The first recorded use of paper for money, rather than gold, silver, bronze, copper, iron, and other metals, occurred in China in the thirteenth century. The then Chinese ruler, Kubla Khan, manufactured paper money from the bark of the Chinese mulberry tree. On every piece, officials who been appointed to make the paper ‘valuable,’ wrote their names on the paper and put their vermillion seals on the paper. The Kahn ordered the mulberry bark currency to be accepted as if it were indeed gold and silver. The Khan collected everyone’s gold and silver, and installed it in his own personal treasury. Visitors to China had their precious metals taken, and exchanged for the mulberry paper money. As time passed, the Khan found that paper money was easy to manufacture in unlimited quantities, and he did. Naturally, like all un-backed paper monies, the mulberry paper money became worthless.
600 years later, in 1971, the United States ended convertibity of its paper dollars to gold, which was $35 an ounce. 48 years ago, gold was $35 an ounce! Today, gold, as I write this, is $1315 an ounce. Many times, when people are urged to buy gold and silver as inflation hedges, they will say to the effect that, ’the dollar is fine, because the government has billions of dollars in gold at Ft. Knox, and that makes the dollar O.K.’ Au contraire my friend. The last inventory of Ft. Knox was when Eisenhower was President, and most Americans weren’t even born then. A few years after that inventory, armored tractor trailers, under armed guard were seen leaving Ft. Knox, and even the government no longer says that Ft. Knox has any gold in it. When the World Trade Centers went down, there was a lot of gold stored in the lower levels of one of them, which many thought was U.S. gold. When it was recovered, it was labeled as the U.S. being the guardian of it, not the owner.
Many buy futures contracts in gold and silver, but there is less than 30% of physical gold and silver, covering those contracts. If an economic problem occurred in America, such as hyper-inflation, market crash, or the like, and it became smart to cash in contracts for physical gold and silver, the first 30% would get theirs, and the rest would be offered the paper money equivalent, probably. Not satisfactory, to put it mildly.
In 1933, President Roosevelt, under Executive Order # 6102 forbid ownership of gold, at $35 an ounce, and ordered citizens to turn theirs in and receive paper money in exchange for the same amount. A $20 gold coin would receive a $20 bill. After the gold had been turned in, he raised the gold price to $40, thereby robbing Americans who turned theirs in, of billions of dollars. Many laughed at Roosevelt’s order, and kept their gold, and that’s why numismatic gold coins can be foolishly bought at coin shops today. In 1975, gold ownership became legal, and the Krugerrand quickly came available. I began doing this in November of 1977, and that’s about all we had to sell, other than fake U.S. Double Eagles made in Communist China, and we didn’t fall for that, although a few did.
The U.S. is technically bankrupt. It has $22 trillion in current national debt, plus committed payments in future years of close to $200 trillion. It has no gold or silver, and when it makes Gold and Silver Eagles, it buys the metals with which to make the coins! Still, America is far less bankrupt than all other nations, and still has the U.S. dollar as the world’s reserve currency, and legal tender laws say we must use dollars in trade. Our government is more stable and prosperous than any other nation’s government, and the world’s debt is unbelievable, just like ours. I still think our nation will continue to be a world leader. China’s economy is going down, which is alarming the world’s economists. Our obvious bankruptcy means that I will not store my assets in the un-backed paper currency of my nation or any nation. That isn’t being un-patriotic…just sensible. Like Chinese mulberry paper money, the dollar is easy to print and lose its value, which it already has by 95% or more in the last hundred years.
John Calhoun, in a speech before the House of Representatives in 1812, said, “Protection and patriotism are reciprocal.” Protect yourself with gold and silver! – don@coloradogold.com.