The best monetary economist on the internet expounds on fiat currencies’ and gold’s prospects for the coming year. From Alasdair Macleod at goldmoney.com:
This article is an overview of the economic conditions that will drive the gold price in 2020 and beyond. The turn of the credit cycle, the effect on government deficits and how they are to be financed are addressed.
In the absence of foreign demand for new US Treasuries and of a rise in the savings rate the US budget deficit can only be financed by monetary inflation. This is bound to lead to higher bond yields as the dollar’s falling purchasing power accelerates due to the sheer quantity of new dollars entering circulation. The relationship between rising bond yields and the gold price is also discussed.
It may turn out that the recent extraordinary events on Comex, with the expansion of open interest failing to suppress the gold price, are an early recognition in some quarters of the US Government’s debt trap.
The strains leading to a crisis for fiat currencies are emerging into plain sight.
Posted in banking, Business, Currencies, Debt, Economics, Economy, Financial markets, Governments
Tagged Currency depreciation, Fiat currencies, Gold, Government debt
Paul Volker helped free the US dollar from its last tether to gold. A few years later, he had to tame the inflation his move had helped ignite. From Joseph T. Salerno at mises.org:
The flood of obituaries that noted the passing of Paul Volcker (1927–2019) last week have almost all lauded his achievement as Fed chair (1979–1987) in reining in the double-digit inflation that ravaged the US economy during the 1970s.
Volcker was referred to as the “former Fed chairman who fought inflation” (here); “inflation tamer” and “a full-fledged inflation warrior” (here); and the “Fed chairman who waged war on inflation” and led “the Federal Reserve’s brute-force campaign to subdue inflation” (here). Mr. Volcker certainly deserves credit for curbing the Great Inflation of the 1970s. However, he also merits a lion’s share of the blame for unleashing the Great Inflation on the US and the world economy in the first place. For it was Mr. Volcker who masterminded the program that President Nixon announced on August 15, 1971, which unilaterally suspended gold convertibility of US dollars held by foreign governments and central banks, imposed a fascist wage-price freeze on the US economy, and slapped a 10 percent surcharge on foreign imports.
Tragically, by severing the last link between the dollar and gold, Volcker’s program scuttled the last chance of restoring a genuine gold standard.
Posted in Currencies, Debt, Economy, Financial markets, Government, History, Money
Tagged Gold, Gold Window, Inflation, John Connally, Paul Volker, Richard Nixon
If you want honest money, you have to get government completely out of the money business. From Jacob G. Hornberger at fff.org:
The U.S. Constitution states:
Article 1, Section 8
1. The Congress shall have Power …
5. To coin Money, regulate the value thereof, and of foreign coin….
6. To provide for the punishment of counterfeiting … current coin of the United States.
Article 1, Section 10
- No state shall … emit Bills of Credit and make any Thing but gold and silver Coin a Tender in Payment of Debts.
The intent of the Framers could not have been clearer. The Constitution clearly and unequivocally brought into existence a monetary system based on gold coins and silver coins being the official money of the United States.
A cautionary note about gold: FDR banned the private ownership of gold and it could happen again. You may not want to put all your eggs in that basket. From Bill Bonner at bonnerandpartners:
Maria’s Note: Maria Bonaventura here, managing editor of the Diary. Bill is on his way back to America to spend Thanksgiving with his family. So today, we share a story every Diary reader should know about how the feds first opened the floodgates of money-printing…
Today, we woke up with a disagreeable headache… and a depressing hypothesis:
The Supreme Court has been derelict in its duty for the last 80 years. For years, the Court has looked the other way as the feds robbed one class of citizen (ordinary, working people) and rewarded another (the elite).
As a result, the American empire faces a catastrophic money crisis… probably accompanied by internal schisms, social breakdowns, and dangerous political scuffles.
Let’s begin by looking again at the connection between time and money.
Posted in Capitalism, Debt, Economy, Government, History, Law, Politics
Tagged FDR, Gold, Inflation, James McReynolds, Supreme Court
Gold is Real Money and Doug Casey explains why. From Casey at caseyresearch.com:
It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.
Now, why do I say that?
Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.
The earth is about to get much cooler and so too is the earth’s economy. From Egon von Greyerz at goldswitzerland.com:
“Sic Transit Gloria Mundi” (Thus passes the glory of the world). This phrase was used at the papal coronations between the early 1400s and 1963. It was meant to indicate the transitory or ephemeral nature of life and cycles.
As we are now facing the end of a major economic, political and cultural cycle, the world is likely to experience a dramatic change which very few are prepared for. Interestingly, the peak of economic cycles often coincide with the peaks in climate cycles. At the height of the Roman Empire, which was when Christ was born, the climate in Rome was tropical. Then the earth got cooler until the Viking era which coincided with the dark ages. Continue reading
Whatever its faults, gold generally holds its purchasing power. Historically, an ounce of gold has bought a man’s suit, and it still does. From Simon Black at sovereignman.com:
Warren Buffett, despite his extraordinary investment success, has a rather famous and long-standing love/hate relationship with precious metals.
Maybe it started with his dad– Congressman Howard Buffett of Nebraska– who, as a staunch advocate for the gold standard, argued to his colleagues on Capitol Hill that “paper money systems have always wound up with collapse and economic chaos.”
Warren himself acquired a record-setting 128 million ounces of silver back in the late 1990s… which he later sold at a profit in the early 2000s.
But to listen to him talk about precious metals these days, he’s always negative.