The United States, as well as the rest of the world, abandoned the gold standard in 1971 during President Nixon times. Consequently, our dollar lost its status as money and became a mere fiat currency. Meaning the currency loses value automatically if it stops moving or being accepted. Historically, all currencies will eventually go to zero.
As we all know, the dollar is backed by the full faith and credit of the United States and so it is for the world currecncies: the Yen is backed by full faith in Japan, … But currencies can go bankrupt and can someday be part of a museum’s exhibit entitled, “This paper item used to be called money.”
To fight the recession, central banks across the globe flooded their systems with fiat currencies. Eventually, these currencies have to be devalued against some stable standard. You guessed it! That standard is gold. World deflation and accompanying devaluation will boost the competitive value of gold. At one point, investors and savers will distrust all fiat currencies. People think gold is a “good” hedge against inflation. What nobody wants to talk about is the fact that gold is being bought as a safe haven and defense against the collapse of ALL fiat currencies, including, of course, the dollar. So forget about inflation, it’s the viability of fiat currencies that wealthy buyers of gold are worrying about.
And who is the culprit? It is the Fed and its creation of more and more fiat money. Where is the Fed’s patriotism? Only the Fed can get away with dealing in unconstitutional fiat money. During presidential elections 2008, there was only one courageous candiate to say ”get rid of the Fed” and that is Texas Congressman Ron Paul. Mr. Paul wanted that the nation adhere to the dictates of the Constitution of the United States. Yes, you become eccentric and lose big money’s support if you believe that the nation should abide by its own US Constitution and go back to the safety and sanity of the gold standard as outlined in the Constitution of the United States.
Back in 1910, thru “The Federal Reserve Act” a new system was created called the federal Reserve Bank (it is called the Fed for short) controlled by private individuals who would control the nation’s issue of money. The Fed controlled the money supply and available credit, all by mortgaging the government through borrowing (The Fed is now borrowing somewhere aroun$300B/month to fight the recession). Now what some people may not know is that the Fed is not a federal agency or anything like that; it is privately owned like every other private corporation: it pays its own postage, its employees are not civil service, its physical property is held under private deeds and is subject to local taxation.
Since 1971 and the Fed is flooding the system with “junk money” on the basis that it makes more sense to borrow today and pay back with cheaper dollars tomorrow. Investors or assets owners feel more secure beacuse their assets appear to be going up. But in reality, the currency devaluation or decline towards zero is kicking in and the purchasing power of the dollar is going down. At this point, the US is saddled with so much debt that it defies comprehension. The only way out of this debt disaster is to partially-renege on the debt and then resort to 1) inflation or 2) currecny devaluation.
What does that mean in simple terms? Option 1 or Inflation is to continue monetizing debts ie print money out of thin air to buy its own debts. Option 2 or currency devaluation is to devalue the dollar by revaluing gold upwards massively. The US government has about US$250B of physical gold based on current price. They can simply declare the physical gold as now worth US$15T, ie a 60X revaluation upwards. And via this ‘voodoo’ economics, they can pay off all their debts and need not borrow any more.
One thing is certain; which ever way you choose, the dollar will suffer drastically. What is to be seen is if in our times we will see the dollar doomed and headed for history’s waste basket…
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