Here's Why Governments Hate Gold

This past week several emerging and ongoing crises took attention away from the ongoing sovereign debt problems in Greece. The bailouts are merely kicking the can down the road and making things worse for taxpaying citizens, here and abroad. Greece is unfortunately not unique in its irresponsible spending habits. Greek-style debt explosions are quickly spreading to other nations one by one, and yes, the United States is one of the dominoes on down the line.

Time and again it has been proven that the Keynesian system of big government and fiat paper money are abject failures in the long run. However, the nature of government is to ignore reality when there is an avenue that allows growth in power and control. Thus, most politicians and economists will ignore the long-term damage of Keynesianism in the early stage of a bubble when there is the illusion of prosperity, suggesting that the basic laws of economics had been repealed. In fact, one way to tell if a bubble is about to burst is if economists start talking about how the government and the Central Bank have repealed the business cycle.

The truth is the laws of economics are constant and real, no matter how inconvenient they might be to politicians and bankers. This reality is setting in and the bills are coming due. In the mean time, countries that have no money have bailed out other countries that have no money, except for the phony money created by politicians, bureaucrats, and their partners-in-crime at the central banks. This may be preventing big well-connected banks from having to take on massive losses, but it is all at the expense of

All that means is that there are too many dollars for the amount of gold. It’s a fallacy that there wouldn’t be enough “money” available if it had to be based on gold. Or a gold+silver combo, as we did for a time.

It doesn’t matter if gold is 50,000 an ounce. What matters, is that the dollar becomes a constant. With a dollar based on nothing but faith, you don’t get more dollars by printing more, you get a dollar that has it’ value slowly stolen. Thats why what used to be 20 dollars worth of gold is up over 1000 today.

Money supply suffering from not enough physical gold is a rather silly concept. It’s the reason why a car that used to cost 1000 bucks is 40,000 today.
Politicans HATE the money being constrained by an actual value.

My question to those who hate a standard, where does it stop? In the last century, the buying power of a dollar has dropped by a factor of around 50. If it does that another 100 years, todays dollar will be worth about 2 cents. What do we do? Just accept a dollar that shrinks until the end of time? Or in year 2100 do we use 50 dollar bills the way we use ones today??

It’s amazing that the insane position is the one that says our currency must have a fixed value.

The Laws of the Copybook Headings

By Rudyard Kipling

(sorry about omitted scansions)

AS I PASS through my incarnations in every age and race, I make my proper prostrations to the Gods of the Market Place. Peering through reverent fingers I watch them flourish and fall, And the Gods of the Copybook Headings, I notice, outlast them all

We were living in trees when they met us. They showed us each in turn That Water would certainly wet us, as Fire would certainly burn: But we found them lacking in Uplift, Vision and Breadth of Mind, So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace, Being neither cloud nor wind-borne like the Gods of the Market Place, But they always caught up with our progress, and presently word would come That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch, They denied that the Moon was Stilton; they denied she was even Dutch; They denied that Wishes were Horses; they denied that a Pig had Wings; So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace. They swore, if we gave them our weapons, that the wars of the tribes would cease. But when we disarmed They sold us and delivered us bound to our foe, And the Gods of the Copybook Headings said: “Stick to the Devil you know.”

On the first Feminian Sandstones we were promised the Fuller Life (Which started by loving our neighbour and ended by loving his wife) Till our women had no more children and the men lost reason and faith, And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”

In the Carboniferous Epoch we were promised abundance for all, By robbing selected Peter to pay for collective Paul; But, though we had plenty of money, there was nothing our money could buy, And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew And the hearts of the meanest were humbled and began to believe it was true That All is not Gold that Glitters, and Two and Two make Four And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man There are only four things certain since Social Progress began. That the Dog returns to his Vomit and the Sow returns to her Mire, And the burnt Fool’s bandaged finger goes wabbling back to the Fire; And that after this is accomplished, and the brave new world begins When all men are paid for existing and no man must pay for his sins, As surely as Water will wet us, as surely as Fire will bum, The Gods of the Copybook Headings with terror and slaughter return. ————————————————————————————————————————

What do we do? Just accept a dollar that shrinks until the end of time? Or in year 2100 do we use 50 dollar bills the way we use ones today??

Inflation is simply a tax on the holding of currency. It not only taxes you and me: It taxes China. It taxes the russian mafia, the black market, drug dealers and the underground economy. I am very happy for them to be holding paper rather than gold. If done responsibly, it takes 3% of dollar-denominated wealth per year. Inevitably every century or two you issue new currency knocking a couple zeros off. We should have already phased out cents and nickels.

Thats why what used to be 20 dollars worth of gold is up over 1000 today.

Computer memory that cost $1000 a few years ago now costs 20. I make more use of computer memory than gold but I wouldn't want to hold large amounts for long periods, only what I need to use. And I would not want to hold much fiat currency for long, investing and putting it to work instead. Gold, you can hide, good for you, bad for the economy.

The problem is that most money today is electronically created by fractional reserve, not printed by government. Fractional reserve is responsive to economic need. But that's why the Fed can dump $2 trillion in the economy and you don't even notice it. Even China's holding of U.S. debt is a fraction of that. Yet, the currency and economy is in fair balance.

Making all that backed by, i.e. convertable on demand into a fixed weight of gold, would require $50,000 an ounce gold given today's world reserves, and does not count converting other national currencies. And then it freezes the money supply to that 50,000 to 1 ratio, no matter what the economic conditions or supply of gold: to create more money, you need more gold. And it is obvious that old-economy gold supply has not kept up with the size of a digital economy even adjusting for inflation (50,000 vs 1,250, i.e. 40 to 1).

Gold is something best kept in a mattress or a safe. Nothing is stopping you right now from doing just that with all the cash you don't need to use. Gold-based currency would have disappeared into mattresses in the current climate because it would be 40 times over-valued. And then what would you use?

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