An ideal currency “should be absolutely invariable in value. Precious metals are not perfect but they are ‘the best with which we are acquainted.” ***** David Ricardo *****
Gold fits almost perfectly all the criteria required for an item to be used as money. It is instructive to give a list of the requirements for an item to be a good candidate to be used as money:
1. Durability – It must be able to stand the wear and tear to which money is subjected without degrading over time.
2. Portability – It must have a high amount of worth relative to its size. In 2014 a one ounce American Gold Eagle carried in one’s pocket is about the size of a silver dollar and is worth about $1,250.
3. Divisibility and consistency – It must be able to be broken into smaller parts and still retain the same value. A ¼ ounce gold coin is exactly one-fourth of the value of a one ounce coin. A diamond, for example, when split into four parts will not retain the same value as the original stone. The purity and weight of gold can be precisely measured.
4. Intrinsic value – It must have some worth in and of itself. Gold is used in various ways and has a value above and beyond its value as money.
5. Scarcity – The world stocks of gold have consistently risen about 1.5% per year on average with very little fluctuation, giving it an edge over silver in this respect. Silver stocks have shown a somewhat greater tendency to fluctuate.
6. Difficulty of counterfeiting – Since gold is a basic item, number 79 on the periodic table, it has yet to be duplicated by any technique known to man. Also its authenticity can be easily discerned through various tests.
This is a quiz for you. Who made the following statements? Hint – they were all made by the same person.
“When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us … The “Fed” succeeded: it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market – triggering a fantastic speculative boom…. As a result, the American economy collapsed.” (Sound like now to anyone?)
“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit….”
“The law of supply and demand is not to be conned. As the supply of money increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes….”
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold…. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.”
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”
I’ll spell his name backward so you can’t scan down the page and peek: – napsneerG nalA –
In 1987, after being appointed Chairman of the Federal Reserve Board, he apparently forgot everything he ever learned and was swallowed by the monster, proving once again that the need for power almost always overcomes principle. The “Maestro” became nothing more than a front man for the big banks and the Socialists in Congress, with the people behind the curtains pulling the levers. Today he is still probably babbling about his favorite straw man, deflation, proving once again how corrupt people can become to gain the trappings of power.