Big Questions: Is There Enough Gold For a Gold Standard?
Money is a complicated subject, and subscribers have lots of questions. I usually answer via email or in a post’s comments section, but some questions recur often enough to warrant a monthly Q&A post. This is the first in that series:
Question: US gold reserves are only worth a fraction of GDP. Does that mean there’s not enough gold to back the dollar in a future gold standard?
The Answer: No. There’s a gold price that makes it work.
Background: What Is A Gold Standard?
A “gold standard” is a monetary system in which a nation’s currency is backed by (or defined as) gold held by the central bank. If the amount of currency in circulation is “40% backed by gold,” that means the value of national gold reserves, at the official gold price, equals 40% of the currency in circulation.
To maintain this balance, the government promises to exchange gold and currency upon request from citizens. If the central bank is creating too much currency (which causes inflation), holders of the currency will convert it to gold, and the central bank will take the cash it receives out of circulation, thus lowering the money supply and slowing the economy. If growth is too sluggish, people will convert their gold to currency and spend it, which raises the money supply and spurs growth.
The result: sustainable growth and low or non-existent inflation.
Also note that a gold standard turns the omnipotent Federal Reserve into a bank teller window that swaps gold and currency, and otherwise stays out of our way — another reason to love the concept.
[Yes, the Great Depression happened under a gold standard. That’s a separate, very interesting subject for a future Q&A]
How Would A Gold Standard Work Today?
To back the US money supply with, let’s say, 40% gold, we simply have to calculate a gold price that balances the equation.
For example:
M1, a narrow measure of the money supply, is about $19 trillion.
US official gold reserves are 8,133 tonnes (or 261 million ounces), which, at today’s price, are worth $1.18 trillion.
The Math: A 40% backing of M1’s $19 trillion requires gold reserves worth $7 trillion. Dividing this requirement by the 261 million ounces of reserves yields an official price of approximately $29,000 per ounce.
Math and Politics
There are obviously some variables here. For instance, America’s Fort Knox gold vaults haven’t been audited for decades, so we don’t know how many ounces the US actually has. And the variety of money supply measures guarantees a heated debate, as interested parties pursue divergent goals. But the math itself is straightforward.
So let’s say the monetary authorities conclude that returning to a gold standard is the least bad option on a horrifying list (including but not limited to hyperinflation, bond market collapse, and energy and food supply chain disruptions), and they work out the details of a monetary reset in secrecy.
On the following Sunday night, while US markets are closed, the government announces that henceforth the dollar is just a word for, say, 1/20,000th of an ounce of gold. The official gold price, in other words, is now $20,000. And the Fed stands ready to exchange gold for dollars and vice versa on demand.
The result is a massive devaluation of the dollar and a sudden wealth realignment, as holders of government bonds and dollar bank accounts see their capital diminished while gold bugs and other commodities investors get richer.
This will cause civil unrest in many places. But remember that the other alternatives are worse. So we muddle through the turmoil and emerge at the other end with sound money and, therefore, a healthy financial system going forward.
To sum up, there’s plenty of gold for a gold standard. The government just has to price the metal correctly.
Why We’re Gold Bugs
Two things make this a compelling investment thesis.
A monetary reset is now inevitable. US government debt has risen to levels that make normal interest rates impossible because the resulting interest payments are debilitating (see below). But a return to zero or negative interest rates will, as we discovered earlier in this decade, cause inflation to spike to catastrophic levels.
So the world’s central banks are out of palatable options, and a crisis is coming that will reshape or replace parts of the financial system.
The most obvious reset — a return to a gold standard — requires a much higher gold price. That makes gold (and silver, and the gold/silver miners) seem like bargains, which is why so many smart people are loading up on commodities.
I'd love to see it, but it(gold standard) is not going to happen. Back in the middle of the 19th century the entire world was on a gold standard. But the bankers were still conniving on how to control it all. This excerpt from Karl Marx work reveals their underlying thinking WITH a gold standard in place, see if it sounds familiar...
"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to Communism" (Das Kapital, 1867)
This date, May 1, 1776 that the Illuminati was formed by the Jewish Jesuit priest Adam Wieshaupt under organizational plans put forth by Mayer Amschel Rothschild(central banker/part owner Federal Reserve). To offer insight on Rothschild's views...
Meyer Amschel Rothschild of Germany once said: "Permit me to issue and control the money of a nation, and I care not who makes its laws . . ." He said "enforced unemployment and hunger, imposed on the masses because of the power we have to create shortages of food, will create the RIGHT of Capital to rule more surely than it was given to the real aristocracy."
Speaking of world government Amschel Rothschild said, "It will be necessary to establish huge monopolies, reservoirs of such colossal riches that even the largest fortunes of the goiim will depend on us to such an extent that they will go to the bottom together with the credit of their governments ON THE DAY AFTER THE GREAT POLITICAL SMASH."
The communist ties came from the writings of Wieshaupt who was influenced by Rothschild, and were picked up by an American, Clinton Roosevelt, after Wieshaupt's death in 1830.
Roosevelt continued the concepts brought forth by Wieshaupt which eventually caught the eye of the Bank Of England. The BOE favored these political permutations but could not publicly endorse them for obvious reasons.
So the Bank of England went looking for a straw man, a torch bearer to expound on the dogmas put forth by Wieshaupt and Roosevelt. These concepts became known as "The Communist Manifesto" which was allegedly authored by one Karl Marx!
Through time the bankers started removing gold from the economy's of the world which gave them more and more control over said economy. They found the less gold in a system the more control they had. Which brings us to the present where there is NO gold in a monetary function any where on earth. One can bet the bankers will NOT step back by reintroducing gold backing!
Matter of fact the US federal govt's bankruptcy in March 1933 dissolved our govt and removed ALL gold from this system through executive order. This April Exec Order gave US citizens one month to sell their gold to a Federal Reserve bank for $20.67! This change left the US dollar as a debt instrument and our currency in total as debt. That means the only way a dollar can come into existence is to be borrowed. This debt can NEVER be repaid as the only way to pay it would be to borrow the currency! If there was a way to repay the debt, it would negate ALL Currency as debt is currency!
One other quirk of our current monetary system is there is NO provision for the interest. Now it should be obvious why debt MUST continue to grow which is true inflation!
And then there is the Gold Reserve Act of 1934 which makes it illegal to redeem paper dollars for gold.
Section 2 of the act transferred ownership of all monetary gold in the United States to the US Treasury. Monetary gold included all coins and bullion held by individuals and institutions, including the Federal Reserve. In return, individuals and institutions received currency at a rate of $35 per ounce of gold. This rate reduced the gold value of the dollar to 59 percent of the value set by the Gold Act of 1900,(through actions of president William McKinley who was later assassinated for his trouble) which equaled $20.67 per ounce. That rate had prevailed until the spring of 1933, when the Roosevelt administration began its campaign to devalue the dollar.(they transferred ownership but not possession)
Sections 5 and 6 of the act prohibited the Treasury and financial institutions from redeeming dollars for gold, inverting the system that had prevailed in the United States since the nineteenth century. Under that system, the government converted paper currency to gold coins, whenever citizens desired to do so. Now, the government converted gold into dollars, regardless of whether citizens wanted to engage in the exchange.
https://www.federalreservehistory.org/essays/gold-reserve-act
This may sound conspiratorial... and it is as the bankers are out to rule the world through their New World Order, which will appear after the last vestiges of the old order are no more than a memory. A history professor from Georgetown studying this central bank plan wrote...
“The powers of financial capitalism had a far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences."
“Each central bank…sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”
Dr. Carroll Quigley, author of " Tragedy and Hope "(1966), CFR member, professor and mentor to Bill Clinton at Georgetown University
The way I see this playing out is to allow this monetary system to ultimately fail. Since everything runs on some type of credit it will begin perhaps as almost happened in 2008. The banks stopped lending to other banks overnight and was a day or two away from locking up the entire system.
All the bankers have to do is nothing, the conditions are there for a total lock up of this system. The first thing most will notice is their credit cards are declined. Next they will find the have no access to their banks or brokerage accounts. Next the financial markets will shut down. Since most business like grocers operate om letters of credit, their shelves will empty. Power companies too operate on letters of credit so it is a matter of time before the electricity grid winds down.
Here we sit, a society with no credit(cards), no cash, little food and no power. Can one imagine this state of affairs for several months? Can one see it may not take that long for the bankers solution to be accepted? Of course we are talking central bank digital currency! The CBDC is the third leg of their totalitarian technocracy which will turn this world into an electronic gulag.
Not long after these events the bankers will bring their leader to the fore by instituting the "Mark of the Beast" which will be necessary to buy or sell. It is all lined up and within 2-6 years it should be up and running perhaps by 2033 at the latest.
I think we as a nation lost God's protection when we began kicking him out of our institutions! We have only our selves to blame!
Let me add one more thing to this.
If yields are right (and the market is usually right), then this isn’t just about inflation.
It’s about the current system hitting its limits.
Debt levels are so high that:
– higher rates hurt
– lower rates fuel inflation again
That’s not a stable equilibrium.
And that’s exactly why the idea of some kind of “reset” is starting to make sense — whatever you want to call it.
In that context, gold isn’t speculation.
It’s insurance against a change in the rules.
The question isn’t whether there’s “enough” gold.
The question is: at what price would it have to be valued to make the system hold together?
And I think that’s something the market is only starting to price in.
Silver Dominion