Who Really Killed the Gold Standard?

originally posted by: SkeptiSchism
Here is another interesting factoid. The US treasury currently 'books' gold at $48 an ounce. That means treasury is intentionally understating the value of our gold reserves by about 2600%.

To put it to numbers, treasury says they own about 8,500 tons of gold or 258 million ounces.

258 million ounces x $48 /ounce = $12 billion
258 billion ounces x $1,335/ounce = $344 billion.

So treasury is intentionally understating our gold assets by $332 billion when our national debt is more than $20 trillion.

Some real geniuses at work here folks.

They may not be intentionally understating the value of gold, they are likely stating the real value based on the removal of paper gold, and gold futures, short gold buys and so on. I suspect if all manipulation were removed (paper gold in particular) the value as measure against the debt dollar would be very low. What's the real "value" of a bitcoin?

the IMF moved folks off the gold standard, not the US, the IMF moved to the Special Drawing Rights after it had secured the majority of the nations on earth as beholden to fiat currency - vietnam was a holdout, as were/are Cuba, Syria, Iran, Iraq, Libya and North Korea. The gold standard was planned to die hundreds of years ago, not 40, as part of the natural progression of making sure wealth stays where it belongs, with those who have always owned.

The problem we see today is folks who were supposed to die a natural death economically have refused, so gold/silver have lingered but they are meant to die once all of the worlds assets are sufficient buried under debt that can never be repaid. The only reason the US still lives as it does is due to the fact that we have policed for the IMF for 100 years, so the US was allowed to live through the Petro dollar deal set up with the Arabs (US prints money, the Arabs sell oil in dollars and remove them from circulation to avoid inflation until world is enslaved, then new means of exchange is installed taking all physical "money" from the people). That plan is hundreds of years old.

I think it can be hard for people to see that plans are long, but they are not decades long but hundreds of years long (a russian researcher sorted this some time back by determining that folks failed to extend their models back far enough to see patterns - 100 years is needed).

a reply to: SkeptiSchism

i know alot of people were pissed on 9/12 when they stopped looking for survivors and started with all hast started excavating the gold that was deposited in its vaults by foreign countries

dang I was wanting to read the thread but you ruined it for man.....

dollar prolly lost 55% by the time Nixon did his duty for satan

Taking a different tact, IMO our modern money is really an accounting system of inter-connected nodes, that is the accounting system of the commercial banks. The danger in that is if any particular bank should go down, then other banks are affected because they are all inter-connected.

The more debt, and derivatives there are, then the more inter-connected banks become and the more fragile the system becomes.

There is a point to be made that the traditional gold standard itself wasn't as effective as the original gold bills of credit system that was used for global trade before WW1 and some people say the entire point of WW1 was to destroy this gold bills of credit system and replace it with the fiat currency system we have in place today.

We look at the question how the circulation of gold bills will arise after the inevitable collapse of our regime of global irredeemable currency. At that point the world will be bereft of any usable currency. All paper money will be worthless, all gold and silver will have been chased into hiding b y permanent backwardation.

In this desperate situation some governments shall, to revive trade, willy-nilly open their Mint to gold and silver. However, gold and silver coins will be in short supply for quite some time.

The phrases ‘means of exchange’ and ‘store of value ’ have long been used in listing the various functions of money. Yet these terms are far too imprecise to be useful in a scientific discourse. One should use terms such as marketability in the large (also called salability) and marketability in the small (also called hoardability). Then gold appears as the monetary metal most marketable in the large; silver as the most marketable in the small. We need not recognize any other monetary metal beside these two. A common mistake is to confuse the concept of a ‘precious’ metal with that of a ‘monetary’ metal. Unlike gold and silver, platinum is not a monetary commodity. It fails have the requisite high stocks-to-flows ratio, reflecting its failure to have constant marginal utility.

professorfekete.com...

a reply to: crankyoldman

It's confusing, several federal courts have ruled that a 1 ounce gold eagle is worth $50 as stated on the coin. But obviously you can sell that coin in a coin shop for the current spot price of gold minus their handling fees.

There was a legal case in Nevada where an employer was paying his employees in gold coins so that he could claim less for workers compensation insurance. The courts ruled in his favor because of previous federal court rulings.

So I agree in part with what you are saying, a 1 ounce gold eagle is $50, real $50 not counterfeit.

Some interesting papers on gold and backwardation.

goldstandardinstitute.us...

This helps explain why the bi-metallic gold/silver standard (15:1) failed in the US:

There were many different kinds of gold standard, including what we now call the Classical Gold Standard, the Gold Bullion Standard, and the Gold Exchange Standard. Each contained flaws; each was adulterated.

For example, in the Coinage Act of 1792, the government forced the price of one thing to be fixed in terms of another thing. The mechanism was in Section 11:

“And be it further enacted, That ”the proportional value of gold to silver in all coins which shall by law be current as money within the United States, shall be as fifteen to one…”[1]

Of course, people respond to such distortions. When the government fixes the price of something too low, then people will hoard or export it. If the price is fixed too high, then they will flood the market with it.

According to Craig K. Elwell, in his 2011 Congressional Research Service Report:

“Because world markets valued them [gold and silver] at a 15½ to 1 ratio, much of the gold left the country and silver was the de facto standard.”[2]

Subsequently, the government changed direction. Elwell notes:

“In 1834, the gold content of the dollar was reduced to make the ratio 16 to 1. As a result, silver left the country and gold became the de facto standard.”

If the law dictates the ratio between gold and silver, then only one metal—the one that is undervalued—will be used. It would be extremely difficult for the government to get the ratio exactly right. And even if so, as soon as the market value changed the ratio would be wrong and only one metal would circulate.

goldstandardinstitute.us...

Here is more good summary:

In 1933, the President Roosevelt told American citizens that they must turn in their gold for approximately $20 per ounce. Once the government got all the gold they could, Roosevelt revalued gold at $35 per ounce. The dollar was never again to be redeemable to Americans.

After World War II, Europe was physically and financially devastated. European gold had largely moved to the US either because of the coming war, or to pay for munitions. The Allied powers knew by 1944 that they would be victorious, and so met at Bretton Woods to agree on the next monetary system. They agreed to what could be called the Gold Exchange Standard.

In this new standard, the US dollar would be the reserve asset of the central banks and commercial banks of the world. They would end up with dollars on both sides of their balance sheets, and pyramid credit in their local currencies on top of this reserve. The dollar would continue to be redeemable to foreign central banks (but not to US citizens).

This regime was unstable, as economists such as Jacques Rueff and Robert Triffin realized. Triffin proposed that there is a dilemma for the world and the US. As the world demanded more money, this meant that the US had to run a trade deficit to provide the currency. But a chronic trade deficit would cause the value of the dollar to fall, with wealth being transferred from foreign creditors to domestic (US) consumers.

Throughout the 1960’s, European central banks, and most visibly France, redeemed dollars. By 1971, the gold was flowing out of the US at a rate of over 100 tons per day. President Nixon had to do something. What he did was end the Gold Exchange Standard and plunge us into the worldwide regime of irredeemable paper money.

Since then, it has become obvious that without the anchor of gold, the monetary system is un-tethered, unbounded, and unhinged. Capital is being destroyed at an exponentially accelerating rate, and this can be seen by exponentially rising debt that can never be repaid, a falling interest rate, and numerous other phenomena.

goldstandardinstitute.us...

Another thought then might be that what really killed the previous gold standards was that there was no interest paid in gold. For gold to circulate as money, there needs to be a mechanism where the owner of gold can earn interest on their gold paid in gold. Otherwise they hoard gold.

Why lend your gold if it pays no interest because you're taking a risk you might not get it back.

originally posted by: SkeptiSchism
Another thought then might be that what really killed the previous gold standards was that there was no interest paid in gold. For gold to circulate as money, there needs to be a mechanism where the owner of gold can earn interest on their gold paid in gold. Otherwise they hoard gold.

Why lend your gold if it pays no interest because you're taking a risk you might not get it back.

Not sure what you mean by this. Why wouldn't interest be paid in gold?

a reply to: ScepticScot

In our fiat money system companies have to report their profits/earning statements in dollars correct? So there is always an exchange from gold to dollars, at the spot price.

If all money was liberated that is if people could use whatever they wanted as money, then interest earned on investments in gold would pay interest in gold not dollars. Then gold would be coaxed from hoarding.

Just seems that way to me, you know scott that I'm not a finance person I have interest in 'money' only from a philosophical point of view as I've tried to discuss previously.

My point is that a functioning gold standard wouldn't 'force' by fiat (law) that people use gold, or paper as money but would instead liberate all money allowing gold to assume it's true role as the best form of money humanity has ever invented.

I know you have a different opinion so you can spare me the criticism

a reply to: SkeptiSchism

People use dollars (or whatever national equivalence) as that is what they are taxed in. It doesn't really matter in that regard whether it's a fiat currency, gold or pretty seashells.

As the current fad for crypto demonstrated people are free to use whatever they like as a currency, but they will still value things in dollars as long as the taxman does.

The part I didn't understand was your assertion that that there was no interest paid on gold.

a reply to: ScepticScot

I think I said interest paid in gold on investments made in gold. There are a couple states in the US that have passed laws making gold and silver 'legal tender' so you're probably aware of that.

But many people consider a gold standard as like printing $50 on the face of a gold coin and then allowing paper receipts (bills) to be used and redeemable in gold specie upon demand.

But Fekete and some others, I think they are the 'new austrian economists' are implying a true gold standard would be liberating all forms of money then the mint minting gold coins that just have the weight and purity stamped on the face instead of a paper unit equivalency.

So a one ounce gold coin would just say on it's face 1 ounce .999 fine or something like that instead of $50.

originally posted by: SkeptiSchism
a reply to: ScepticScot

I think I said interest paid in gold on investments made in gold. There are a couple states in the US that have passed laws making gold and silver 'legal tender' so you're probably aware of that.

But many people consider a gold standard as like printing $50 on the face of a gold coin and then allowing paper receipts (bills) to be used and redeemable in gold specie upon demand.

But Fekete and some others, I think they are the 'new austrian economists' are implying a true gold standard would be liberating all forms of money then the mint minting gold coins that just have the weight and purity stamped on the face instead of a paper unit equivalency.

So a one ounce gold coin would just say on it's face 1 ounce .999 fine or something like that instead of $50.

People pretty much can whatever they want as money. But there will generally always be a dominant unit of exchange and in most cases this will be currency they are taxed in. This makes sense as people want the price transparency and ease of exchange that a single currency brings.

Using gold directly (or any commodity) is far far less efficient. The vast majority of transactions are electronic, why would people want to use a physical commodity?

originally posted by: ScepticScot

originally posted by: SkeptiSchism
a reply to: ScepticScot

I think I said interest paid in gold on investments made in gold. There are a couple states in the US that have passed laws making gold and silver 'legal tender' so you're probably aware of that.

But many people consider a gold standard as like printing $50 on the face of a gold coin and then allowing paper receipts (bills) to be used and redeemable in gold specie upon demand.

But Fekete and some others, I think they are the 'new austrian economists' are implying a true gold standard would be liberating all forms of money then the mint minting gold coins that just have the weight and purity stamped on the face instead of a paper unit equivalency.

So a one ounce gold coin would just say on it's face 1 ounce .999 fine or something like that instead of $50.

People pretty much can whatever they want as money. But there will generally always be a dominant unit of exchange and in most cases this will be currency they are taxed in. This makes sense as people want the price transparency and ease of exchange that a single currency brings.

Using gold directly (or any commodity) is far far less efficient. The vast majority of transactions are electronic, why would people want to use a physical commodity?

Not to pay debts or pay taxes, as I said before companies have to report their earnings and all financial statements are under review if they are publicly traded corporations, correct me if I am wrong. Liberating all currencies would end the requirements to force all publicly traded corporations to keep records in dollars.

I don't see why using gold would be far less efficient say if crypto currencies were created based on known quantities of gold in warehousing, available for review/audit by users of the system to maintain transparency.

But there are also lots of reasons why people would want to use physical coins or bars as currency since modern electronic currencies are all tracked. Despite some people's shock there are those of us who think our purchase history should remain private, we value our privacy.

And no that doesn't make us criminals or terrorists, it just means we don't think people should profit off our transaction histories without giving us any discount in price for compensation.

Electronic currencies will be taxed by banks, all transactions will be recorded and sold to third parties. You'll end up paying at least 3% on all your transactions, probably a lot more.

But getting back to the point of this thread, I'm just flushing out reasons why the 'gold standards' tried throughout history haven't worked and my point is they haven't worked because the banker always wants to be the middleman. That's why they fixed a certain weight of gold to a set price in dollars or euros or pounds or whatever so there would always be a banker, a tax man and probably insurance middlemen in the way.

All that is overhead that the economy doesn't need. I support free markets not centrally planned economies that create jobs and cost for useless overhead like banks.

I read this article today and thought I'd include it in this thread although the article is long and probably deserves it's own thread I thought I'd just put it here

__________________________________________

US Gold Reserves, Of Immense Interest to Russia and China - Ronan Manly

Recently, Russian television network RT extensively quoted me in a series of articles about the US Government’s gold reserves. The RT articles, published on the RT.com website, were based on a series of questions RT put to me about various aspects of the official US gold reserves. These gold reserves are held by the US Treasury, mostly in the custody of the US Mint. The US Mint is a branch of the US Treasury.

The first of these articles, published by RT on 30 December 2017, is titled US gold of low purity & that’s why audit of reserves will never be allowed expert tells RT.

The second article was published by RT on 8 January 2018 and is titled Russia-China combined gold reserves could shake US dominance in global economy expert tells RT.

As the subject matter of US gold reserves is broad and wide-ranging, the RT questions and my answers and opinions covered a lot of material and RT therefore decided to divide it’s coverage into 2 articles. The first RT article covered the lack of transparency into the US gold reserves, the fact that has never been any of independent audits of the gold, and the fact that a lot of gold bars that the US claims to hold are actually low purity gold bars which do not conform to international industry standards on tradable wholesale gold bars (i.e. Good Delivery standards).

www.bullionstar.com...

The article is pretty extensive and covers the various attempts at researchers to discover the validity of past 'audits' that have been conducted on US gold reserves, and the primary conclusion of the article is that most of the gold currently held in US reserves is of sub-standard industry standards. According the article industry standards are:

The US Government claims to hold 8133.5 tonnes of physical gold in its official reserves. However its impossible to verify this number because the entire story around the US gold reserves is opaque and secretive. Therefore, it’s impossible to say how much, or how little, physical gold the US actually has. This is so because there has never been a full independent audit of the US gold reserves, and the custodians of the gold (the US Mint and the Federal Reserve of New York) will not let anybody into the vaults to view the gold or to count it.

Even the details that have been provided on the supposed US gold holdings show that a majority of the gold bars are low purity and in weights that don’t conform to industry standard ‘Good Delivery gold bar specifications'

A Good Delivery gold bar, as traded and accepted on the international wholesale gold market, and as generally held by central banks across the world, has to satisfy the following criteria:

Have a minimum gold content of 350 fine troy ounces (approx 10.9 kilograms) and a maximum gold content of 430 fine troy ounces (approx 13.4 kilograms).

Have a minimum acceptable fineness is 995.0 parts per thousand fine gold

www.bullionstar.com...

The author concludes:

In general, most of the US Treasury gold comprises bars that are either smaller and larger than the weights of Good Delivery bars and that are of low-grade purity bars (below the required purity of Good Delivery bars); e.g. a lot of the gold bars that the US treasury claims to hold have gold purity of 0.90 or 0.9167. Overall, less than 20% of the gold supposedly held between Fort Knox, West Point and Denver is Good Delivery Gold.

So apparently the issue isn't so much that treasury doesn't have the gold it says it does, but rather most of the gold it has is of sub-standard according to industry standards.

Finally to shorten this post up, I'll include a couple important paragraphs near the end of the article:

A final Point Chinese gold at the NY Fed: 600 tonnes

After translating the 11 January BWChinese article from Chinese into English, I noticed that the last few paragraphs discussed Chinese gold being held at the Federal Reserve Bank of New York, and the inability of the Chinese to get this gold back. The relevant paragraphs are as follows (which I translated and re-edited):

A BWC Chinese network report mentioned that the Federal Reserve had on several occasions rejected China’s request to ship back about 600 tonnes of gold reserves stored in underground vaults in the New York.

Some analysts said at the time that for China to overcome the sanctions imposed by the United States, it had no choice but to use gold as collateral. A report by People’s Daily’s IFC in December 2012, How Much Gold Has Been Pocketed by the United States has been confirmed:

It is reported that more than 60 countries have allocated some or most of their gold reserves hidden in the New York Federal Reserve Bank’s underground vault.

Some experts said that China once had shipped 600 tons of gold reserves to the United States and continuing its search, found that China first deposited its gold reserves with the United States in 1990.

This is the first time I have heard of such a scenario. Perhaps its true. If its true, it could mean that the People’s Bank of China (PBoC), the agent of the Chinese State, could still be holding a significant quantity of its gold in the vaults of the NY Fed, that the Fed will not return.

So, the fed holds 600 tons of Chinese gold that they will not return, most likely because their either don't have it or they've leased it out and cannot fix the chain of leases and derivatives that have been created on their gold.

I think that is the real issue here, the bars held by treasury are sub-standard by industry standards and yet potentially hundreds of billions of dollars in leases and derivatives have been made on this gold.

Here's an interesting quote from that article above by Trump in 2015:

In some ways, I like the gold standard and there is something very nice about it but you have to go back at the right time. We used to have a very solid country because it was based on a gold standard for it.

We do not have that anymore. There is something very nice about the concept of that. It would be very hard to do at this point and one of the problems is we do not have the gold. Other places have the gold.

www.bullionstar.com...