That’s part of a headline in last Thursday’s Journal. The rest of the headline is, “and Make the Dollar Stable Again.” That would be nice; to make the dollar stable again, wouldn’t it? A sentence in the first paragraph reads, “The gold standard won’t work for the 21st century monetary and financial system.” I looked in vain for the writer’s logical reason as to why it won’t work today, and could find none. “The idea behind the gold standard is simple. The government promises that if you bring in, say, $1,000 in cash, you can trade it for one ounce of gold, and vice versa.” The writer, John Cochrane, posits that since the price of gold varies, it would never work. Under a gold standard, with gold backed paper money and gold coins, the price of gold would be the value of the dollar! Utter simplicity.
He continues; ”Other than jewelry and some minor industrial uses, there is nothing special about gold. How could they (government) promise always to exchange money for gold? The gold standard was an art, much like fractional reserve banking.” I suspect that any reasonable economic minded individual, can instantly see the big difference. Under a gold standard, the government not only backed its paper money with gold, but it also issued gold coinage, so that an exchange would be silly, as both had the same value. A gold standard certainly was not an “art,” but fractional reserve banking is, because a bank only needs maybe 10% in cash to loan billions of dollars it creates out of thin air, as does the Federal Reserve. That, my friend is a true art form, making everyone believe that their paper money and banking system is as true and valuable as the skies above.
Cochrane, who is a ‘senior fellow at Stanford University’s Hoover Institution,’ should know better. He continues in another paragraph, “The gold standard was really a fiscal commitment, not a monetary one. If people demanded more gold from the government than it had in reserve, the government had to raise taxes or cut spending to buy more gold.” EXACTLY! Under the gold standard, there was no inflation for a hundred years. By backing paper money with gold, and issuing gold coins with the dollar value imprmatured on them, there couldn’t be inflation, and there wasn’t. Government had to balance its budget, borrow or mine gold to do it. There was no alternative. Banks had never heard of, nor conceived of, ‘fractional reserve banking,’ as an art form or any other form, designed to fool the masses into subjection. It has worked very well! A close to final quote from the Cochrane piece, finally bears a modicum of truth. “Gold standard advocates offer a cogent critique of current monetary policy…” Amen.
The absolute fact is that a description of gold as “nothing special,” as Cochrane insists, (excuse the slang) is a damned lie, and he knows it. Gold is indeed ‘very special,’ being true, real, physical, historic, beautiful, tarnish free, scarce, money, as long as history books have been written. Gold and silver have been money throughout all of history and in all civilizations. America was founded on a true monetary system, using gold and silver as money or backing paper currencies with them. There was no inflation. Gold was at $20.67 an ounce for a century, till FDR unconstitutionally raised it to $35, and then we were off to the races.
The only way to subvert the fractional reserve banking system, which promises continual inflation until it becomes so absurd that dollars are used for insulation and to start fires, is to store reserves in true money… gold and silver. Those who had saved their surplus assets in gold and silver, will have been secure. Those who had saved in Greenbacks, Confederate dollars, Continental dollars, other currencies, and yes, American dollars, will have lost their life’s savings. Those who had life jackets or access to a life boat, when the Titanic went down, lived to tell about it. In some future date, here or abroad, those who saved in their respective un-backed currencies, will lose their life’s work. Those who invested in a gold or silver life jacket, will live to tell their grandkids about that terrible time. – don@coloradogold.com