes DOWN in such a situation.  Keep in mind that unrtil the creation of the Federal Reserve (and access to Central Bank funds) inflation in the US occurred primarily d=uring wartime and was not common.  Bouts of inflation were offset by bouts of deflation.  Overheated expanding economies would contract periodically, at ties waiting for the money supply to 'catch up'.    But in the current system when Banks have access to Central Bank funds and government funds at low interst rates, the banks themselves are also major debtors and benefit from inflation.

But few nations can resist the temptation to debase their money supply (and profiting from the resulting inflation so they can borrow moeny and pay off those debts with devalued money in the future).  NAtions also choose to consciously devalue their money relative to other nations to give their products a 'competitive advantage' (lower price when bought as imports in another nation).  Sometimes thsistrategy CAN work to a nation's advantage and not impact domestic inflation rates but this is rare.  Eventually other nations react and imports will cost more.  Trade balances shift back and forth leading to further instability.  Labor prices may have to be reduced to keep prices on goods at the same level, undoing the original advantage gained by devalueing the nation's money.

The US got away with horrid monetary policies - living on credit for decades and having far lower prices on goods than those paid by other nations  - by artificially FORCING others to use $US to settle international debts in the place of gold (though in theory you could redeem 'escess' dollars for gold, few nations did so regularly until the late 1960's - early 1970's when the $US began to show signs of inflation.)  This was primarily accomplished by the sheer economic dominance of the US after WWII (Bretton Woods) and then by the creation of the petrodollar - where a nation needed $US to buy oil from the Saudis and others.

DeGalle realized the con game the US was pulling  and his insistence on redemption of $US for gold forced Nixon to close the gold exchange window and abrogate the conditions set forth the Bretton Woods agreement.

The total inflation that should have been seen in the $US has - until recently - been partially borne by all those nations using the $US s a reserve currency in trade.  But that is ending.  Despite heavily manipulated inflation and GDP stats the $US is losing buying power.  Only because other paper currencies are in WORSE shape has the $US held up so far.  But eventually governments will be unable to service the debt they have acrued.  The advantage held by the LAST government to default evaporates when it DOES finally default.  Then the 'last refuge' which the $US is promoted as being - brings down a far larger number who fled there.  US military might will NOT be enough to force other nations to accept a worthless $US in exchange for needed oil, raw materials and manufactired goods.  THAT is the flaw in the neo con dream of dominating oil supplies in the Middle East.


Put simply ANY SYSTEM that limits expansion of a money supply to the expansion of goods and services produced in an economy (and best yet CONTRACTS that supply when the value of goods and services contracts) is of benefot in keeping a STABLE system.

ANY SYSTEM that limits the ability of governments to debase their money supplu is GOOD for the populace in general.  IF you have a productive populace profiting from their labor you do NOT want inflation.  

If you have a populace dependent on government handouts to maintain minimum living standards  for a too large unproductive populace  - think Rome's bread and circuses - you need to pay for that somehow.  So in the latter scenario you either militarily conquer others and steal their wealth or you create more money to pay for that government support.  Neither of these options can go on forever.  Most Empires start out being highly productove, then transition into a mode where they extract wealth for oters and eventually, when that option no longer produces enough wealth to pay for all that government spends, then they proceed to expansion of the money supply.  And THAT is the beginning of the end.   No way out.

Tue, 05/07/2013 - 01:45 | 3536720 joak
joak's picture

Yeah, that's exactly what the German economists did during the thirties : adapt the money supply to inflation and worked hours. And it worked. They also controlled the importation of commodities to avoid trusts to manipulate the prices. In short, Germans said to banks and trusts : the rip off is over. Which probably explains why they became THE enemy of the whole world.  

Tue, 05/07/2013 - 01:37 | 3536717 joak
joak's picture

Here is a topic that is never discussed here, because it happened in Germany during the Thirties I guess. Everybody knows that Germany initiated an incredible economic recovery, but few people knows why. Actually, Germany was one of the few countries to have 100 % fiat currency and almost no access to foreign loan. Despite that, the German fiat money, during a few years, managed to create less inflation than the currencies backed by gold (entirely or partially). I would like someone like Pr Fekete to analyse what the Germans did at that time to have a stable currency and strong economic growth.

And oh yes, I like gold etc., but for the sake of the truth, I think those economic policies have to be assessed (yeah it was under the ruling of the very evil Hitler, but we talk about economics). Because I always heard that fiat currencies cannot be stable, while this example tend to prove the opposite, and suggests fiat itself might not be the culprit, but the way you manage it.

Tue, 05/07/2013 - 04:52 | 3536794 Mr. Hudson
Mr. Hudson's picture

Read John Gunther's "Inside Europe". He explains what Hitler did to make the German currency so strong.

Tue, 05/07/2013 - 01:52 | 3536724 New American Re...
New American Revolution's picture

Which gold standard are you talking about?  A real classical gold standard, or a Sears gold standard?

Tue, 05/07/2013 - 02:24 | 3536735 Aquarius
Aquarius's picture

"... you either militarily conquer others and steal their wealth or you create more money to pay for that government support."

No "or" about it - the USA is involved it both options - I wonder if this then is a 'monetary accelerator'?


Thanks, I enjoyed this and @RM's posts.

Ho hum

Tue, 05/07/2013 - 02:41 | 3536740 TheSheepWolf
TheSheepWolf's picture

The gold standard might be better for people as it helps to maintain a stable purchasing power. However the guys who run this show have different set of goals I guess...

Tue, 05/07/2013 - 05:04 | 3536799 Mr. Hudson
Mr. Hudson's picture

It's all about making money. Who owns the majority of gold? Those that own the gold keep the price supressed because we will one day return to a gold standard, and when we do, gold will go to $10,000-$20,000 an ounce. Those who have the gold will become rich beyond their wildest dreams. But, before we go to a gold standard, there will be another Gold Confiscation Act. Marc Farber said so. So, you better hide any gold you have.

Tue, 05/07/2013 - 07:06 | 3536884 Hail Spode
Hail Spode's picture

History teaches us that governments debauch their own currency.   If we went to the gold standard they would just start the process of debasement over again.   The real solution is to make all currency private, and the role of the government in this matter is simply to enforce the contract that the issuer of the money shall uphold its value.  There is an implied contract by the issuer of money that the issuer will keep its value sound.  How can we trust government to enforce that contract when they are one of the parties to the contract?   The conflict of interest is inheirent and irresistable.  This is explained in more detail in "Localism, A Philosophy of Government"

Tue, 05/07/2013 - 07:23 | 3536919 SnatchnGrab
SnatchnGrab's picture

Without enough money to support the level of economic activity in an economy, that economy remains throttled and constrained.



If that argument held true then our economy should be improving by 85 Billion dollars a month. Instead multiple economic indicators (other than the rigged stock market) show the exact opposite.

If that argument held true then the very thing the government / fed should do would be to print and issue money like food stamps to "spur" growth.

Again, people can't find jobs and businesses are sitting on billions of dollars of capital because of regulation and taxes.

Tue, 05/07/2013 - 08:50 | 3537120 GreatUncle
GreatUncle's picture

How do governments get to play the inflate / deflate the debt game?

By ditching any physical standard such as gold because it would reflect the true financial manipulations that were going to happen.

Bankers and polticians in cahoots stitched their populations up a treat but a point of interest never mentioned.

Why was this game played? Because the economy before the inflate / deflate the debt game had already failed a long time back and this was kicking the can down the road.

Well that problem is now orders of magnitude far greater.

Tue, 05/07/2013 - 10:06 | 3537378 northerngirl
northerngirl's picture

If going back to the gold standard is no longer possible then what do we do?  It is clear that TPTB will continue to make and execute policies that benefit themselves at the cost of everyone else.  How do we get back to sound money?  As a country can we even agree on what a sound money policy should be? 

Wed, 05/08/2013 - 06:27 | 3540292 Buzz Hacksaw
Buzz Hacksaw's picture

It's not that a gold standard would not work, it's that our enforcement does not work. Same as always, privilaged intrests sidestep well intended LAW in one way or another, and through corruption enforcement backs off. I can argue that we've never truely seen a gold standard or capitolism or communism for that matter. Just cheep labels spoon fed to the sheep when inreality it's rich people overloeding the surfs.

Fraud is not a grey, to be regulated, act. It is UNLAWFUL and need to be prosecuted. Counterfeiting is Fraud!


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