US Gold Reserve Act
en.wikipedia.org
en.wikipedia.org
Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme.
We're at a watershed moment in modern history. In the coming months and years, countries will have to return to a gold standard and when they do, they will have to either limit gold sales, deeply penalize it, or just like in 1934, confiscate it. This has all happened before.
Care to put a number of years on that?
I asked you for a concrete prediction, so I'll give you mine. On January 1, 2040, the number of countries that have adopted the gold standard since 2021 will be either 0 or 1.
Let's say that you're wealthy and bought three houses for three families and they all owe you that money. You don't want a bunch of paper in return, you want to get the value back that you invested. How? If all currencies have lost their value, where will you turn? You'll want something that can't be printed.
This essay talks about it in more detail: https://blankpoole.com
And if a country can't pay me in fiat currency, how in the world are they going to be able to pay me in gold?
And defaulting doesn't mean you get off, scott free. When you default and go bankrupt, there's an effort to recoup losses. Germany was encumbered with huge debt from World War One and went into full hyperinflation and eventually paid it off... in 2010.
Please, read that essay. It's fascinating and talks about things much better than I can.
> One is that Federal Reserve stopped reporting money supply after hitting $28 trillion, signaling that the US Dollar is defaulting.
It may be signalling that the dollar is inflating. That it's depreciating. But defaulting? How does a currency default? What would that even mean?
Nope. Done.
Arguably, even maximal Congressional bungling (at least, absent positive action to force a default, which doesn't seem politically possible) won't make a default necessary, as there are several no-default courses possible without Cobgressional action (“mint the coin”, ignore debt limit due to conflict with mandated fiscal actions, ignore debt limit as unconstitutional)
I'm not a soothsayer; I'm not trying to time anything. I'm saying the steering wheel and pedals have come off the car and it's going 80 and so in the coming months and years, this won't end well.
It seems to me that the discussion is the car, not what day of the week it will hit the wall.
(Or at least, we won't hit that wall. There are other walls that we are likely to hit before 2040, but the gold standard isn't one.)
There is no way any government is going to let the value of their currency be tied to how much metal is extracted from the ground, let’s be real.
Michael Burry tweeted this earlier this year, "Prepare for inflation. Re-opening & stimulus on the way. Pre-COVID it took $3 debt to create $1 GDP, and it is worse now. In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold."
All of those things happened as the gold standard was breaking down to and countries were trying to escape its constraints, as part of the process of getting to fiat and the control of money supply it allows.
> This has all happened before.
No, a return to the gold standard after its general global rejection has not happened before.
But only because a general global rejection didn't happen before. Remember that the "general global rejection" only started with the Nixon Shock in the US in 1971.
The “only” part is speculative, but even if that is entirely true, it is still sufficient to show that “this has all happened before” is false.
No, it isn't. Individual countries or small groups temporarily suspending the gold standard for a particular emergency and returning to it thereafter has happened (particularly in the final century of the general dominance of the standard).
Very much not the same thing.
I mean, maybe you have a point. Few that become heavy meth users ever go back to being healthy.
"Since those dim beginnings in the forests of the Stone Age, governments have been perpetually rediscovering first the splendors and later the woes of inflation. Each new government discoverer of the splendors seems to believe that no one has ever beheld such splendors before. Each new discoverer of the woes professes not to understand any connection with the earlier splendors. In the thousands of years of inflation's history, there has been nothing really new about inflation, and there still is not." -- Jens O. Parson
https://recision.files.wordpress.com/2010/12/jens-parsson-dy...
Its, again, not the same thing you predict, so...does it matter? (Rome didn't have a simple gold standard and despite coin debasement never abandoned metallic commodity base of its currency in principle.)
> Few that become heavy meth users ever go back to being healthy.
And few that have fully adopted useful new technology (social or otherwise) simply abandon it for the less useful thing they had before. Argument by analogy often involves begging the question.
You are well aware that the Denarius went from pure silver to .02%. You know it’s a classic example of inflation bringing an empire to its knees. Why split hairs to point out that there was still a sliver of silver?
My point is that history is filled with stories of inflation and its disastrous consequences. This time will not be different. You can win the words but I’m not sure you’re going to win that point.
I mean, its not, though its frequently cited as such by those obsessed with pure commodity money; at that level of reductionism it would be more accurate to say you are reversing cause and effect, as the Empire tried to cope with decline by debasing currency.
> My point is that history is filled with stories of inflation and its disastrous consequences.
History is filled with stories of inflation with and without disasters, and full of disasters during which inflation was turned to as an (sometimes successful, sometimes not) route of escape. Reading it as full of stories of inflation’s “disastrous consequences” takes both reversing cause and effect and highly selective reading.
That sounds like, "The spouse tried to cope with the failed marriage by cheating." Maybe, but maybe also it played a role in the marriage failing. Can you truly separate the two things?
Listen, you could be right. I would definitely say that I've never been one to be "obsessed with pure commodity money." But I've also steadily lowered my respect for the entire branch of Economics over time. What's that H.L. Mencken quote? "It is difficult to get a man to understand something when his income depends on his not understanding it." When you watch the film The Big Short, it seems to talk down to the audience but it's also talking down to the entire finance industry and population at large. It all seems so patently obvious in hindsight -- but it was obvious in foresight too, if anyone wanted to look. (Note: We're facing the same thing now, in greater degrees, but with different names (CDO's? Horrible! BTO's? Sure!) and we're about to be humiliated once again.)
I'll repeat what I said initially. I used to be Keynesian. I used to think that inflation allowed for growth. It encouraged investment. I saw the opposition as a fringe group: gold bugs and conspiracy theorists, frankly.
But what I came to realize is that, long-term, it can't work. It's not a Nash equilibrium (see: https://blankpoole.com). It doesn't encourage investment; it demands it. And that, to repeat myself, removes the coupling to value. Your local coffee shop is only worth so much, based on its revenues. Period. If you go above that, you're speculating -- fine; but you continue past that and you're in "growth investing" land, where you quite literally know that the coffee shop isn't worth that but you expect someone to be the greater fool.
People right now, unironically, say that the market always goes up. I'm not joking. You've probably heard it yourself. Economists could fight it but they enable it instead. "Just put your money in the market and wait. There is always a greater fool." Shame on them.
As that article I linked to points out, while the coffee shop shares can only be worth so much, any scare resource widely viewed as a currency, such as precious metals, have no such restriction. It's a Nash equilibrium. If field of Economics was minutely honest, if it had a mote of respectability, it would recognize that and stand firm despite what its income depends on.
Nope - most countries already rejected it. The mismatch allowed them to extract gold at under market prices from the US, since we tried to claim we were on it, and when it became clear that the US was being taken advantage of, we dropped the pretense.
The US has not held enough gold to back it's money for well over 100 years. Holding the pretense till 1971 was to lessen gold bugs from freaking out.
European nations dropped the gold standard during WW1 and then mostly returned to the gold standard afterward[2]:
"During World War I, most major countries abandoned the gold standard in order to use fiat currency to fund the war effort. As a result, those nations experienced high rates of inflation. The desire to bring inflation under control and restore monetary stability led most countries to plan on returning to the gold standard at some point after the war. Unfortunately, many of the international monetary difficulties of the late 1920s can be traced to decisions regarding the resumption of the gold standard in the mid-1920s. "
There is an interesting history here[1]:
"Britain had left the gold standard in 1914 and responded by increasing the supply of money to stimulate the economy. Production was limited due to substantial decreases in working hours agreed at the end of the war. In 1919 increased consumer demand caused inflation and a price boom.
By early 1920 the Government was more concerned with a desire to return to the gold standard and with the high rates of inflation than with unemployment. In December 1919 the Cunliffe Committee on Currency and Foreign Exchange Rates recommended an early return to the gold standard. The overall objective was to restore pre-war British predominance in international trade, which depended on stabilising the value of sterling around the pre-war dollar exchange rate. This required equilibrium in the balance of payments and the reduction of the money in circulation..."
[1] https://www.nationalarchives.gov.uk/cabinetpapers/themes/eco...
[2] https://cpb-us-e1.wpmucdn.com/sites.dartmouth.edu/dist/c/199...
Every single one of the 200+ countries left the gold standard since the evidence on how bad economies fared tied to the rate you can dig up gold became irrefutable. Hopefully no major countries get dumb enough to revisit that fiasco.
For example, read the academic work showing that trying to stay on the gold gold standard during the great depression lengthened and deepened the depression with solid data across over 100 countries.
There is no question now that tying your economy to digging up rocks is a bad idea.
Second, they've only left it since the 1970's in the current era and that was because the US could use its dominant position to do so (the Petro-dollar).
Third, it doesn't matter if it's a "rock" or not, as long as it's scarce. In this case, this rock has all of human history recognizing its use in this capacity. You have to remember that the monetization of a scarce material, such as precious metals, is a Nash equilibrium. It's the long-term answer, by definition. The markets don't actually always go up, but gold stays gold.
> read the academic work showing that trying to stay on the gold standard
Like Bernanke's PhD dissertation? Sure. Or I can just wait. Because since his tenure we went from $3 trillion to $28 trillion before the Federal Reserve stopped reporting money supply.
Or just compare the US to Germany in the same time period with its hyperinflation. Which fared better?
UN recognizes 251 countries and territories. Many territories have independent currencies. So for the sake of this discussion, there are over 200 places that left gold standards. Not a single country (or territory) remained on one. Not one. So by that metric, every currency that was not fiat has failed. If a gold standard resulted in a better economy, don't you think maybe one country would have kept on it and demonstrated this superiority? Or maybe if a gold standard is demonstrably inferior, would not every country eventually realize it and leave? Which does evidence demonstrate?
>Second, they've only left it since the 1970's in
That's false. Most left it in the 1930s [0] as it became clear the gold standard was bad for economic recovery. There's a good reason the world economic growth was so slow for centuries but really grew after countries stopped tying their growth to the rate they can mine. It's silly to limit the total value of transactions across goods to the rate one can dig up gold. It slows capital.
>Because since his tenure we went from $3 trillion to $28 trillion before the Federal Reserve stopped reporting money supply
If your claim is that lack of gold standards results in debt, then why is this not the case in all the countries? Oops. It's simply not. The US debt or lack of other country debt is simply political fiscal policy - nothing about a gold standard prevented past countries from getting into debt. So this is irrelevant.
The US had public government debt longer under the gold standard than it did not being on the gold standard, since it started public debt in the 1700s. Public debt is simply borrowing, and can happen with or without a gold standard, and history shows.
As to the Fed "stopped reporting money supply", here are at least M1 [1], M2 [2], and multiple flavors [3] of money supply as reported by the Fed. They all track from at latest 1960 through (checks date) Aug 2021. There's plenty more places to see the Fed reports on the money supply. What do you mean when you claim they don't report any more?
The only places making this claim (as usual) are places like shadow stats and zerohedge. If you want to do a neat experiment (I have), take claimed historical inflation from zerohedge, integrate it to get compound for say the past 20 years, then look at BLS claimed inflation for the past 20 years, then get ads from then and now, and see which places are closer to reality. I've used this simple, do-it-yourself demonstration many times to show people that those sites are crap.
The Fed (and Census, and BLS, and every agency) from time to time changes things to better reflect current needs. I suppose the Fed changing how it reports is what you're referring to, an action that every time flips out the zerohedge crowd. Here's a decent explanation [4].
>Or just compare the US to Germany in the same time period with its hyperinflation. Which fared better?
We're nothing like Germany hyperinflation. Panic and doom nonsense. Germany entered a gold standard, and tried to hold onto it after WWI, but reparations made them lose enough gold, that they imploded fiscally trying to maintain it. Had they not wanted to limit themselves to gold (which they ultimately didn't since it proved impossible economically - again an example that tying one's economy to the amount of gold one owns is stupid), they would have had a smoother transition after WWI and leading to their hyperinflation.
This also clearly demonstrates that having a gold standard does not prevent a country going into hyperinflation - Germany had one, it imploded due to debts, and they hyperinflated. Of course you can claim "they stopped the gold standard!" Of course they did, as did every country that claimed to be on one until fiscal irresponsibility or external hazard caused it to implode. A gold standard is no insurance against hyperinflation - and history (and academic literature) has plenty of examples.
The evidence now is that gold standards harm economies.
[0] https://www.thebalance.com/what-is-the-history-of-the-gold-s...
[1] https://fred.stlouisfed.org/series/M1SL
[2] https://fred.stlouisfed.org/series/M2SL [3] https://www.federalreserve.gov/releases/h6/current/default.h...
[4] https://rationalreasoning.substack.com/p/on-the-feds-discont...
My initial thought is that this move would be seen as deeply unpopular, but clearly it wasn't. This seems to be the first step in moving from gold-backed currency, and that process took about 40 years. Which means that this policy was not only popular, but broadly seen as necessary by five subsequent presidential administrations.
I cannot imagine any sort of project taking 40 years of bipartisan collaboration succeeding in today's climate.
A year earlier, in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins.
--
Like how much jewelry?