Posted on 11/02/2022 9:29:54 AM PDT by SeekAndFind
On October 7, 2022, US congressman Alex Mooney (a Republican from West Virginia) introduced a bill (the Gold Standard Restoration Act, H.R. 9157) that stipulates that the US dollar must be backed by physical gold owned by the US Treasury. The initiative clearly indicates that the increasingly inflationary US dollar is triggering efforts to get better money.
It should be noted that there have already been many legislative changes to make precious metals more attractive as a means of payment in recent years: in many US states, the value-added and capital gains taxes on gold and silver, but also on platinum and palladium, have been abolished. Mr. Mooney’s proposal is divided into three sections.
The first section of the bill establishes the need for a return to a gold-backed US dollar. For example, it is said that the US dollar—or more precisely, the bill refers to “Federal Reserve Notes”—that is, banknotes issued by the US Federal Reserve (Fed)—has lost its purchasing power on a massive scale in the past: Since 2000, it has dropped by 30 percent, and since 1913 by 97 percent. The bill also argues that with an inflation target of 2 percent, the Fed will not preserve the purchasing power of the US dollar but will have it halved after just thirty-five years. Moreover, the bill points out that it is in the interest of US citizens and firms to have a “stable US dollar.” The bill highlights that the inflationary US dollar has been eroding the industrial base of the US economy, enriching the owners of financial assets, while endangering workers’ jobs, wages, and savings.
The second section of the bill describes in more detail the technical process for reanchoring the US dollar to the US official gold stock. It states that (1) the US secretary of the Treasury must define the US dollar banknotes using a fixed fine gold weight thirty days after the law goes into effect, based on the closing price of the gold on that day. The Fed must (2) ensure that the US banknotes are redeemable for physical gold at the designated rate at the Fed. (3) If the banks of the Fed system fail to comply with peoples’ exchange requests, the exchange must be made by the US Treasury, and in return, the Treasury takes the Fed’s bank assets as collateral.
The third section specifies how a “fair” gold price in US dollar can develop in an orderly manner within thirty days after the bill has taken effect. To this end, (1) the US Treasury and the Fed must publish all of their gold holdings, disclosing all purchases, sales, swaps, leases, and all other gold transactions that have taken place since the “temporary” suspension of the redeemability of the US dollar into gold on August 15, 1971, under the Bretton Woods Agreement of 1944. In addition, (2) the US Treasury and the Fed must publicly disclose all gold redemptions and transfers in the 10 years preceding the “temporary” suspension of the US dollar’s gold redemption obligation on August 15, 1971.
The bill’s core is the idea of reanchoring the US dollar to physical gold based on a fair gold price freely determined in the market. (By the way, this is an idea put forward by the economist Ludwig von Mises (1881–1973) in the early 1950s.) In this context, the bill refers to US banknotes. However, banknotes only comprise a (fractional) part of the total US dollar money supply. But since US bank deposits can be redeemed (at least in principle) in US banknotes, not only US dollar cash (coins and notes) could be exchanged for gold, but also the money supply M1 or M2 as fixed and savings deposits could be exchanged for sight deposits, and sight deposits, in turn, could be withdrawn in cash by customers, and the banknotes could then be exchanged for gold at the Fed.
As of August 2022, the stock of US cash (“currency in circulation”) amounted to $2,276.3 billion. Assuming that the official physical gold holdings of the US Treasury amount to 261.5 million troy ounces, and the market expected US cash to be backed by the official US gold stock, a gold price of about $8,700 per troy ounce would result. This would correspond to a 418 percent increase compared to the current gold price of $1,680. If, however, the market were to expect the entire US money supply M2 to be covered by the official US gold stock, then the price of gold would move toward $83,000 per troy ounce—an increase of 4.840 percent compared to the current gold price. Needless to say, such an appreciation of gold has far-reaching consequences.
All goods prices in US dollars can be expected to rise (perhaps to the extent that the price of gold has risen). After all, the purchasing power of the owners of gold has increased significantly. Therefore, they can be expected to use their increased purchasing power to buy other goods (such as consumer goods, but also stocks, houses, etc.). If this happens, the prices of these goods in US dollar terms will be pushed up—and thus, the initial purchasing power gain that the gold dollar holders have enjoyed by being tied to the increased gold price will melt away again. Moreover, if US banks were willing to accept additional gold from the public in exchange for issuing new US dollar, reanchoring the US dollar in gold would increase the upward price effect.
A reanchoring of the US dollar in the US official gold stock will result in a far-reaching redistribution of income and wealth. In fact, it would be fatal for the outstanding US dollar debt: US dollar goods prices would rise, caused by a rise in the US dollar gold price at which the US dollar is redeemable for physical gold, thereby eroding the US dollar’s purchasing power. In the foreign exchange markets, the US dollar would probably appreciate drastically against those currencies that are not backed by gold and against currencies which are backed by gold not as fine compared to the fineness of the gold backing of the US dollar. The purchasing power of the US dollar abroad would increase sharply, while the US export economy would suffer. US goods would become correspondingly expensive abroad, while foreign companies gain high price competitiveness in the US market.
Once the US dollar is reanchored in gold, today’s chronic inflation will end; monetary policy–induced boom-and-bust cycles will come to an end; the world will become more peaceful because financing a war in a gold-backed monetary system will be very expensive, and the general public will most likely not want to bear its costs. However, there is still room for improvement. A “Gold Standard Restoration Act” will deserve unconditional support if and when it paves the way toward a truly “free market for money.” A free market in money means that you and I have the freedom to choose the kind of money we believe serves our purposes best; and that people are free to offer their fellow human beings a good that they voluntarily choose to use as money.
In a truly free market, people will choose the good they want to use as money. Most importantly, in a truly free market in money, the state (as we know it today) loses its influence on money and money production altogether. In fact, the state (and the special interest groups that exploit the state) no longer determine which kind of gold (coins and bars, cast or minted) can be used as money; the state is no longer active in the minting business and cannot monopolize it anymore; there is no longer a state-controlled central bank to intervene in the credit and money markets and influence market interest rates. That said, let us hope that the Gold Standard Restoration Act proposed by Mr. Mooney will pave the way to reforming the US dollar currency system—and that it will eventually move us toward a truly free market in money.
Ah, but Gold isn't some arbitrary commodity. Gold and Silver are Constitutional money - your Founders knew what they were doing.
Not to say that a commodity-based currency can't work. I think the BRICS countries are going to make it happen.
So your solution is to send trillions of dollar to enrich farmers in India (Indians hold a huge amount of gold) and to hand control of the US money supply away from the US Treasury and the Fed over to gold mining companies in the two largest producers, China and Russia?
Just because gold and silver are referenced in the Constitution doesn't mean they're not arbitrary. If founders had added bronze or iron coins (like China had) or Platinum or Palladium it would have been just as arbitrary.
Right now the US Treasury and Fed jointly control the value of the dollar. With a gold standard, China and Russia would. That would be bad, actually!
Needs a transition step - GEOs Gold Equivalent Oz
Basically convert all assets to an estimated dollar amount, then covert to gold oz (all on paper). Congress then sets the currency exchange rate for the next 10 years. X dollars in circulation vs Y GEOs. Then limit the production of dollars to maintain this ratio.
This then helps to disentangle the currency from the Federal Reserve. This also would enable a gradual alteration of that ratio to reflect a specific gold ratio.
Yes - but of course in the case of the United States (with the Petrodollar reserve currency) literally nothing stopped the Federal government from vastly overshooting the economy's productive capacity.
The only real barriers to the exit of foreign creditors from the dollar system have historically been the respect shown to US military power, and the return on Treasury bonds. With a real price inflation of maybe 18%, number 2 isn't looking so good right now.
When the Saudis move into BRICS the dollar will crash like a fallen angel - now is the last opportunity to find a new basis for the dollar
Instead of worrying about what gold and Bitcoin might be worth on any day, why not just stop spending?
My solution is to recognise reality.
The US had 20K tons of Gold after WW2. This wasn't due to domestic gold production. The US produced and traded goods and services that people wanted.
Its not like the US can't compete on the international stage. It's just been much easier to buy things with promises and credit. That time is coming to an end.
US citizens currently - currently, mark you - have purchasing power that vastly exceeds that of most Indian farmers. Its time to buy some Gold and Silver while you guys still can.
“The bill highlights that the inflationary US dollar has been eroding the industrial base of the US economy, enriching the owners of financial assets, while endangering workers’ jobs, wages, and savings.”
Yeah, that’s called “working as intended”. This is what happens when you let the financial sector control you currency. They implement a currency that robs everyone else in society for their own benefit.
Well said. Thank you.
The stability is timeless. :)
Gold and Silver were recognised as money in the Constitution because the Founders recognised reality.
Money has a multi-part definition: requiring e.g. fungibility, the ability to act as a share of value, the ability to meet a coincidence of wants, and so on.
Only Gold, Silver (and plausibly Copper) fit all of the requirements of Money. Petrol doesn't. Ammo doesn't. Rhodium doesn't. Jade and cowrie shells and land don't.
Historically societies not trapped on desert islands nor ruled by tyrants have freely chosen to adopt Gold and Silver as money. The Founders recognised the vote of history.
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Right now the US Treasury and Fed jointly control the value of the dollar
Until the market says different. At 18% inflation, people are looking elsewhere. The collapse of the Euro will give the Dollar a reprieve, but when Saudi moves to the BRICS I can't see the dollar holding up for long.
“Peg the dollar to corn for example!”
You don’t back currencies with non-durable, perishable commodities.
“That’s called a depression. Not a good idea!”
We’re heading into a depression anyway caused by the money printing.
Nearly every single American is addicted to credit purchases. The world system is addicted to and runs on a system of finances directly in opposition to the Creator of the Universe, God, Jehovah, Yehova, Christ, the great IAM. Until what is to come, this system of paying a tax to those who make the credit/money available is not going away.
Without the ability to pretend that digits on a computer are worth something, the paper dollars in your pocket, the crypto in the cloud are just so much junk. Business cannot operate, farmers cannot plant or sow, chinese builders of our power production cannot send us a few measly KWh producing things. It all grinds to a halt. In short, we are well and truly hosed.
I would love to get back to a value backed currency, but anyone that gets close to it will be killed or lose their power to be heard.
We are living in satans world. He designed the power structure to be this way through those who would bow.
He offered Christ the entire world, if he would just bow down to him. He couldn’t have done that without having the power to grant it. So we are stuck until a Messiah comes and sets things straight. Spiritually we are not under the control of Earthly things, but physically we still are.
Come quickly Lord Jesus and let it be so.
“Labor productivity has jumped *dramatically* since 1966...”
That just means the situation is even worse than looking at the raw inflation numbers portrays. If labor productivity has increased, then the price of the vehicle (if materials are about the same) should have decreased, not increased tenfold.
“provided they don’t exceed the productive capacity of the real economy and drive up inflation”
Which they inevitably always do.
works as long as gold price is ten million dollars per ounce ...
Do you want the Biden administration to have more power ? I don’t. America is now one of the most dangerously out of control dictatorships in the world. No fair elections, political prisoners, gearing up for mass violence against its own citizens as well as for nuclear war. A collapse of American power would have a pretty fantastic effect for liberty within the Western world.
Maybe not so much for China and Russia’s neighbours, but hey. You have to have other big dogs to keep the American dictators under control.
You are talking to people who are afraid. They don’t think that American people making a product wanted and needed by Russia or China, would entice them to send their gold to us in exchange.
It seems simple to me, place gold into a vault, value currency to a set amount and trade in dollars or coin, just as now. Make it a basket full of metals as things redeemable for paper or things. Work it out and it will be quite feasible. The only thing that will happen is, debts will have to be forgiven, and money lending will be a pittance to what it is today. Very few credit cards, or loans without some tangible thing being offered in the event of default. Like your house, your business or your Yacht. Hence the “speed of money” will slow to a crawl. A lot of rich people will have to actually work.
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