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

(thanks, Pining!)

About the Author

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  124 Comments

redwood
Feb 13, 2012 - 8:20pm

Love that Santa, smart man,

Love that Santa, smart man, but wish somebody could be his personal editor. Simple english always works better, especially when dealing with complex ideas.

JohnGLumpy
Feb 13, 2012 - 8:25pm

DXY Reval

Remember the Euro is over 60% of DXY. If there was a significant devaluation of all currencies in the DXY, the dollar would soar.

Interestingly, I don't think it would affect the POG for long. Sure, we would see a drop, bit imo the POG would pop right back up.

Interesting thought experiment.

This is happening btw, continual, gradual debasement of all currencies. if it happened all at once there would be chaos....commodities panic, oil through the roof, food shortages, rough times...

--------------

More likely, eventually, we will see a revaluation of the dollar itself against gold. That's exactly why I buy gold. THAT's when inflation explodes, and you'd do well to make sure you can feed yourself for a year or two WHEN this happens. Won't be long now. 2015 at the OUTSIDE, probably sooner as the global economy sours.

Velocity
Feb 13, 2012 - 8:25pm

Mr T (and Santa)

You're (both) on the right side and pulling for a sound economic system

But i'm with Martin Armstrong on this one, at least as far as saying a Gold or Silver standard is no solution. Both heavy metals have been used before and both have also been trashed (debased)

The problem we have here is problem solving.

Here's where i diverge from Mr Armstrong in that everyone wants one (monopoly) money system replaced by another (monopoly) money system.

The problem with any monopoly, public or private, is the people in charge are all-powerful and it goes to their heads. They end up spending too much which leads us to the reason both Fiat money AND Gold and Silver money has been debased throughout history, DEBT

ONLY a free competitive market (ie. no rules whatsoever) with competing money systems will provide longevity, constant benifical change and the kicking out of the crap.

No man, committee, institution or group of the most brilliant experts in history has or will ever out-think the free market

..is everyone crystal clear on that point?

Let us all do ourselves a favour (and stop playing God) and advocate for a free market in money ...not a new monopoly. The Free Market works (if you let it). Let the competition begin

Amen

¤
Feb 13, 2012 - 8:28pm
DaddyO¤
Feb 13, 2012 - 8:40pm

DPH, Bernanke was about...

to get Greeked with his bumbershoot...by some jack booted riot cop with a bad attitude, wouldn't you say?

DaddyO

Be Prepared
Feb 13, 2012 - 8:44pm

OBummer May Oust Troops Involuntarily

OBummer May Oust Troops Involuntarily to Meet Reductions in Budget Plan

The Defense Department may have to force soldiers, Marines or other members of the military out of the services for the first time since the aftermath of the Cold War to achieve the spending reductions in its budget proposal.

The Pentagon plans to cut 67,100 soldiers from active and reserve Army units and the Army National Guard in the five years starting Oct. 1, as well as 15,200 from the active and reserve ranks of the Marine Corps as part of an effort to save $487 billion over a decade, according to the budget sent to Congress today. The Navy and Air Force would lose fewer people -- 8,600 and 1,700 respectively -- because of their role in a strategic shift toward the Asia-Pacific region and the Middle East.

The military will first try buying out contracts or offering bonuses for people to leave, while working to keep those with valuable specialties such as cyber warfare and acquisitions, according to Travis Sharp, a fellow at the Center for a New American Security, a Washington policy group, who attended a Pentagon briefing for analysts last month.

“I was surprised that they were going to complete the reductions to the Army and the Marine Corps in just five years,” Sharp said in an interview before the budget was released. “What they told us is that they will try to use those types of positive incentives to the greatest extent possible, but that involuntary separations would probably still be necessary.” <Article>

___________________________________________________________________________

Welfare for Illegal Aliens, but let's cut the military while we're still fighting wars and plan on starting new ones.....

If the government was serious about cutting, then, Yes, it would have to reduce the military significantly, but this is all a ploy and its so obvious.... like the military/industrial complex will let them wind down the hundreds of billions going into their coffers.

Be Prepared
Feb 13, 2012 - 8:51pm

A Taste of OBummer 2013 Budget Proposal

Unbelievable. Totally. The Title of the Budget is still full of irony... "America Built to last"....... what he should add..... "for another few minutes before I tear this house down!"

From Americans for Tax Reform:

The capital gains rate will rise from 15% today to 23.8% next year. That’s because the Obama budget assumes the pre-2001 capital gains rate of 20% for investors earning more than $250,000 per year. On top of this, the Obamcare surtax on investment will raise this rate to 23.8%. Separately, capital gains earned as “carried interest” will be taxed at ordinary income tax rates.

The dividends rate will raise from 15% today to 43.4% next year. The Obama budget proposes taxing dividends for investors making more than $250,000 per year at ordinary income tax rates, which will rise to a top rate of 39.6% under the budget. In addition, the Obamacare surtax on investors will combine to nearly triple the tax rate on dividends in just one year.

The real tax rate on capital gains and dividends is actually even higher than this. Since taxes on dividends and capital gains are a cascaded double taxation on savings, the rate is actually far higher than this. Before being taxed to investors as capital gains and dividends, the money first faced taxation as corporate profits. The U.S. has the highest corporate income tax rate in the developed world at 35%. When factoring this in, the Obama budget is actually proposing a capital gains tax rate of 50.5% and a dividends rate of 63.2%. That would leave U.S. employers and savers at a severe competitive disadvantage.

Be Prepared
Feb 13, 2012 - 8:53pm

The Crazy World of Paul Krugman....

....otherwise known.... as I'm Mr. Big!

Feb 13, 2012 - 8:57pm

cutting the military?

Sounds a lot like a layoff to me--especially if you signed up because you could not land a good job in the civilian economy.

Be Prepared
Feb 13, 2012 - 9:03pm

Dr. Jerome - If they do it... they should do it right...

I don't have any problem with a reduction of military forces and taking those costs out of the budget..... The problem is that Our Government is still out there warmongering and actively fighting. You don't starve your forces when they are in the heat of battle. I just wish they would do it smartly......

I guess that it is good that this budget proposal won't really ever see the light of Congress or the Senate....not during this election year.....

It bugs me that they aren't taking this seriously and because they aren't.... they just throwing things around that are just a ploy so they can say these cuts were their intention during the campaign run for the 2nd term of "Our Dear Leader."

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