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GOLD IS A WEAPON

The gold standard was sustained by a near universal belief that gold was money - and that nothing else was.

What's so special about gold, anyways? Why is gold $1200 an ounce while silver (which is more rare) is worth only $18 an ounce? Why not make copper or iron or tin special and make one of those metals the new standard?

Who started the universal belief that gold was money, anyways? The people who owned tons of it, of course. The royal families. They're the ones who say gold is special and we believe them!

Who owns most of the world's gold today? Who has been busily hoarding away the world's gold in enormous underground vaults? Who has been gleefully rubbing their hands together and planning for the day when gold will once again become the monetary standard?

Why is returning to the gold standard a bad idea? Because there isn’t enough gold to support a gold standard at current gold prices. Paper money must be redeemable for actual gold and that means your government can't print any more money than they actually have of the shiny stuff. The truth is, the banksters own more gold than world governments do.

Gold: Our biggest weapon against the bankster Mafia

If Alan "Darth Vader" Greenspan and his entourage of "insiders" are pitching a return to the gold standard - you know you're getting fleeced!

What's our biggest weapon against the New World Order bankster Mafia? It's gold! We have to make the gold they have been hoarding over the centuries WORTHLESS. We have to stop worshipping it, buying it, selling it, trading it, making a gold standard out of it. We have to make it WORTHLESS...which will make their publicly looted fortune worthless and render them powerless.

There needs to be a cancellation of all national and personal debt. We don't owe these Mafia crime families one penny. They owe us for the grand theft they've committed over the centuries. WE need a credit system, not a debt system with a brand new standard - not gold, not silver or diamonds or anything else the banksters have a monopoly over.

Birth Of The Banksters

Throughout human history, money has been predominantly based on gold - but not always. It has also been based on other commodities. Peter Bernstein’s book The Power of Gold details the history of gold and commodity based monetary standards throughout history, from salt to large stones, some of which lay at the bottom of the sea. As time went on, people found that gold, along with other commodity based monetary standards, was hard to carry around. Used in coinage, they could be difficult to divide and this division problem was a hindrance to commerce.

Then came the financial innovation called banking. You could deposit your gold in a bank. The owners of the bank would issue you a receipt and you could use that paper receipt for trade and commerce. HERE'S WHERE THE TROUBLE STARTED! The owners of the banks ("banksters") discovered they could profit from your money by lending out your deposit of gold to others and charging interest on it. This was credit creation, which expanded the money supply. For every ducat lent out, that ducat would usually wind back up in the banking system, creating another ducat available to be lent out. Even with the imposition of reserve requirements that constrained the amount of loans that the banksters could make, this form of "fractional bank lending" expanded credit and created an enormous number of jobs.

When kings and political rulers got into financial trouble, there was always a temptation to debase the currency. The current episode of paper money debasement began in earnest when President Richard Nixon took the U.S. off the gold standard and the world went to a dollar standard for monetary reserves. The trouble was, the U.S. dollar wasn’t based on anything other than the good name of the U.S. government.

A return to the gold standard would be disastrous

by Cam Hui, CFA Charterholder, Portfolio Investment Manager

Today we stand on the edge of a precipice. America is deeply in debt and printing money at an alarming rate to climb out of its hole. This consensus has been supported by pretty much all of the central banks and governments around the world.

Some analysts are calling for a return to the gold standard. A return to the gold standard would be disastrous. It would be a prelude to a global downturn of unprecedented proportions.

What does a gold standard really mean?

Let’s think this through – what does a gold standard really mean? Does it mean going back to carrying around pieces of gold coinage? In that case, how do we facilitate global trade?

Do we just want to revive a gold backing for money? There isn’t enough gold around in the world to support a gold standard at current gold prices. Rough back of the envelope calculations show that the Fed’s holdings of gold, assuming that it is unencumbered and not lent out, is worth around $200 billion at current prices. Remember that the U.S. Federal Reserve is one of the larger central bank holders of gold in the world. While that change might satisfy the gold bugs, it wouldn’t help the vast majority of the population around the world.

One of the assumptions of a gold standard is that the currency is backed by gold at a fixed rate. Anyone could turn in their dollars, euros, yens, pound sterling and so on, to the appropriate central bank and get gold at a fixed gold price. Such a monetary regime also implies a fixed exchange rate arrangement like Bretton Woods. Instead of allowing the market to determine currency prices, the world would return to fixed exchange rates and periodic exchange rate revaluations. Is that really the regime that we want to return to?

A gold standard also creates economic volatility in the economy. Monetary theory is based on the elegant formula MV = PQ. Holding V (monetary velocity) constant, changes in money supply directly changes the GDP level. Under a gold standard, money supply is restricted by the supply of gold, based on world mine output. National gold supply could shrink because of shocks. As an example, the Roman empire was subjected to credit crunches during wartime when hostile forces captured Roman gold and territory.

The problem of fractional lending remains under a gold standard. The banking system could still create credit. Under such a regime, if everyone decided to redeem their paper currency for gold, the money supply would collapse and the result would be another Depression. Do we want to get rid of the banking system?

If we were to take the radical step of eliminating fractional lending, going to a gold standard would mean a drastic shrinking of world GDP given the amount of money sloshing around the world today.

Culling the herd?

This is financial Armageddon. The result would be the financial equivalent of mandatory infection of the population with the Ebola virus. Maybe we could get Disney to lend a PR hand as we play “The Circle of Life” while we infect everybody with Ebola so people would be persuaded to sacrifice themselves for the Common Good.