Gold-backed dollar a myth
Greetings investors
I wish people would stop talking about how stupid Nixon was to take the US dollar off the gold standard. It was the smartest thing he ever did.
Yes, yes … I know the likes of Jim Dines will call me a cretin and go on and on about recent currency debasement and how the folks who run the printing presses will eventually come to ruin, etc. etc.
But has anyone really thought this thing through?
I mean, gold is a small commodity compared with copper or pork bellies. In fact, the entire world’s supply would fit neatly into a small warehouse. The U.S. owns a mere quarter of that.
Wouldn’t a gold backed dollar essentially hand over control of the currency to whoever owns the rest?
Do we even know who those people are?
The central banks? The EU?
The gnomes of Zurich? George Soros? King Faisal? Newmont? The Oxford Group?
The antedeluvians always point to the historic stability of gold, which is intended to prove their point that attaching the dollar’s value to it would have a stabilizing effect. Well, sure gold was stable — back in 1870!
Currently, the value of the dollar is controlled by the folks who run the printing presses, people who are appointed by duly elected representatives. Sure, they’re insufferable fools. But I’d rather have them determining U.S. fiscal policy than a handful of speculators in London and Brussels. Hey, if they screw up you can fire them.
Anyway, I happen to think the U.S. dollar is exactly where it is intended to be. Washington doesn’t leave these things up to fate, or kismet, or the Arabs, or a kind and loving God. The dollar is controlled by supply and demand, like any other commodity. As long as the U.S. Federal Reserve controls the supply, they’ve got the edge.
I don’t think they’re going to surrender that trump card to appease some gun-toting survivalist in Montana with a handful of Krugeraands stashed under the floorboards, or a few wise guys who aren’t fit to carry Paul Bernanke’s briefcase.
Careful out there.
Kb
The BarkerLetter on April 30th 2008 in Commodity investing
Frank responded on 30 Apr 2008 at 4:53 pm #
You obviously have no idea about the ramifications of hyper-inflation.
The BarkerLetter responded on 30 Apr 2008 at 6:31 pm #
Matthew responded on 02 May 2008 at 12:54 pm #
Wow. You actually accept the current inflation numbers as accurate. What do you think the number would be if we used a real basket of goods like how the CPI was in 1980 before hedonic adjustments, substitution and other “innovations”? It’s amazing what one can do with the CPI when one is on the hook for cost of living increases to Social Security, public employee union agreements and whatnot.
FYI, pre-Clinton CPI is around 7% and 1980 CPI measurement has us at just over 11%. Of 3.98%, 7% and 11%, which do you feel actually reflects the increases in the cost of living experienced by the average American over the last year? Only someone who’s out of touch with reality would say the 3.98% calculated through the “modern” innovative methods.
It’s also humorous that you think those deciding monetary policy are actually accountable elected officials. Are the Fed governors elected? What about the chairman? Is the Fed open to an audit? Has it ever been audited?
The BarkerLetter responded on 03 May 2008 at 11:31 am #
Look, I’m not interested in knowing all the dirty little secrets the bankers keep to themselves. I only want to figure out what their next move is going to be so I can get ahead of the curve and make a buck.
That’s the only thing worth knowing.
Francisco Almeida responded on 03 May 2008 at 3:06 pm #
The whole logic of statements that base this article, is foud into this little extract:
- …” Wouldn’t a gold backed dollar essentially hand over control of the currency to whoever owns the rest?”.
But, hold on ! It’s undeniable fact that gold hoardings are scattered all over the world !!! Therefore NO ONE would be able to do it !!!
Besides, picking another piece from your article: … “The U.S. owns a mere quarter of that”.
Wait a minute !!! what you mean with a “mere” quarter ???
That’s HUGE share !!!
Thereafter, the whole of the article sinks like a stone in water.
The BarkerLetter responded on 04 May 2008 at 4:14 pm #
Everyone agrees that investors should have at least 10% of their portfolio in gold. My question to you, and to Matthew, and to Frank is merely this — does gold comprise your entire portfolio? And if not, then why not? If you think an entire nation’s net worth should be valued in gold, why shouldn’t yours, as an individual?
Because it would be folly, that’s why. And I don’t know any sophisticated investor who would dispute that.
Gold is a commodity whose pricing is subject to the vicissitudes of supply and demand. The dollar is a commodity too, whose value is determined not just by supply and demand, but also by a set of constantly changing economic data including GDP, balance of trade, rate of inflation, competitiveness, interest rates, productivity, tariffs, and others.
Why not be as diversified as possible?
James Cyr responded on 05 May 2008 at 12:04 pm #
I think you need to do a bit more research and thinking before you post such an article. What happened when some US bigwigs tried to corner the silver market? A gold-backed dollar is NOT a myth but is a viable economic reality, should you do some looking into it!
The BarkerLetter responded on 05 May 2008 at 1:01 pm #
TaxiDriver responded on 12 Jul 2008 at 1:33 pm #
I agree that everyone should read up on their history before expounding on the merits (or lack thereof) of the Gold Standard. I also agree that everyone should stop ragging on Nixon for abolishing it.
The reason for both of my positions is simple:
Nixon DID NOT abolish the Gold Standard, F D Roosevelt did in 1933 by outlawing the private ownership of gold. Thereafter, the US government kept the ostensibly gold backing “reserve” in Fort Knox, but only a fraction of the amount that would be required to redeem the entire dollar money supply.
The notion of a gold standard when private ownership of gold itself is criminalized is a joke at best and a fraudulent charade at worst.
Nixon merely ended the pretense of a de facto non-gold standard, in an economy where it was becoming increasingly a sword of Damoclese over the government’s head, as the actual gold reserves as a fraction of the money supply continued to spiral in the downward direction.
So, the US only had a “real” gold standard for 33 years, from 1900 (with the adoption of the gold standard act), to 1933, with Roosevelt’s outlawing of gold ownership. Coincidentally, those were pretty lean years for the US economy. I say coincidentally because I do not wish anyone to infer that I mean causally.
Taxi Driver