Skip to comments.Abandoning the gold standard was a fatal error we're now all paying for
Posted on 08/13/2011 5:20:28 PM PDT by PotatoHeadMick
Roll out the bunting. Tomorrow is the 40th anniversary of the modern global economy.
That's right: come Monday morning we will have managed to survive four decades of fiat money though, given the chaos in markets in recent weeks, it is anyone's guess how much longer it will last.
On 15 August 1971, with the US public finances straitened by the cost of the war in Vietnam, Richard Nixon finally cut the link between the US dollar and gold. Until then, the US Treasury was duty bound to exchange an ounce of gold with central banks willing to pay them $35.
Suddenly, for the first time in history, the level of the world's currencies depended not on the value of gold or some other tangible commodity but on the amount of trust investors had in that currency. Central banks were allowed to set monetary policy based on their instincts rather than on the need to keep their currency in line with gold.
(Excerpt) Read more at telegraph.co.uk ...
Yes, we need to get back to SOME kind of fixed standard, preferably gold. Ron Paul and Steve Forbes have this down correctly.
I believe that leaving the Gold Standard was one of America’s great mistakes. Dropping the Draft was another.
the dollar today is widely seen as being worth about $0.03 compared to 1800
if you do the math... we’re still on the gold standard.
the US currently has about $500 billion in gold bullion
the US also has a debt of $14.5 trillion... which is 29 times the value of our gold
$1.00 divided by 29 == $0.035
d to abandon the gold standard because LBJ had simply printed money to pay for HIS Vietnam War and HIS great society. Charles de Gaulle had realized what happened and Charles was converting every dollar he could get into gold. When Nixon realized wed end up with no gold, Nixon took us off the gold standard. Yes indeedie, that is where real dollar printing began, as there wasnt even the pretense that dollars had to be backed by gold.
Now, we could, in essence, go back on a real value standard. We could issue petro-dollars. Each dollar would be convertible into oil. In actuality, oil has real value as you can convert it to energy, plastics or food. Gold, on the other hand, just looks pretty. Of course, this would necessitate drilling our own oil.
Sure as long as the new new gold dollars cannot be used to pay off debt accrued under the fiat money.
*** Until then, the US Treasury was duty bound to exchange an ounce of gold with central banks willing to pay them $35.*****
And anyone who can remember those days it was illegal for Americans to own GOLD thanks to FDR. At the same time FRANCE was buying all the US GOLD it could at $32 an ounce.
When Nixon cut the Gold standard the price of GOLD shot up to about $280 an ounce.
do socialists and rinos ruin people’s lives.
I’ve never understood how a society could put value in a piece of paper backed by NOTHING and accept it for exchange of goods and services. Why not use blades of grass? Tree bark?
I suppose the only thing that makes it ‘valuable’ is the fact that ‘they’ can print it, and ‘we’ can’t....
Today a gold backed US $1 dollar bill would have bought a hundred Euros or more.
Back in the 60’s $1 US bought 360 Japanese Yen.
Today $1 US buys only 76 Yen.
Being a gold bug even back then, I was fully aware of the swindle being pulled off, tried to tell people (Letters to Ed, etc.) - and was pegged as a right-wing kook.
When Roosevelt took us off the gold standard, he left redemption in place for the foreigners - hence the “dollar is as good as gold” saying.
By the ‘70s, the rest of the world, especially France, were alarmed at amount of ever-increasing dollars and started redeeming them. I think the gold backing was something like one ounce of gold for every four dollars in circulation and a bit less for other forms.
In a typical maneuver, the politicians talked the foreign claimants into taking silver instead, replacing their dollars with silver certificates and then converting paper to silver. (I remember citizens doing that, even down to one dollar, getting a packet of silver granules.) They also started melting US silver coins and blaming hoarders for their scarcity - The mint couldn’t make clad coins fast enough and there was a temporary shortage.
While Nixon and the rest were assuring us that “gold was archaic”, I began my first phase of preparing for when TSHTF as I thought this country would only last a few years - shades of the Roman Empire. (I’ve been off in timing but not the direction.)
I believe it’s just a matter of time (i.e. SOON) before things get SO chaotic that we will have to return to a gold-backed but not redeemable currency. IMO, without some brake on the politicians, nothing short of backing like this will keep their spending in check.
Wow, those are two wildly contradictory statements. The first supports freedom, the second denies it.
You're right, I think. But, unfortunately, without the citizens' right of redemption, there aren't any real checks on the politicians.
“Why not use blades of grass? Tree bark?”
I remember asking my father why didn’t we use chickens, but I forget what he told me.
Seriously, I was shocked, really shocked to find out we had only gone off the gold standard under Nixon. I thought it had been long before.
When Steve Forbes ran for pres. and had this as part of his campaign, all the media did was giggle about it.
It was that behaviour that caused me to realize that the MSM is not in any way interested in “informing” the public.
Although I was still shocked, really shocked, to see what shills they were for Obama.
not in any frame of mind just now to vet this logic, however...what you're really saying is the system works; the market allows no free lunch; and Leo Melamed, father of forex trading at the CME, was correct when he said the dollar is on "the information standard."
And it appears to work just fine.
Agreed. I'd really like to see go back to what was basically a redeemable warehouse receipt:
Dropping the Gold Standard does not support Freedom any more than Dropping the Draft deny’s it/
Being born in America is not a happy free life given to our young people. Someone fought for that Freedom and someone will have to fight to keep it. It’s time young people realized that Freedom is not Free, or that the attitude of let someone else do it is a proper one.
Being born Free is a debt owed to our Government and every last citizen when they come out of High School should serve in one way or another so they would appreciate that fact.
6 months and some training in weapons and discipline is the least that should be acceptable. Instead of Government loans they think they are entitled to and somone else required to carry their burden.
Now I know many will not accept my opinion, and I don’t give a damn. Military service of some sort should be a required duty of ever citizen of this country during their youth.
Gold standard - hogwash.
You can find this in google books:
Popular Science Sep 1897
Search and find it. You’ll find the first page:
POPULAR SCIENCE MONTHLY
SPANISH EXPERIMENTS IN COINAGE.
By Henry Charles Lea.
Read on, you’ll find the horrific inflation problems of the Spanish Empire over decades.
They did not produce manufactured items, they exported raw materials: wool, flax, hemp, silk, iron, steel, timber and wine. All exported as raw materials. And they minted coins by the boatload, and they devalued their coins as they needed more and more of them. And the more they needed, the more they devalued and that made them need even more.
one bubble after another. first the stock bubble. Then the RE bubble and now the gold bubble. Gold isn’t worth $1,700 an once any more than a fixer upper that was once on the market for $1,000,000 and is now an REO on the market for $250K was worth the million. Common sense goes out the window when people get into a frenzy....and then they get burned.
****I remember asking my father why didnt we use chickens, but I forget what he told me.****
I remember reading some si-fi books back in the 1960s that I have forgotten their names.
One delt with a planet where there was lots of unused gold but the medium of exchange was red headed woodpecker scalps. Needless to say there was a real shortage of woodpeckers.
Another book had a strange planet where the creatures were not flesh and the highest medium of exchange was leather, meat, flesh, and they had captured a starship full of humans.
“Wow, those are two wildly contradictory statements. The first supports freedom, the second denies it.”
Don't want to hijack this but the draft is perfectly legit and constitutional.
In the old days the locals would form a militia to protect themselves from Indians and other troublemakers. In a time of war the Army would raise a “levy” (draft) on the militias and they would send men to become part of the army.
Today we have the Organized Militia (National Guard) and the UNorganized militia, (everyone else). When the US Army needs troops they call up some of the Organized Militia and can raise a draft on the UNORGANIZED MILITIA.
***And they (the Spanish) minted coins by the boatload, and they devalued their coins as they needed more and more of them.***
I read that when a treasure ship from the New World landed in Spain, the price of everything would go up because of the excess gold brought in. The inflation would start at that particular port where the lsip landed, and spread put as the excess gold was spent.
Makes one wonder what our monetary supply would look like if Lead was rare and Gold was plentiful.
The problem with the gold standard is that there is a fixed amount of gold. We went off the gold standard because we were printing more cash than we had gold. Right now there is more cash out there than there is gold in the world, even with gold at $1600 an ounce.
And the problem with the draft is that draftees are not like they were in WWII and Korea. They are more like the Vietnam draftees who could not be trusted with anything more complicated than picking up trash. And then they have to be watched constantly. You sure as hell don’t want them working on a helicopter rotor head or fighter engine.
Not necessarily advocating for, or against, “the gold standard” but something needs to be pointed out - The US went off gold in 1933, not 1971. When someone talks about gold “backed” currency, that doesn’t make any sense and would be subject to the same nonsense that got us where we are today if one follows that line of thinking to begin with.
IF, and by that meaning IF one believes in a gold standard, then paper money is not money, but the ghost of money. The system in place from 1933 to 1971 was where Americans were prohibited from owning monetary gold or, specifying payment in gold contracts.
Foreign central banks could exchange dollars for gold, until the supply ran out. Be very skeptical of anyone who today talks about a return to “the gold standard” because you can bet they don’t mean gold coins in the hands of the public ( no way) and someone should point out to have a “gold standard”, ya gotta have some gold. I’d like a pony, too as long as we’re dreaming.
Centralizing the printing of currency with the Treasury Department was a terrible mistake. Only states should be printing currency!
Those sound pretty creepy!
You should check out the 100 best sci fi books thread.
I was actually thinking about it when Korn said “why not blades of grass” because on that thread I remembered reading the book “No Blade of Grass”. Which I can’t remember what it was about, but I’m pretty much sure it wasn’t about monetary policy.
Not on FR.
The danger for America is also devaluation, of U.S. dollars. “Backing” them with gold or anything else will not prevent the government from devaluing dollars relative to what they are “backed” with; they could just adjust the ratio.
Devaluation is caused, of course, by the government creating new money faster than it is needed, i.e., faster than GDP, and therefore, the dollar volume of transactions per year, grows. No matter what is considered “money”, creating too much needs to be avoided.
The Federal government spending far more than it collects in taxes and to make up the difference is issuing new Treasury bonds, i.e., borrowing, so fast that there really are not enough buyers who want to or can buy the bonds. The Federal Reserve, ever helpful, is getting to the point of basically creating money to buy the debt.
All of government is counting on increases in GDP to somehow happen by magic and cause government revenue to “catch up” to spending.
There’s only one thing that will cause that; people knowing that the government was permanently shrinking it’s scope.
Get over it. The honorable Vietnam vets know exactly who I am talking about. Would YOU like to trust your life to a dope smoking, meth using moron that is like many of the draft age? Not me.
The fourth big gold strike in former Spanish territory was California, then Indiana, then Colorado, then Alaska, and then Alaska again.
Today we are far more sophisticated and obtain much more of our gold reworking old tailings and with secondary recovery.
There are yet other sources. You'll notice the guys with the gravel beds don't make much noise about it. That's because when you make a strike for a gold source of any size the best course of action is to keep your mouth shut!
Gold is still worth what it will buy. For Saudi princes and Big China entrepreneurs it buys security (maybe) so they have bid up the price!
About now ancient Indian temples filled with gold should be surfacing ~ and, lo and behold, they are! One found recently had in just one of its many chambers about 10% as much gold as the US government.
BTW, do you think that ALL Vietnam vets served honorably? Hell, a lot of them TRIED to get thrown out of the military by screwing up! They couldn’t be trusted for anything.
Frankly i don't really care who went to jail or who screwed up. I have 14 friends who went to the Nam and died.
*** because on that thread I remembered reading the book No Blade of Grass. ****
I saw that movie 40 years ago at the theater.
So what? There were way too many draftees in Vietnam who were total screw ups and some of your friends may have died because of them.
And I don’t give a damned how much of a hissy fit you have, you will get a much lower quality of soldier, sailor, airman, or Marine if you have the draft.
If it's not redeemable, it's not "gold-backed."
I think it was FDR that originally put a stop to paying in gold for gold certificates that you wanted to redeem for gold....
1. Gold is durable ... chickens aren't
2. Chickens reproduce ... gold doesn't
3. There is significant demand for chicken; humans eat nearly all chickens produced annually, therefore demand affects price ... there isn't significant demand for gold (beyond its use as a store of value); the world could meet its net uses of gold for a century or more without increasing gold production; the price of gold is driven by its use as a store of value.
4. New supply of chickens can easily and immediately be increased ... despite advances in alchemy, creating new supply of gold is extremely difficult.
(Feel free to add to this list)
Gold demand for jewelry and industrial uses is currently 3,000 tons a year. New gold supply from mining is 2,500 tons a year (another 1,000 tons per year is recovered through recycling). With well over 100,000 tons of gold mined and in existence, it is easy to see that supply (mining) and demand (jewelry and industrial use) don't affect the price of gold. This makes gold an extremely good store of value. If you see the dollar price of gold change, you can be sure that something is going on with the dollar (printing dollars faster than the economy can absorb or not printing them fast enough*) and not gold (stable, stable, stable).
* Given our political class, guess which of these scenarios is more likely.
John Kerry served in Vietnam....
And he got three Purple Hearts for two owies and a booboo. What a total loser.
A Government gives _____ (whatever, fill in the blank) by demanding it in payment of taxes.
You don’t want a gold standard like during the wild west days because you would owe/pay all your bills/debt in gold plus other countries would hoard our gold and it would leave our borders.
The entire financial system needs a rework from the ground up but it will have to melt down first before Congress decides to do anything meaningful.
I like the idea of interest free banks, which means interest free debt...you don’t think bankers would howl about that idea.
Why wouldn't the U.S. hoard all the other countries' gold and keep it in our borders?
I like the idea of interest free banks, which means interest free debt...you dont think bankers would howl about that idea.
I'm guessing you don't keep a lot of deposits at banks, do you?
(meant to say, government gives _____ value by demanding it in payment of taxes)
The US is already hold most of Euroland’s gold since it was transferred here (to the US) during WWII for safe keeping.
If you noticed, the US recently stated that they would continue holding interest rates near zero in the foreseeable future. Of course this doesn’t stop credit card issuing banks from practicing usury.
You really need to think it through before you jump up and down and start pouting. Having less government is a scary thing to those who live off its tit.
So how would the bank pay their own bills? They do have a payroll, and stockholders, and all of the other bills that businesses must pay.
I didn’t know there was a movie, maybe I’ll stumble upon it someday.
Doing the math one could imply that today's dollar is worth $0.0109 in 1833 dollars, just over a cent.
Only today that $50.00 coin would be as thin as the wrapper on the chocolate ones and smaller than a dime. (I know one ounce Eagles are denominated at $50.00, and legal tender, but who would spend them for that?)
You can’t be on the gold standard if you have no gold.
There isn’t enough gold in the solar system to back up the amount of money floating around this planet.
There isnt enough gold in the solar system to back up the amount of money floating around this planet.
Of course there is.
Just set the price of gold at a trillion dollars per ounce.
Just one caveat:
Do not EVER deviate from that fixed price.