Skip to comments.Jim Rickards - Gold Standard Coming, Fedís Hoenig Correct (Bernanke gold standard trial balloon)
Posted on 01/06/2011 7:36:18 PM PST by dollarbull
Fed Governor Hoenig shocked many observers yesterday when he stated, The gold standard is a very legitimate monetary system...We're not going to have fewer crises necessarily. You will have a longer period of price stability or price level stability, but I don't know that you'll have lower unemployment, I don't know that you'll have fewer bank failures. King World News immediately interviewed Jim Rickards who has worked with both the Fed & US Treasury, and who also has a background in national defense as well as consulting with government directorates around the world.
(Excerpt) Read more at kingworldnews.com ...
You paperbugs are going to be screwed
okay I think I understand the arguments on both sides. The usual argument in favor of a fractional reserve system is there is not physically enough gold for it to be used as a means of exchange in the economy.
In early 1983, I wrote Senator Sam Nunn of Georgia
to ask about the redeemability of Federal Reserve
Notes. His reply arrived on March 11 and read (in
part) as posted below.
It would APPEAR that either:
1. Sam Nunn ACTUALLY gets it about what happens when man
(or certain men) play God with money;
2. Nunn DOESNT get it — and some staffer sent this out
without actually READING it or running it by the boss (in
which case said staffer now works for the DC Sanitation
3. None of the above. Because nearly every American is an
economic illiterate, what possible harm could it do to send it?
In which case, you economic illiterates who read this will mutter
So what? and flip back to MTV.
In any event, for the edification of you non-economic illiterates
out there, here it is.
Thank you for your letter requesting information on
redeemability of Federal Reserve Notes for lawful
money. I have enclosed information from the
Congressional Research Service that I hope will be of
The enclosure was 4 pages from something called
“The Gold Standard: Its history and record against
inflation. A Study prepared for the use of the
Subcommittee on Monetary and Fiscal Policy of the Joint
Economic Committee, Congress of The United States.” It
was printed September 18, 1981. I was sent only the
England and U.S. portions of the study. What they
revealed was most interesting. From the England study:
“England has had 350 years of experience with
various forms of the gold standard. She first went on
the gold coin standard, de facto, in 1717. This was
done by Sir Isaac Newton, then Master of the Mint (and we all know what a dumb ass HE was). It
was done by pricing gold at the mint more favorably,
relative to silver, than in the marketplace. An Act of
Parliament in 1816 gave formal recognition to this
‘new’ monetary standard that had been operational for a
century in promoting England to a world power.
“Between 1797 and 1821, England temporarily
suspended the gold standard because of the economic
disruptions of the Napoleonic Wars. With no gold
backing to the currency, the supply of money had no
discipline except that imposed by the Board of
Governors of the Bank of England (analogous to our Fed
The result was that wholesale commodity prices shot up
nearly 50% in 4 years-a momentous inflation.
The ‘Bullion Committee’ was formed by parliament
to investigate. Their findings read in part as follows:
‘The suspension of cash payments has had the
effect of committing into the hands of the Directors of
the Bank of England, to be exercised by their sole
discretion the immediate charge of supplying the
country with that quantity of circulating medium which
exactly proportioned to the wants and occasions of
the Public. In the judgment of the Committee, that is
a trust which it is unreasonable to expect that the
Directors of the Bank of England should ever be able to
discharge. The most detailed knowledge of the actual
trade of the Country, combined with the profound
Science in all principles of Money and circulation,
would not allow any man or set of men to adjust, and
keep always adjusted, the right proportion of
circulating medium in a country to the wants of trade.’
“Gold convertibility of the currency was resumed
in 1821. It is a matter of record that wholesale
prices came back down immediately to the level
preceding the hiatus in the gold standard.
“England was again off the gold standard between
1919 and 1925. When she resumed gold convertibility it
was on a gold bullion standard where she remained until
1931, when she went off the gold standard altogether in
the midst of the Great Depression.”
Under the United States, we find the following:
“The long period of the gold standard in the
United States was not an economic nirvana. The most
severe inflationary period reaching completion under
the gold standard was from 1897 to 1920. But from
trough to peak, the average annual compound rate
was 5.4%—mild by present experience. And most of this
occurred from 1914 to 1920 when the European war and
its aftermath bore so heavily on the domestic economy.
If we look at the period between 1897 and 1914, the
average annual rate of inflation was 2.6% — enviable
from the perspective of today.”
DICK BACHERT (circa 1993)
People look at the gold standard through rose colored glasses, forgetting about the miserable management of it all throughout the 1800s and into the 20th century.
It’s not that I’m for paper or gold. In reality, it doesn’t really matter what medium of exchange is used, but rather the government manipulating the supply of whatever that medium happens to be for all kinds of reasons that likely has nothing to do with what’s good for the average Joe.
What screws us over more than anything else is the government monopoly on money and unless or until that is removed, there is no escaping the screwing one way or the other.
Time to hide those krugerrands, kiddies.
So we've known this for the past 200 years but somehow we keep thinking we can avoid reality?
Coinage Act of 1792...
All you need to know...
there is not physically enough gold for it to be used as a means of exchange in the economy.<<<
HOW STUPD CAN U BE?????????????
I need you in my math class...it can be divided equally ...
If u have any questions after that...please respond
Some folks simply cannot resist playing god.
And, sadly, the rest of the folks, busy with their own lives and convinced that these brilliant folks have some special wisdom or knowledge, let ‘em!
Is it possible to have rational discussion on the subject without each side resorting to name calling? I didn’t say I was pro or anti-gold, just stated one of the arguments.
Fractional reserve banking is part of the problem; it’s basically a legalized form of counterfeiting. Neither the idea of basing money on gold nor the idea of fractional reserve banking should have survived past the middle ages. My own guess would be that the thing which saved both of them was the influx of gold from the New World, but those days are over. The gold standard was a major source of grief all through the 1800s and would be a disaster were it to be implemented now.
Volume???..in this day and age?...If u cant do the math i can
Now!...U may not like the answer...but that's your problem at that point....retreat and plan a new attack
Good post thanks!
“The usual argument in favor of a fractional reserve system is there is not physically enough gold for it to be used as a means of exchange in the economy”
Especially since the US has no gold.
I ain’t hidin’ nothin’. If they can get through my front door, they can confiscate it. They’re free to try.
Hate to change the subject, but we’re talking about spescultion, and I would like to ask the question if anyone has heard of, or have any thoughts on the Iraqi Dinar Investment.
Is it a scam? Legit, but high risk? etc.
Thanks for any responses.
I am sorry, but the US does not have a manufacturing base upon which to rest the value of our currency now, thanks to NAFTA and other free trade BS which has lead to our losing all that. So going back to SOME sort of hard monetary value upon which to back our currency is essential. If we intend to survive that is.
You are partially correct, but the US does have assets to sell. We have advanced weapons, we are still a leading nation in certain areas of technology innovation, plus we have a six hundred year supply of coal, about three hundred years of natural gas that can be sold to the emerging world and the leading world producer of food. Standing in the way is environmentalists and liberal economic illiterates. If we are deep in debt, the dollar’s status as the reserve currency is threaten enough and prospect of default/bankruptcy maybe our true ruling elites will read the riot act to the liberals and something will be done.
“okay I think I understand the arguments on both sides. The usual argument in favor of a fractional reserve system is there is not physically enough gold for it to be used as a means of exchange in the economy.”
It is also extremely inefficient, gold standard is thought to be a good idea by those who have no idea what money is...the primary function of the Fed is to manage money supply. Making certain that there is enough...not too much nor too little currency in circulation. The same would have to be done if we went for a “gold standard”. Personally, I think we should be on a water system...there is plenty of water right??? And water can be bottled and carried in so many convenient sizes...:)
how about a system based on energy - joules.
you give me a piece of paper that say 100 MJ on it.
I can redeem it later for 100 MJ of energy.
I’d like to see the math.
The dollar is already pegged to gold. It depends on how many dollars it takes to buy an ounce of it. It used to be 20 now it is 1500. Gold is worth about the same and dollars are worth a lot less. The Fed may fear Ron Paul investigations.
Because nine people in a room are perfectly capable of determining how much money a nation with a complex economy and a GDP of $14 trillion dollars and 308 million people needs.
We all know that that most of the money supply is bank accounts, right ? People are paid by check, business sales are transacted with check or electronic payment. Currency (paper money) transactions are quite a small percentage of money transactions. There is nowhere near enough paper currency to pay out the dollars in all bank accounts. I think there was only about $800 billion or so, may a trillion, as of this year. That’s chump change compared to our multi-trillion dollar economy, not to mention our multi-trillion gubmt spending. How much paper currency does a person spend out of their paycheck anyway any more ?
Also, in terms of gold, U.S. government-owned gold (fort knox, etc.) is only worth about $300 billion at the current dollar price of the metal. The dollar value of physical gold in the world is trivial compared to the money supply, so it would have to be priced many times what it is now in order to effect money transactions. The industrial uses of gold would then have that much more added cost (gold is a fantastic electrical conductor which lasts a very long time without corrosion due to its physical properties).
It mostly makes sense for anyone with at least modest wealth to simply continue to use it as a convenient and mobile medium of exchange for times of emergency. It can be stored for years, not corrode, and still gain value relative to any currency after many years. People with power and wealth can use it as a little “last resort” value store, i.e., money to “get started again” with. It has always worked great for this during and after wars, certainly better than any currency, because it’s value after the war does not depend on who wins the war.
On the other hand, the number and dollar amount of money transactions continues to increase every year simply based on people wanting a raise, companies trying to increase sales and increase of human population, even if inflation were 0%. Businesses and people need enough money to operate, and there’s no problem with that since banks don’t need to settle up every day with paper currency, they just settle up every night with electronic payments; the check-clearing process is all electronic, has been for years.
To a person or a business, whether a dollar is “backed” by the government or not is irrelevant, right ? Does anyone have the urge to cash their paycheck and demand gold ? No, not as long as they can spend the dollars in their bank account, and get paper currency to buy ice cream cones with.
Our overeducated Federal Reserve guys just don’t understand the physics of business, they think on a “macro economic” level, so they think they can control business revenue and hiring by adjusting the money supply through leveraging and lending by banks. The money supply simply has to be adequate to handle transaction volume; it could be adjusted by formula and we could do without the Fed and never miss it; it’s just not that important to business transactions, it’s just important to the pinheads who sit waiting for basis point announcements.
They don’t understand that the economy is not about the money supply, but total value, i.e., net worth, which increases every year we make a profit. Money is simply part of the asset allocation of the balance sheet. As our equity (net worth) pile grows every year, the gubmnt has to just keep enough currency in the system to replace worn out currency so we can spend cash if we want to. They can lend and print all the dollars they want, only money that is earned is important. Borrowed money is not revenue. Only Revenue can add to Retained Earnings.
They also don’t see that business efficiency is the biggest driver of profitability, and we have reached a plateau for that until people realize that unions, regulation and big business being in bed with big government will hold business efficiency and investor confidence back until those obsolete mechanisms are effectively eliminated. They must be eliminated simultaneously or they will bring each other back, since at this point they are all wound up together.
The benefits of the correct approach at this point would be utterly amazing in a good way, i.e., the world would be shocked at the resulting new standard level of prosperity and consequent U.S. dollar strength. I theorize that the currency strength is actually a measure of total national efficiency relative to other nations (but I’ve never heard an economist say that). Don’t forget that the stronger the U.S. dollar is, the more of a tailwind it gives our economy. Or we can just keep making the government bubble bigger and it will crash even harder when it crashes.
Banksterz like Zoelick>>>>>>>
Now head of World Bank
Has been a managing director at Goldman Sachs
That traitor goes way back. He has been in the revolving door of lawyer/lobbyist/government official for years.
He spent many years getting us into retarded trade agreements like NAFTA and GATT. Since 1990 I have noticed him since he has an unusual name
Then again, I could be wrong. I might decide to buy some gold when it stops going down and the dollar stops going up, as Larry Kudlow was talking about last night.
Roosevelt's order recalled all circulating US gold coins and also voided contracts specifying payment in gold coin.
EO 6102 did not confiscate "privately held gold" except US coin - I'm wearing my grandfather's gold wedding ring while I'm typing this, and he was the most law-abiding man on earth.
They can't, and they won't take your gold, and they don't have to.
They will either outlaw transactions involving monetary gold in the G-20 countries (i.e., you can't sell it) OR crash the price by selling large lots into the private market.
Neither of those will require you to get out your AR-15.
They have done fine for the most part up to and including now...their decisions are transparent. There are a lot more than nine individuals involved in coming to the decisions.
You can now...only you aren’t limited to energy. You can purchase any legal (and illegal) good in the economy with currency that is easily recognizable, very easy to transport, respected, and whose value is very stable.
Mail me to get on or off the Free Republic Goldbug Ping List.
Wendy, you’re probably joking but:
1) if you listen to Kudlow you’re an idiot
2) if you can’t pull up a 10 year chart of gold you’re an idiot
3) if you can’t pull up a 50 year chart of the dollar you’re an idiot
You appear to have quite a high opinion of your own intellect (probably incorrectly so), so what’s going on?
In the judgment of the Committee, that is a trust [appropriately managing the money supply] which it is unreasonable to expect that the Directors of the Bank of England should ever be able to discharge. The most detailed knowledge of the actual trade of the Country, combined with the profound Science in all principles of Money and circulation, would not allow any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a country to the wants of trade.
Didn't work then, won't work now. It's only a matter of time before it fails.
As of 13 October 2009
The US currently holds 261,499,000 fine troy ounces in its reserves. US International Reserve Position, US Treasury
The gold is valued on the books at $42.2222 per fine troy ounce.
This represents a total value of $11,041,063,078.
This value appears on the Treasury’s International Reserve Position US Treasury on Line 4.
Since there are 32150.7466 troy ounces in a tonne, the US Treasury is holding 8,133.528072 tonnes of fine gold.
Written words & figures, nothing more. I do not trust ANYTHING our government says anymore.
I’d like to see some proof that any gold at all still remains in Ft. Knox.
“Since there are 32150.7466 troy ounces in a tonne, the US Treasury is holding 8,133.528072 tonnes of fine gold.”
I would respectfully submit that nobody has been in to look at the reserves since the 60’s and no audit has been performed either. That is what Ron Paul wants to do.
We could not even give the Germans back their $700billion in gold that we were supposed to be holding for them. They asked for it back about 3 years ago. As far as I know we have still not coughed it up. Speculation is that we have either sold it or lease it out.
Also, I read an accounting sheet from I think the end of 2009 and it showed that Obama had quietly sold off almost all of the gold we had left. If I can lay my hands on that report I will post it.
So the truth is we don’t know how much gold is in our reserves. I can tell you I have a 400 carat diamond but if I dont’ show it to you how do you know?
Personally I think we have little or no gold reserves. The government has lied about everything else why would they suddenly tell the truth about the gold reserves?
I saw that movie! With (the late)Robert Urich and it was called Ice Pirates. "Show me the color of your water, Pilgrim..."
Well, I agree that Fed and Treasury are adding to the money supply without the dollars being earned by lending to banks and hoping they will lend to business, who will borrow it from them and then spend, causing (in their pipe dream) demand to increase. The theory is, if I own a business and I can borrow a lot at a very low interest rate, I will borrow and spend. Obviously these folks don’t own and operate small businesses.
But me as an employee wanting raises... if you think about it, when we start out at 18 years old, we just can’t demand a top salary. I worked for less than $10 per hour. As I got older and garnered more education and experience, I was able to change from one line of work to another, eventually winding up in a profession with years of experience earning more of a living wage. In any trade or profession, a newbie will never be worth the salary that an experienced person is worth. Of course, there is a whole working population and people at the top of their field are retiring every day, and more newbies are starting out every day.
But the whole employee-employer market has this upward pressure on salary prices based on people seeking to “move up the ladder”. Of course, there’s a counterbalancing downward price pressure on salaries where employers are constantly trying to find lower costs.
So, to “bring this thing in for a landing”, if I was paid 1/4 troy ounce of gold per week when I was 18 years old, I would sure hope to be paid at least 1 or 2 troy ounces per week by the time I’m 60 years old. God forbid I’m 50 and being paid the same as an 18 year old. In fact, since gold production is not keeping pace with population increase, we would indeed have less gold per capita as time went on. Gold is getting harder for miners to find over time.
Cost of living declining... hmmm that’s interesting. Are you referencing the above declining per capita gold supply ? I don’t think we can ever assume cost of living declining from the time I’m 18 until the time that I’m 60, and I don’t see how currency changes that. Unless you’re saying that a gold-backed dollar where the dollar to gold ratio is frequently adjusted up, but I’m paid in actual gold. Then, yes, my gold would appreciate relative to dollars as the dollars are revalued. Paying in something other than currency causes a lot of accounting for commodity valuation. At the end of the year, when a business wants to know how much it paid it’s employees, it needs to express that in terms of currency. Well, they have to calculate based on the price of gold at the time of each individual paycheck and then add that all up for an “annual salary paid”. This calculation is only avoided if we don’t use a currency at all, but all business transactions are in gold and there is no dollar. This calculation needs to be done for all non-money transactions, which is why we use money. If a business or person only uses one currency, say the U.S. dollar, for an entire year and all their books are kept in U.S. dollars, they don’t have to do any multi-currency accounting and the only time they have to do commodity valuations is when they actually buy and sell commodities.
Businesses and Persons use currencies for some fundamental reasons of very good efficiency in conducting transactions and - the big thing - having a consistent accounting for what they’ve transacted throughout the year.
The current irresponsible wackiness of our government is very frustrating, but I think it inspires us to want to throw out our whole economic system, rather than having the government participants in the system understand fundamentals, not overcomplicate and not try to look for a “magic wand” solution like the money supply to fix fundamental problems like Loius XVI and many others have had; spending too much.
The gubmint seems like a bunch of 7-year olds to me; they’ll talk for ours, spew illogical arguments about the other party wanting to give tax breaks to the rich, they’ll dance around the subject for literally years and not want to admit that they’ve just got spending way too high as a percent of GDP and they continue to want to spend more, all directed at the big-liberal-big-union-big-business-state-legislature cabal that controls most media and elections; thinking that we (like the parent) don’t know what they’re doing. Unfortunately, many union members continue to keep their head in the sand, still clinging to their old thought that the employer has “plenty of money” and is ripping them off, not wanting to admit that the “symbiotic relationship” they have is quickly killing their “host” and they will suffer the same fate as non-union members if the U.S. loses world dominance, when all bets are off.
“Didn’t work then, won’t work now. It’s only a matter of time before it fails.”
Thank God most of us have moved on to the twenty first century and am not limited by the knowledge of the nineteenth century...
Managing the money supply is not anywhere near what would commonly be considered “Central Planning” The Fed’s job is not to decide how much money will be allowed, but to make certain enough is available for ease of transactions including investments. But, also keeping an eye out for having too much is not available. It is the grease or oil for a free market system to work more efficiently. You obviously have not thought through a gold standard economy...you have simply read misguided synopsis from people who do not understand what money actually is. If you really think about it...you are free to use gold or whatever you wish as currency now. Go ahead...
“I saw that movie! With (the late)Robert Urich and it was called Ice Pirates. “Show me the color of your water, Pilgrim...””
Thanks! That was funny. I had the honor of scaring off Mr. Urich one fine day when I was in my thirties...I owned an office building in Salt Lake City and rented space to the production company doing a tv series (can’t remember the name right now...only lasted one season) and Mr. Urich was the star. He drove a red HD motorcycle cross country with his son whom he was trying to re-establish a relationship with. Anyway, they had weekly bad guys on the show. To get the “bad guys” they auditioned at their offices...hundreds of really rough guys came to audition. Then the production company bosses were surprised when they began being broken into weekly and having expensive equipment stolen.
In order to keep the good tenant I and a friend staked out the building one weekend and saw three guys we didn’t recognize enter their office area. We walked around the building...I had an axe handle and my friend had a baseball bat. Mr. Urich happened to be driving up at that moment and caught the look on our faces as we were prepared for battle and he quickly fled the area. I am sure I would have done the same in his shoes...he really could not afford to take a chance on getting injured cause it would have affected the series adversely. Oh, and the guys who entered the building ended up being employees of the production company we had never seen before. After that they asked me several times to play a bad guy...I am too shy though... :) Urich seemed to be a really decent man, sorry he left us early.
I’ve got limited time, so I’m going to point out just 1 of your errors.
No kidding you will make more when you are 40, 50, 60 vs. 18 years old. That’s because your skills increased and you a VP vs. a mail room clerk (or in your case “senior janitor” vs. “trainee janitor”).
That has nothing to do with people demanding “cost of living” type increases, which you see commonly with unions, etc. That’s purely driven by inflation. More money is need for the same job because food, energy etc have risen in price.