Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why You Shouldn’t Get Excited About Gold Price Mini-Rally - 26th Jan 21
The Truth About Personal Savings Everybody Should Know and Think About - 26th Jan 21
4 Economic Challenges for 2021 - 26th Jan 21
Scan Computers 2021 "Awaiting Picking" - 5950x RTX 3080 Custom PC Build Stock Status - 26th Jan 21
The End of the World History Stock Market Chart : Big Pattern = Big Move - 26th Jan 21
Stock Market Recent Sector Triggers Suggest Stocks May Enter Rally Phase - 26th Jan 21
3 Top-Performing Tech Stocks for 2021 - 26th Jan 21
5 Tips to Manage Your Debt - 26th Jan 21
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Standard Manifesto

Commodities / Gold and Silver 2010 Nov 10, 2010 - 03:20 AM GMT

By: Jordan_Roy_Byrne


Best Financial Markets Analysis ArticleA great quote from William Osler typifies the evolution of our current monetary system. He said: “The philosophies of one age have become the absurdities of the next, and the foolishness of yesterday has become the wisdom of tomorrow.”

Decades and centuries ago, no one would have done without a hard money standard. The founders wrote in the Constitution that only Gold and Silver could be legal tender. Today our fiat monetary system is firmly in place. Although it has wrecked a once healthy economy, you’d be considered a pagan in mainstream academia if you wanted to abolish it in favor of the gold standard. 

As our monetary system has evolved, it has become ill and more ill. During the first major crisis with hard money, the government devalued paper money and raised the value of Gold. However, Roosevelt essentially suspended convertibility for citizens. International convertibility and the standard remained until the next crisis. Then the government could no longer afford the gold standard so it delinked the dollar permanently.  

Note that there are three types of currency: commodity currency, representative currency and fiat currency. The western world was quite prosperous under representative currency (1800-1971). Can the same be said of fiat currency?

Under a fiat regime, the US and other governments have built up unsustainable debts. Debt has grown faster than GDP. Gross misallocations of capital have occurred. While society has prospered and standards of living have improved, more and more people are falling behind and falling into poverty.

Tell me, did this happen from 1800 to 1971? Sure, there were major bumps along the way but the reverse happened. Opportunity spread. Individuals and families were lifted out of poverty. Living standards for all were raised. The progress in the world from 0 to 1800 was nil compared to what happened over the next 170 years. Yes, this happened under a hard-money standard.  

The gold and silver standards kept prices stable over the long haul. Capital was respected and deployed accordingly. When the value of money isn’t stable and/or left to a group of unelected men fixing prices, gross distortions and misallocations of capital occur with certainty.  

Yet, today we constantly hear that we need central banks and that we can’t have stable prices. Prices have to go up a little bit but they can’t go down. The objective is for prices to go up 2-3% annually. Yet, if prices go up by 5%, that is too much. If prices go up by 0-1%, that is too little. And if prices fall that is the worst! Only the non-economists can see how asinine this really is.

Moreover, didn’t prices actually fall during the Industrial Revolution? The greatest economic transformation occurred because production was enhanced and prices fell.
According to Wikipedia:

The Industrial Revolution marks a major turning point in human history; almost every aspect of daily life was eventually influenced in some way. Most notably, average income and population began to exhibit unprecedented sustained growth. In the two centuries following 1800, the world's average per capita income increased over 10-fold, while the world's population increased over 6-fold. In the words of Nobel Prize winning Robert E. Lucas, Jr., "For the first time in history, the living standards of the masses of ordinary people have begun to undergo sustained growth. ... Nothing remotely like this economic behavior has happened before.

Today we see the exact opposite. The living standards of the masses in the US are falling and have been since 1970. The cost of living has risen faster than wages, despite whatever the CPI says. One in seven Americans lives in poverty while 42 million receive food stamps. That is up 58% in just the last three years.    

Meanwhile, among many others a partisan political hack masquerading as an economist thinks we are seeing a steady slide towards lower inflation. Mr. Krugman, why don’t you leave your office and do some first-hand real research? Why don’t you talk to those folks who are struggling? Do you have any idea of the cost of food? General bills? Education? Healthcare? Are you paying attention to commodity prices?

You should be disgusted with yourself for thinking deflation is the problem. I’m glad folks like you, your fluffer Brad Delong (thanks to Gonzalo Lira for the apt description) and Ben Bernanke weren’t around in the early 19th Century. You may have impeded the industrial revolution because you were worried about “falling prices.” 

In the end it doesn’t matter what we think because a new monetary system and return to some form of the Gold Standard is a certainty. Policy makers have no other options this time. Back in the 1930s, they raised the price of Gold and devalued the dollar. In the 1970s, they ended convertibility entirely. Today we cannot raise interest rates sufficiently high to end this mess. There is too much debt in the system and it would bankrupt governments.

This speaks to why Gold is rising. Low interest rates and quantitative easing help the case, but sovereign debt default by western nations is a certainty. Remember, fiat currencies are tied to government finances. It may take five years or ten, but it is a certainty. There is no way these economics can grow their way out of the debt bubble.

Hence, the logical ending point of this bull market is a new currency regime and Gold will play a large role in that. Not by coincidence, the new monetary system with Gold as part will go a long way towards fixing America’s problems.

First, let me discuss why the end of the gold standard was an impetus to many of our problems. The economic effects are obvious. It set in motion constant inflation, which has continuously undermined the middle class and poor. It created inflation, which forced corporations to seek cheaper labor alternatives offshore. It removed controls and restrictions on the government, which could now easily buy votes.

As a result of the government losing its discipline, the population followed. Individuals went from earning and saving to consuming, going into debt and accumulating too many possessions. Not surprisingly, people lost their work ethic and became lazy and fat. Attitudes, morals and values have changed and for the worse in many cases.

The new monetary regime will help to reverse these trends. It will impose tight controls and restrictions on the government. Massive deficits will become a thing of the past. The populace is already getting the message and won’t have trouble following suit. Debt and consumption will be shunned. Initially, a lower standard of living will force families closer together and better values will emerge.
It may be five or ten years before we see this new monetary and currency system. In the meantime, consider where things are going and stake your claim. Gold hit $1400 but that is barely more than 5x its low. Major bull markets rise 20, 30 even 50-fold. Months ago, we repeatedly mentioned that less than 1% of global managed assets were invested in precious metals. It doesn’t take an expert to see where this is going. 

Despite this we hear folks pan Gold who have never owned a single ounce or single gold stock. Simply put, these folks are trolls with an agenda of some kind. Why their thoughts are broadcast, is beyond me. In truth, we have also have an agenda. It is to make our subscribers money and help them ride the ups and downs of this bull market. We invite you to consider a free 14-day trial to our services.

Good luck ahead!

Jordan Roy-Byrne, CMT

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules