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.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Triggernometry's picture

Au, Ag, and Cu coated Pb

knukles's picture

Answer:  A Gold Standard is a Good Standard.

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 ?

philipat's picture

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

Antifederalist's picture

Are you Germany?

Funny, they have a similar concern.

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. 

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.

http://www.planbeconomics.com/2013/04/interview-with-ellen-brown-author-...

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!

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).

Then:
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:
http://www.zerohedge.com/news/2013-04-28/it-gets-its-latest-european-lifeline-life-greece-about-get-even-harder#comment-3508434

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!

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.

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.

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.

TwoShortPlanks's picture

From: http://www.jsmineset.com/
“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)”

http://www.zerohedge.com/news/2013-04-22/bill-fleckenstein-hold-tight-your-gold#comment-3486212

http://www.zerohedge.com/news/2013-04-30/cme-chairman-gold-%E2%80%9Cpeople-don%E2%80%99t-want-gold-certificates-they-want-real-product%E2%80%9D#comment-3516317

http://www.zerohedge.com/news/2013-04-30/cme-chairman-gold-%E2%80%9Cpeople-don%E2%80%99t-want-gold-certificates-they-want-real-product%E2%80%9D#comment-3516491

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: http://www.smh.com.au/business/greece-worst-is-over-before-imf-delivers-verdict-20130505-2j1ab.html#ixzz2SVCJMrEQ

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?
http://www.youtube.com/watch?v=Zvl9N9GdraQ

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 gold...now you're talking!
All hail our Overlords!

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 http://www.yesmagazine.org/new-economy/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.

Freewheelin Franklin's picture

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

 
Neo-greenbacker

 

http://www.garynorth.com/public/department141.cfm 

 

 

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.

Professorlocknload's picture

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

knukles's picture

Is Ft Knox as empty as Tsarnaev's grave?

Hulk's picture

Is Banacek Polish ???

Fuh Querada's picture

can you make a bull shot?

PiratePawpaw's picture

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

ignorance

obesity

sense of entitlement

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

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.

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

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 ...

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.

RaceToTheBottom's picture

Any $/ft2 estimates?  How volatile is nickel?

 

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.

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. 

http://www.kitcometals.com/charts/nickel_historical_large.html

 

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).

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.

http://www.pennybullion.com/

ps...no, 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.

 

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.

helping_friendly_book's picture

http://www.fms.treas.gov/gold/current.html

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  
Vooter's picture

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

helping_friendly_book's picture

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

 

http://www.fms.treas.gov/gold/current.html

 

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  
TwoShortPlanks's picture

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

Vooter's picture

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

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?

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!

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.

 

Kirk2NCC1701's picture

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

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.

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.

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: http://en.wikipedia.org/wiki/London_Gold_Pool

 

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

DanDaley's picture

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

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?

 

https://www.youtube.com/watch?v=mfXC9T8hzlY

 

 

 

 

Alpo for Granny's picture

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