Posted on 08/23/2012 3:42:23 PM PDT by barmag25
The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold commission” set to become part of official Republican party policy.
Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold.
The move shows how five years of easy monetary policy — and the efforts of congressman Ron Paul — have made the once-fringe idea of returning to gold-as-money a legitimate part of Republican debate.
Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the platform committee, said the issues were not adopted merely to placate Paul and the delegates that he picked up during his campaign for the party’s nomination.
“These were adopted because they are things that Republicans agree on,”
(Excerpt) Read more at cnbc.com ...
Or gold has to drastically increase in price or prices of everything else have to drastically fall...
Its a tad bit late to want to go back to gold standard...
Nothing happens by accident.
This is clearly part of the deal made with Ron Paul to prevent him and his supporters from causing problems at the convention. I’m sure that another piece of the deal was Rand’s speaking part. I’ll go out on a limb and say that there will also be some discussion about auditing the fed.
Why Gold? Because its easy to verify and very rare. Only a few elements have greater density and they are even more rare. The exception is Tungsten which is very hard to work with although fakes using it have been done. Coins made with Tungsten will not have the Golden ring you get when a balanced 1 oz piece is tapped lightly.
And just ‘how’ would we return to the GOLD STANDARD ?
Wouldn’t we have to pay off our ‘debt’ first ?
Is there $20 trillion in gold anywhere on the planet ?
It should be obvious that I didn’t read the entire article or I would have known that the fed audit was going to be part of the platform. Good work Ron. I like that he pushed the most sensible pieces of his platform.
It doesn’t have to be a full gold standard. Even a fractional gold standard would be better than what we have. Or, we could go back to a bimetal standard.
“I need [to be] educated on how picking a specific metal as a standard is a good idea economically. Why not Rhodium, or platinum, etc.?”
You ask a great question, and while I’ll not try to provide the fully comprehensive answer, I will point out two things, presented as questions:
The US was on the gold standard until 1971. Did it prevent the Great Depression? Did it prevent the vicious recession of 1920? Did it prevent the panic of 1907? Did it prevent the panic of 1873? Answer to all: No.
Suppose we go on a gold standard. Does anyone really think that Goldman Sachs and JPM would not immediately move to manipulate that market as they have done with virtually everything else they have touched? And, does anyone genuinely think they would not succeed?
And for the record, I own and am modestly bullish on PMs.
-——One of Tricky Dick’s most boneheaded moves IMO-——
Actually he had no choice in the matter. The US was selling gold for $35 per ounce and the line to buy was long enough to buy all the gold in Fort Knox.The market in London was something like $40 per ounce.
All you had to do was buy it from the USA, take it to london and make around 12% on the trip. Going off the gold standard was the only possible course of action
Gold standard won’t happen. Two solutions to the entitlement problem:a) cut entitlements (remember what they did to W when he tried to fix ss?) b) print money to pay the entitlements.
choice’b’ is the default and requires virtually no legislative actions.
MR’s pitch to seniors should be “Is your fixed income buying less and less every month? As 0 prints IOUs that fixed income will buy less and less.
The question is will they keep their word.
The right idea, but they need to think beyond just gold.
Even traditional mercantilism used gold *and* silver as its basis for determining national strength. But today, just those two are not enough either.
Now here’s the real zinger. Some years ago, an economist-historian made an extraordinary and unique discovery. That economic spheres have a single, 100% correlation with success and failure throughout all of human history.
To his credit, he refused to believe this discovery, so spent the next 20 years trying to disprove it, and couldn’t, before publishing.
The 100% correlation of success and failure was mining.
The more a country, or a group of countries that form an economic sphere mine, the more they succeed. When they mine less, they are on a descending path to failure. With no mining, they only live a generation or two.
So how does this relate to gold and silver?
Mercantilism fell out of fashion when it was realized that economic power was tenuous indeed if a nation or economic sphere just *had* specie. Just possession, or active trading of specie might create the impression of strength, but it was a shallow thing. Here today, gone tomorrow.
So the new idea was that economic power was based on economic activity. And this is how fiat currencies were born, the illusion under which we still live today. But that theory was only half true.
Mining literally stimulates every part of an economy. It is the heart of economic success, because it not only provides resources, but also economic activity, spreading outward from the industry like a pebble in a pond.
And mining goes beyond specie in its economic power, which is my point. If a nation does not have gold or silver ore to mine, it can mine other metals and non-metals.
The most blatant example of this is the oil of the Middle East, which has given primitive peoples such vast wealth that they are able to inflict their primitive ideas on the rest of the world.
Call it “expanded mercantilism”.
So what are the mining industries with the highest profit margins in America?
Copper, Nickel, Lead and Zinc have about a 52% profit margin. Oil drilling and gas extraction, 48%. Iron ore, 46%. Molybdenum and other metal ores, 42%. Gold and silver, 39%.
Yes, these profit margins need to be balanced against the overall value of what is mined, but specie alone is dwarfed compared to specie plus all the others combined.
Importantly, the US also has many renewable resources that have and create enormous economic power. Yet these are too volatile to use as backing for a currency. The mining and oil industry are inherently carefully controlled and adjust to economic conditions.
That is, the mining industry can insist on particular profit margins for their product. If the market won’t give it to them, that particular industry stops mining. And if the price of their product jumps, they mine more of it.
So what they produce is carefully controlled, something you want if it is to be used to back a currency.
Does expanded mercantilism threaten the holders and investors in specie? Not at all. In fact it solidifies their position and insulates them from uncontrollable economic fluctuations to the value of their holdings, stabilizing its value over time.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
Actually, I remember Mitt talking about replacing Bernanke back in the early debates. One of the other candidates said he was doing a good job, but it wasn’t Mitt. Not saying he hasn’t flipped on it at some point, but his current position is at least 9 months old.
Gold? Bones! Bones, I say! We’ll be rich...rich!
[Little humor there based on the tone of today’s political speech.]
I’ll have to check. I recall him saying in some interview that he was happy with Bernanke and wasn’t going to waste his time going after the federal reserve.
“But why gold? Why not multiple precious metals or materials? Why not high quality steel? Why not grains?”
Well, potentially, you can back a currency with nearly any commodity. However, certain commodities lend themselves to that function better than others.
The standard qualities that matter most are scarcity and durability. Portability is an additional standard, that was more important when the commodities were being used for currency themselves, rather than sitting in a bank vault backing the currency. Now, it’s probably not a big factor.
When it comes to durability, any perishable commodity such as grain fails the test immediately. Sure, grains can be preserved for a long time, under the right conditions, but they are still vastly inferior in terms of durability to precious metals. You don’t want something like a burst pipe ruining all the backing commodity in your vaults, and precious metals provide that security.
Scarcity is important because it allows the commodity to have a stable value. The commodity must be reliably scarce, but not so scarce that an insufficient quantity is available to back the currency. Any manufactured commodity, such as grain, steel, microchips, etc, would not be reliably scarce, and therefore, wouldn’t have any reliable value. Precious metals, barring discovery of significant new deposits (such as happened during the Gold Rush), are reliably scarce enough to hold their value, but not too scarce. There are some complications since precious metals are also subject to industrial demand, which can affect the rate of production, availabilty, and the value of the metals, but they are still probably the best fit for a currency backing commodity.
One thing to note is that gold isn’t the only metal that has been used to back currency. In the US, we used a bimetal standard (gold & silver) for a long time. So, other metals can be used, even in combination. Some metals, like Rhodium, are probably too scarce to be considered viable though.
I’m just remembering a debate, but who knows if he has flipped, then flopped again in 9 months and was talking to different audiences. We are talking about Mitt Romney.
Do you have some source you can cite?
I would like to read more about this.
The only thing that bothers me about your thesis is the example of Spain. Now granted they did not originally mine most of the gold & silver that made them rich and a world power for 200 years or so. (They stole it from the Aztecs, Incas, etc!) But remember it didn't translate into wealth for Spain. I draw a distinct between riches and wealth. Wealth is richness that is self-sustaining usually comes developing a free enterprise oriented infrastructure. Think the US, 16th century Holland, Great Britain, Hong Kong, Japan. You can adopt policies that break the self-sustaining cycle of “wealth” so once accomplished its not permanent. However in Spain's case they sank fast. I think the the Middle East Oil Countries will go the way of Spain. All it will take is something that breaks the current demand for their oil. Remember take away their oil and combined the Islamic world produces less then Finland. (This is no knock on the Finns, there is what 10 million of them?)
1.6 quadrillion tons of gold exist just half-way to China. If you hadn't quit digging when you were 4 years old you'd be rich by now.
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