Wednesday, August 15, 2012

Gold Is Sending A Warning

This being August 15, 2012, students of the history of monetary economics no doubt are aware that this is the 41th Anniversary of the breakdown of Bretton Woods.

It was on this day 41 years ago that President Nixon defaulted on the promise to exchange gold for paper dollars presented for exchange by foreign central banks. Aug 15th marks the anniversary of the collapse of Bretton Woods and the gold-exchange standard that was established after WW II. (Notice that dollar debasement has been bipartisan over the years: Republicans Nixon and Bush and Democrats Carter and Obama have all presided over major declines in the value of U.S. money.)

The current crisis in the global monetary system pales in magnitude to the sundering of gold from central banks' fiat paper currencies in 1971.

That is, we are not witnessing the wholesale dismantling of an entire monetary system. What we are witnessing is a loss of confidence in the current monetary system, which, of course, is equivalent to a loss of confidence in central banks' ability to restore stability. However, the decision to renege on the gold-exchange standard that was made 41 years ago is still reverberating today. In *fact*, many or most of the problems observed today are the direct result of wrong-headed discretionary monetary policies.

What was it that made the current morass inevitable once the paper dollar was severed from gold?

 The answer is simple: fiat paper money that is not grounded in any objective standard can be manipulated at the whim of the issuer. Without the requirement to exchange fiat money for gold or some other commodity, the central bank can issue unlimited amounts, thus making its value subject to extreme volatility and, as we have seen, perpetual debasement.

Extra Issues :

1. Gold War (by Redburn Partners UK 2007) :  ' gold will be money when the dollar and the euro and the yuan and the ringgit are mere memories ' - Richard Russel, Dow Theory Letters Inc.

2. US Dollar had lost 95% of its purchasing power since Fed was created by Rothschild/Rockefeller banking interests in 1913.

3. Ludwig von Mises : 'the struggle against gold, which is one of the main concerns of all governments, must not be looked upon as an isolated phenomenon. it is but one item in the gigantic process of destruction (of fiat money/usurious economy) which is the mark of our time '

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