We Need Gold Standard to Stabilize Dollar

MoneyNews.com ^ | April 9, 2012

[SaveOurRepublicFromTyranny]

The dollar has lost 85 percent of its purchasing power since the government scrapped the gold standard in the early 1970s, and it's up to Congress to obey the Constitution and bring the system back, says historian and investor Lewis E. Lehrman, author of the book "The True Gold Standard."

[humblegunner]

We Need Gold Standard to Stabilize Dollar

We talk like cave-man, everyone believe us.

[Stepan12]

Interestingly enough, the Articles of Confederation allowed for fiat currency; i.e., emit bills of credit; however, the Constitution does not.

It is not for nothing that Rush Limbaugh describes the Constitution as a near perfect document.

[Freedom4US]

Hate to point this out, but in order to have a gold standard, ya gotta have some gold.

[shotdog]

Do we have any gold in Fort Knox? I watched an hour on History Channel a few weeks ago, which program revealed that no one has been in the sanctum sanctorum since the mid 50s. Do we have any gold remaining with which to prop up our currency? What’s left? Who has the keys? sd

[Lazlo in PA]

This all sounds great until you realize there isn’t enough gold to back the dollar.

[agere_contra]

Sure there is.

The fiat price just has to rise to $12,500 per oz.

[Lazlo in PA]

There is one group that would be excited to see gold spike to that price. Men who have girlfriends pushing them to get married. “Sorry honey. I need to work just a few more years till I can get you that ring.”

[Razzz42]

A gold standard only works in a honest government, of course if you had an honest government, you wouldn’t need a gold standard.

[SQUID]

Desolve the useless FED

[citizen]

I really don’t know much about it but my understanding is that a modern gold standard would simply set the value of various currencies in relation to the value of gold at the time the gold standard was reinstated. The value of the dollar couldn’t then fluctuate so wildly reacting to other currencies or to FED tinkering.

Thus, Helicopter Ben couldn’t go wild printing money and shoving it out the door of his proverbial helicopter as he has been doing for several years. In fact, I don’t think the wild binge of deficit spending the last 30 years or so would have even been possible under the gold standard. Politicians of both the R and D banners - the bankers and their ilk on one side and the progressive socialists on the other - would have to made do with a balanced budget during most of those years.

I don’t understand why these things are so. Perhaps someone will explain it in layman’s terms.

[Freedom4US]

At current prices, assuming it’s all there, the gold at Ft. Knox is worth about 300 billion dollars or so. Current spending is about 5 or 6 billion a day, so..

[MarkL]

I’ve heard this over and over again, and I guess I’m just not getting it.

How does the government get the toothpaste back in the tube? Does the government even have any gold in reserve? Not too long ago, there was a TV show on Ft Knox and they said it’s been a very long time since any sort of an audit has been done on the repository (I think that the last time was during the Eisenhower administration). Wouldn’t the government have to limit the amount of currency in circulation to a relationship to the amount of gold held by the government? And if there’s more currency than gold, what happens? And how would the government “tie” the value of the dollar to gold?

I’m not being snarky here. I really mean that I don’t understand how it could possibly be done.

Mark

[Gunslingr3]

Interestingly enough, the Articles of Confederation allowed for fiat currency; i.e., emit bills of credit; however, the Constitution does not.

Just to clarify, the Constitution forbids States to emit bills of credit.

Article I, Section 10

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

The Colonies and the post-war States had experience with the evils of paper money. It was evenly specifically cited in Federalist #10 as a reason for adopting the new Constitution (to forbid States this deleterious practice): "The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State." - James Madison

"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." - George Washington -- in a letter to Jabez Bowen, Rhode Island, Jan. 9, 1787

The history of mankind is replete with episodes of paper money. The Chinese introduced it (and abused it) not long after inventing paper itself.

[Gunslingr3]

Wouldn’t the government have to limit the amount of currency in circulation to a relationship to the amount of gold held by the government? And if there’s more currency than gold, what happens? And how would the government “tie” the value of the dollar to gold?

The way forward is to introduce a new currency, redeemable in gold. The Federal Reserve need not be abolished, simply remove the legal tender laws that require under penalty of law its acceptance, the market will determine the relative value of Federal Reserve Notes to dollars ('dollar' referred (before FDR and then Nixon) to a specific weight of gold, it was a concrete measurement of a commodity in the real economy that could not be conjured by alchemists, politicians, or bankers).

Paper currencies have come and gone time and again through mankind's history. Governments debasing the money is old as governments abrogating the responsibility of minting money. Their inflation of the money supply, to support government spending greater than what the public will bear in taxation, results in price distortions and economic malinvestment chasing 'paper profits'. The introduction of new currencies to supplant those the government has destroyed via reckless spending has also happened time and again.

[Freedom4US]

Legal tender laws don’t mean what most people think.

If somebody owes dollars or borrowed same, then the lender has to accept them. But there is no requirement to use dollars. If I want to sell my house for tobacco or seashells, that is perfectly legal. Taxes are another matter.

[Gunslingr3]

Legal tender laws don’t mean what most people think. If somebody owes dollars or borrowed same, then the lender has to accept them.

Think about when the legal tender laws came into effect with respect to Federal Reserve Notes.:

Note the part at the bottom that says "will pay to the bearer on demand 100 dollars". Dollars referred to a specific weight in gold. The note was essentially a certificate that could be redeemed for specie.

"Prior to 1933, the name dollar was used to refer to a unit of gold that had a weight of 23.22 grains. Since there are 480 grains in one ounce, this means that the name dollar also stood for 0.048 ounce of gold. This in turn means that one ounce of gold referred to $20.67. Please note that $20.67 is not the price of one ounce of gold in terms of dollars as Bernanke and other experts are saying. "Dollar" was just a name for 0.048 ounce of gold."

But there is no requirement to use dollars.

But if we signed a contract in 1930 that said you owed me $20.67, I could expect repayment equivalent to 1 oz of gold. When FDR devalued the dollar $35/oz of gold legal tender laws meant you could literally repay me with less than 60% of what I had actually lent you in real terms.

Federal Reserve Notes can remain as another competing currency (like bitcoin, rupies, rubles, or euros), but the Federal government needs to be restricted to hard money, redeemable in specie, or (as we're witnessing) nothing can hold the deficit spending and debt in check.

[Freedom4US]

Yes - I’m aware of all that, and more!- “We wuz robbed.”

My point was, however, regardless of the history of monetary debasement, there is no requirement to conduct business in dollars. The seller sets the terms of the sale “no credit cards accepted” or “no checks”, etc.

The other thing the FDR administration did, was repudiate all the WWI Liberty bonds that were to come due in 1938, as well as renege or repudiate all gold-clause contracts, typically used for long term leases.

Technically though, the US was on a Silver standard, at least until 1873.