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Let's Return To The Gold Standard

124
Mon, Feb 13, 2012 - 6:41pm

Last week, I was perusing the latest issue of The American Spectator (yes, I'm a subscriber and have been since 1994). In it I found a terrific article about returning to The Gold Standard.

First, though, you should read this note from Santa. It fits in well here as he discusses the future and a likely return to a gold-based monetary system.

by Santa Sinclair
My Dear Extended Family,

The replacement of lost liquidity is NOT arithmetic. Booms, like busts, turn geometric on their liquidity effect because of the impact of mass financial psychology. Management of Perspective Economics primarily operated by mainstream media can make the gestation period of this event long, but it cannot reverse the underlying process.
With there being no question whatsoever that a credit event is on the near horizon for Greece, there is no avoidance of a further haircut in the valuation of Greek debt held by international banks, primarily Euroland institutions. What you take away with one hand you must provide with another if the banking system of Euroland is to remain viable. As you haircut (reduce in value for balance sheet considerations) Greek debt you reduce the value of that debt held as assets of financial institutions, therein reducing their viability to borrow in order to conduct their banking activities. This mark down is in full gear as speculation advertises to the world that the next step in this Greek tragedy is a haircut of value to just 30%.
How is it possible for the Euro wizards of words to punish Greek debt severely but not hammer others equally now under assault both by mainstream media as well as the undertakers of bond ratings in the USA?
The argument takes a position that the International Swaps and Derivative Association, which is made up of the manufacturers of these devices, will not self immolate by declaring credit events to be credit defaults. This is the ultimate irreversible can kick directly into the dead end sign at the end of the road of postponement to perdition.
Financial currency inflated hell by global debt monetization is the condition from which there is no escape, except though burning down the old system and making a new one. This is the dead end sign at the end of the road for can kicking. It is the condition of financial perdition. It is not something coming in a distant future. It is here and now, clear and present, if you have the eyes to see.
The means to this end is the combination of sick sovereign debt, risk insurance issued against the default of debt without sufficient liquid capital to do so, and the fact that those entities who issued this insurance are themselves and in truth illiquid under strain thanks to the capitulation of FASB on true market value of their legacy and other assets. This is the construction of the house of financial cards that will not survive intact during the period of 2012 to 2015. This is what gold at $1700 is indicating to those unfortunate enough to understand the practical workings of a system whose life force has been stolen to a degree that can only be deemed epic.
Never in written history has anything this size occurred where trillions has been bled away from an economic system with impunity. In all history when this has occurred the then monetary system imploded, to be replaced always by a commodity based money. That is what the Retenmark was in the Weimar experience. This is what the virtual reserve currency will be that replaces the US dollar in the next three years. The commodity currency definition will be derived by a connection to the gold held by the central banks of all the currencies that make up the Western world averaged virtual currency. This virtual currency will be a computer based settlement mechanism that cannot be traded in by other than central banks on behalf of trade settlement. Each contributing nation will also contribute to a universal M3 that will be the percentage measure of gold’s value to determined percentage-wise appreciation of depreciation, constituting value of the position held by each central bank in gold. Few if any central banks need to make transactions to adjust value as the squids of the world will invent derivatives upon which to speculate on the value of gold as a product of the growth or contraction of the western world M3.
This is not by any means a gold convertible system. This is not by any means a perfect system. There will be automaticity in this system but an agreement only by members to perform as above. However this system will work the same as the Retenmark worked. When the need becomes so great to believe in something solid anything that sounds solid has and will again work.
Only a resurgence of business based on solid foundations of equity and not debt can do the final clean up and provide a door to a better future.
No politician anywhere can do the necessary without causing the explosion of the results being heard almost as a new big bang. We are going to inflate this debt away or those in power will be swept away by the violence inherent in the suffering citizen.
Gold and only those things gold will provide the bridge to maintaining a lifestyle, maintain some freedom of choice and most importantly give you options you would not otherwise have. This has been as it always has been and will continue so. The drama of the market is nothing but that – sound and fury presaging but not defining change.
Do not allow anything to deter you from holding that which will build your bridge to tomorrow safely.
I am personally 100% in. It is my intention to hold as much gold as possible lending to me leverage without borrowing or margin. What was done in the 70s cannot be done now because we are only on the cusp of the volatility in the price of gold and it is already impossible to carry leverage except in the manner I have devised for myself participated in by others. I invite you to join with me.
This is a lonely road we are on where its direction does not tend to make friends. The road to freedom of any kind never does.
Stay focused. “Non Carborumdum Est,” do not let the hateful, vengeful bashers get you down.
Respectfully,
Santa

So, anyway, back to the article in The American Spectator. After I read it, I immediately headed to my MacBook to see if I could find a digital copy. No such luck...the article wasn't yet available. Then, today, turdite "Kevin" published a link in the previous thread. Hooray!

Here's the thing: We all know that the current, fiat-based system is failing and will likely soon die a spectacular death. However, there is so very little good information on a gold-based monetary system that anyone looking for something useful to help persuade others is often frustrated by the ignorance and outright disinformation that permeates academia and the media. This article by longtime WSJ writer and editor George Melloan successfully refutes the nonsense spouted by gold's opponents while simultaneously making a clear and understandable case for a gold-based system. First up, here is a link to Mr. Melloan's bio:

https://authors.simonandschuster.com/George-Melloan/65281824/biography

And here is a link to the article, via The American Spectator website. I encourage you to read it carefully and perhaps consider printing it and/or sending it to your friends.

https://spectator.org/archives/2012/02/13/lets-return-to-the-gold-standa

Have a great evening. TF

p.s. My fledgling presidential campaign is off to a slow start. Anyone interested in supporting the group AmericansElect and/or my candidacy can visit the site here:

https://secure.americanselect.org/profile-candidate/372645/draft-status

medium_turdforprez.jpg

(thanks, Pining!)

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  124 Comments

Xeno · Feb 14, 2012 - 12:29am

But Hell Yes!

The reason I don't post much is because there are so many people who write what I think and feel so much better than I can. People like TF, Santa, Ted B., Martin A., FOFOA, Trader Dan, and others but this latest caught my eye and heart;

https://www.zerohedge.com/news/guest-post-first-dominoes-greece-reality-...

It is what it is, and/or will be.

Hang10-Hawaii · Feb 14, 2012 - 12:35am

All-

Normally I try to offer coherent thoughts that add to the discussion, but on the gold-standard question, I find myself unable to fully assimilate a number of things rattling around in my head. I get that we have a global monetary train wreck on our hands and that going back many thousands of years, gold has been used as money and a store of value (along with jewelry, etc.). That makes it logical to consider, or assume that gold will have some role in future monetary systems. I'm not sold on the fact that there will be just one monetary system. In today's world, money settles exchange across a broad spectrum of transactions, in addition to being a store of value:

* Among private individuals at the local level

* Small business / regional transactions

* International, balance of trade

* Global oil trade

* As part of the reserves of a country

Given all of that, I think there is a reasonable possibility that monetary systems may evolve around each of those (and others - e.g. the black market) rather than one giant, mutually agreed-upon global standard that involves gold at the outset. All the talk of SDR's, baskets, commodities backing, etc etc won't necessarily work for each level of transactions.

Here are some issues that come to mind at various levels, and they are in no particular order.

1 - looking back at gold throughout history, it has formed the basis of monetary systems for ages. That's cool, and there are a number of lessons learned about consequences of debasement and fractional reserves vs paper receipts/notes, etc. Those ages, however, did not have the whole banking world digitally interconnected. Also, there were no such things as OTC derivatives, and to the extent they existed, the ancient versions of credit default swaps didn't dwarf global GDP by a factor of several hundred. Not sure how all the interconnectedness will manifest itself in the collapse and reset of the monetary system.

2 - Global trade will need to be settled with something in the future. Gold backing? Perhaps? Some weird, convoluted mutant thing that egg headed central bankers dream up? Perhaps, but I won't be used those at the LCS.

3 - Gold has always had some level of intrinsic value, so sorry to all the folks who suggest otherwise. Pieces of eight, King Tut's mask, whatever, it's still worth something today. I could pay a visit to any random rancher anywhere in the world today with a handful of maple leafs, or Krug's and come away with a few critters in exchange. That's not going to change regardless of what the governments of the world declare. If necessary, there will always be a black market that accepts gold - period.

My current thinking roughly lines up like this. 

1 - if I hold physical, there will always be a local market that will accept it as payment in exchange for stuff, whether sanctioned by the authorities or not.

2 - gold has a pretty good track record as a store of value, so I'll take my chances on that front as well.

3 - whether gold backstops international trade is of lower interest to me. One one hand I could care less because I'm not conducting international trade. On the other hand, the more transactions that are backstopped by gold, means that there is widespread demand for the metal, meaning that my holdings are liquid and there is active price discovery.

Current conclusion (subject to change) - there is a very long track record for gold as money. I'm not clear how the interconnected, global banking cartel will rely on gold in the future, but at the individual investor level, you'd be crazy not to have a meaningful portion of your net worth in gold.

Full disclosure. I've read a lot on this topic and tried to draw my own conclusions, but the original thoughtware hails from folks like FOFOA, Rickards, Celente, Goyette, and many others.

Can't wait to read what other Turdites have to offer on this subject.

Vernon Wormer · Feb 14, 2012 - 12:45am

I don't want that stuff. There are very few things that the Federal Government does that benefits me. If we would stop sticking our noses into other countries business, I'd support the military. Otherwise, they do nothing. I suppose a trade agreement here or there, but really, I don't need them. Increased taxes! WTF? I don't have any more to give. Since 2004, our incomes have more than doubled. Here's the bitch of it, we have less disposable income now after taxes than in 2004. So if anyone out there wants a big Federal Government, you pay for it, I'm broke.

rant/off

Tyler · Feb 14, 2012 - 12:54am
Magpie · Feb 14, 2012 - 12:54am

You forgot that the exiled bear is pining for the fjords. blush Yer right, it's time for bed. 

· Feb 14, 2012 - 12:55am

Without your help, I might have forgotten Valentine's day and found myself in the midst of futile apologizing and wishing I had paid more attention tot he calendar. I shall go buy a gift first thing in the morning. I wonder if she would like something made of gold?

AlienEyes · Feb 14, 2012 - 1:05am

There are two actual "gold standards". One is what we (the USofA) were once on until the French decided to demand gold instead of USD$ for settlements. The second is what we must have BEFORE there is any return to the first. I'm talking about a "de facto" gold standard. When faith in the filthy green drops so low that alternatives are openly discussed and offered when doing business.....then and only then will we see a return to a gold standard and not for the reason(s) one might expect. It will require the federal government to be in absolute fear that they will see their ability to steal/tax eroded by a less traceable store of value. That would signal their decline in power and power is what it has always been about from day one. Otherwise, "politics" per se will have precious little influence on the final outcome of our return to or our continued absence from the gold standard. We have already split into two groups: those that have something and those that want what the other group has. I no longer fear that this will all end badly. I KNOW it will and by design. It's called "divide and conquer" and sadly, it works. Honest politicians are seldom born but can still be "made". When the daily US news includes reporters in flack jackets and pictures of corrupt politicians hanging by their feet from lamp post, we will be on a gold standard and "honest politicians" like Jefferson et al will begin to appear once again. Until that time, truth tellers like Ron Paul will be scorned by those that fear the truth as their utmost enemy.

· Feb 14, 2012 - 1:10am

Of course, gold makes a good gift! Any time! But you also can't go wrong with flowers for most women. I got some beautiful flowers a day early with chocolate and it was a lovely surprise. Yay!! I only wish it were as easy to get gifts for men! Or maybe I am thinking wrong, maybe I should have gotten some PMs? :-)

Hold over · Feb 14, 2012 - 1:23am

Gentlemen, I am happy to report, that as of a few days ago our ranks have swelled by 1!

I have made a convert to the cause. My friend has made a decent size purchase of phiz gold and silver .The battle of the ants and the elephants continues with an inevitable outcome.

https://www.youtube.com/watch?v=DXO1PxbECh4

Anonymous · Feb 14, 2012 - 1:45am

Removed comment.

LaMachinna Doctor J · Feb 14, 2012 - 1:51am

Jerome, a small hand written note of your affection and appreciation would be more valuable and touching to her than the gold pieces. (gasp) I know I said it. wink Somehow I think whatever she gets it will reinforce how fortunate she is to have a wonderful hubby.

· Feb 14, 2012 - 1:53am

Bored, can't sleep, don't want to grade papers or write up research... So here you go:

And this...

Senseosensei · Feb 14, 2012 - 3:01am

I am with you on this one. I assume, that it will be doable to make it work and solve the current mess of money printing we are in. In fact i am totally not interested in all the details to do so, at this stage anyway. 

We, the stackers, will with a return to the gold standard be richer compared to now. Great! Rather that than being poor. 

But the one drawback i see, a big one, is that most of todays gold is in the hands of the same people we are fed up with. Central banks, the super rich, and the elite who are supposedly pulling the strings.

And they will use the power that comes from holding 90%+ of that gold, rest assured.

badScooter · Feb 14, 2012 - 3:26am

This isn't a flame (per your instructions), CC, but the fact of the matter is, I don't want all that shit, I did not agree to all that shit, and furthermore I would not agree to all that shit today if it was put into a contract and I was asked to sign. I've been obligated by other people, and that ain't right.

@obama apologists...eff off.

dnlward · Feb 14, 2012 - 3:45am
· Feb 14, 2012 - 3:56am

Credit Crumbs, the question is not just simply "if we want government services" like FAA, branches of government, and a military. The key qualifier you are missing is "how much"? How big of a military do we want to have? How big should the branches of government be? How many activities should the State Department be involved in?

This is not simply a question of "either or", but rather one of size and scope. You pose your comment as though the only option we have is to accept the current size.

s1lverbullet · Feb 14, 2012 - 5:22am

Love the picture at the bottom by the way!

Velocity · Feb 14, 2012 - 5:27am

a Free Market (ie. no rules, no regulations, no Govt intervention, no monopolists) will allow a whole host of money systems to rise up and compete

Instead of one rotten monopoly wielded by unelected parasites able to defraud people and commerce at the 'Print' of a button we have a commercial arena of competing monies, just as we have many competing to supply us red peppers, cars, clothes, you name it

we are fixated with 'The One Great Solution' syndrome ...this is a fundamental and tragic mental error (disease?) 99% of us suffer from (i blame Hollywood and the '1 Hero' storyline)

Yet if we look at our own lives we see we are used to dealing with complexity and used to choosing from a range of products or offerings.. why not money too?

For just under a decade i was buying Porsche, now i've been buying BMW. The 'stock' of my transport changes over time. Sometimes i follow Versace or Armani or knock-off jeans from Thailand. My wardrobe is a vast mix of different brands.... why not such a choice of money?

Martin Armstrong detailed in the early American rise traders were cheesed off the stock of Spanish money early Americans used, competing with British money and even local US issued money varied in price.. so the 'solution' was to fix/peg the money value (a rediculous solution)

Because money changes in value over time, just like Gold, just like Silver, just like red peppers and cars.

There is no constant in life. Change (inc changing values) is the only constant

And we humans are perfectly adept at dealing with alot of variety and changing values. In fact we enjoy 'the game' so much we chase after changing values in stocks and metals etc

The only system in human history that works is the free (competing) market. We should have as many competing money systems as the market allows to give us a choice and in some circumstances give us the option to change our money if one money becomes debased or debauched (as they all do over time because change is the constant, everything has a life cycle, nothing goes on/lasts forever)

I don't want another fuking monopoly money system. I want a free market in money and choice to use 1 or 3 or 5 different money systems on offer from the market.

There will undoubtedly be money systems on offer based on silver and gold. But there will be others, such as letters of credit based on zero but the inherent trust in that money system.

Maybe Airmiles will be the money of choice for buying air travel and maybe Nectar will become a money of choice for shoppping. Maybe Lottery tickets will become socially acceptable who knows?!!

What we must NEVER advocate again is 1 solution to money. We must never allow a monopoly in money to establish itself EVER AGAIN.

The Free Market: you cannot beat it (ever)

Las Vegas Dave SilverRunNW · Feb 14, 2012 - 5:34am

APMEX started a nice sale on Canadian 1/2 AU today. only $20 over spot each ($40 per oz.)

Too bad I dropped them all into the bay in that unfortunate boating accident.

Hammer · Feb 14, 2012 - 5:42am

Perfidious Albion · Feb 14, 2012 - 6:14am

1980

· Feb 14, 2012 - 6:39am

Much of international trade is a result of force and gunboat diplomacy. Our ability to secure oil in the middle east is not a result of an open trade policy based on willingness of both parties to trade. It's a result of American guided missile sitting there on a US Navy ship in the Persian Gulf. US navy stays in the Persian Gulf to control Kuwait and Saudi Arabia and other oil countries on the west side of the gulf, then the price of oil can go rather high. Our presence there is to forcibly keep shipping lanes open and tell sovereign countries that we have a right to have our boats cross their sovereign waters. Without this force in Asia, Middle East Africa, what we know as international trade would end overnight. It is also how we keep who we want in power to ensure American Interests continue to be American interests. If you are a revolutionary trying to overthrow a oppressive regime, you think twice when you wake up in the morning and have guns pointing down your throat. 

International trade as we know it would come to a sudden halt if powerful governments such as Britain and US suddenly either acquiesced military control and occupation of 140 countries or a more powerful entity took control. It's a scary thought because life as we know it would end and we would have to look within for our own resources. Our standard of living would fall dramatically as it is supported by the power of a gun.

International banking system is also a result of force. The force of the IMF, and the United Nations based on a 1944 agreement The Brenton Woods which forcibly dictate the terms of trade by making US dollar reserve currency. That's what currency wars is about, destroying the dollar, and returning freedom back to international affairs. The reaason we trade with US dollars and not gold is due to force.

As long as we have large powerful governments all they have to do is get control of a large powerful government and they use this as a tool to get what they want. The solution to the whole thing is to eliminate as much political power as you can so they aren't presented with these tools to use on us. Political power is the problem.

Governments would have a gold standard for convenience of international trade and to pay their debts. Citizens are free to use the governments supply of money however, they are free to use local currencies as alternative. The money supply that is least manipulated wins. Before the Federal reserve there were wildcat banks in the US that issued their own currency. They were regulated by the state. Often they were also backed by gold and silver but sometimes backed by bonds, mortgages but they failed as a result of issuing too much currency.

It's hard for us to get our heads around what a world of truly free markets and competitive currencies would look like because none of us has ever lived in a world where free markets truly existed. We have by force increased our standards of living to the point where if force ceased to exist all the players in the world could decide that they don't want to trade with us, allow us in their countries or shipping in their sovereign waters.

A gold standard is only piece of the equation to get back to a system of authenticity where individuals and countries are free to trade what they want, with who they want with the currency of their choice. That is truly free markets. And the US military is very concerned about riots in the middle east and Europe, where they have their bases. Few people know that the US and Europe have a common goal to build military planes together. With countries in Europe going broke, the US no longer has partners to anti up which means we would have to do it on our own and that again would take an increase in money supply. It also threatens our presence around the world.

I read the other day on military.com that there are generals concerned about our military presence in Europe and Japan. And as an aside, while our attention is focused on Iran and the middle east, Japan and China are involved in a ancient dispute over the Senkaku Islands or in Chinese Daito Islands. These islands were taken by, who else, the United States in WW2 and returned to Japan, but the Chinese claim them as their own. This has caused China to put warships out doing military exercises in the area potentially opening an old can of worms. The world wars were basically euroasian wars before the US got involved. China is tired of US global domination and a war in the China Sea's could seriously effect our access to resources in this part of the world. So Pakistan, Iran, China are all part of a team that is tired of international banking systems and international trade and 200 years of imperialist behavior is coming back to bite is in the ass. So of course, a one world currency is part of the agenda as the US dollar reserve currency falls apart and creating a one world currency ensures control over world resources. I personally don't think it is going to work.

There are no easy answers.

Be Prepared · Feb 14, 2012 - 6:51am

Be Prepared · Feb 14, 2012 - 6:54am

Why does Government get involved in controlling the sexual lives of its citizens?

Be Prepared · Feb 14, 2012 - 6:56am

Be Prepared · Feb 14, 2012 - 7:01am

Can you provide a direct link to the sale? Thanks.

ClinkinKY · Feb 14, 2012 - 7:16am

Clubfoolish CreditCrumbs · Feb 14, 2012 - 7:46am

"Is it too much to ask the capital class to sacrifice more than the working class, by paying a higher rate of capital gains and dividend? It is their turn to chip in. "

True that. ..and very well said.

You are correct, but you should go back 30 yrs. I'll extend your thought by saying "it was not actually even fair under Clinton's rates" (tho certain elements incorrectly think they were high and maybe even 'socialist')...but at least that's a start to achieving better balance. 

The capital class has been profiting huge since Reagan pumped them up by quadrupling the nat'l debt over the 12 yrs of voodoo economics (mostly by slashing rates on passive income for the capital class), and setting us on this unbalanced course. Bush made that course permanent and irreversible (2001 & 2003 were the REAL end of the Keynesian experiment and the final nails in our fiscal & monetary coffins).

Even though it IS too late to 'fix' the damage, it is time to re-balance the equation in favor of the working stiff (almost everyone) anyway. The problem politically is..."almost everyone" has this delusional impression that they'll be part of the capital class *at any moment*, so they keep getting duped into thinking these low rates for the capital class are a good thing...much to our mutual destruction.

Nope - No bashing from me...and I'm one of the ~10% who reaps large benefits from the Bush rates (so do our charities, at almost zero cost to us via donated appreciated silver stocks).

Our Fed taxes last yr were 8.9% - patently absurdly low, and completely legal. Insane.

People think Mitt's 'rich dude' rates were low at ~14-15% the last 2 yrs. LOL..."he ain't got game."

Big L · Feb 14, 2012 - 7:50am

Laffer Curve.

Look it up.

Big L

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