For thousands of years Precious Metals (PM) such as Gold (Au) and Silver (Ag) have been utilized as real money for exchange, wealth store, and metric of value. While I am NOT an advocate of one single commodity backing our money (like a gold standard), I do believe that the price trend of PMs are the most important indicators of the value of fiat money, plus the crimes of corrupt banking corporations and governments that manipulate PM prices. The "Canary in the coal mine" is Gold - AuCanary.
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A new gold standard is crucial. The disasters that the Federal Reserve and other central banks are inflicting on us with their funny-money policies are enormous and underappreciated. An unstable dollar is wreaking havoc on our capital markets, depriving us of money for productive enterprises and future enterprises while subsidizing government debt on a scale never before seen in U.S. history. The zero-interest-rate policy destroys capital by punishing savers and enabling the central bank to allocate where capital goes. By definition such central planning means subpar or negative returns. No one believes, given the finances of the U.S. government, that a ten-year Treasury bond should yield only 1.8%.
The promiscuous printing of money in the U.S., Europe and elsewhere is enabling governments to put off pro-growth structural reforms and giving them incentive to increase the burdens on the private sector. The poster child here, of course, is France, raising its maximum income tax rate to 75%. Not since the early 1930s have governments of major countries collectively acted so destructively. The only difference between then and today—and it is a gargantuan one—is that we haven’t destroyed the global trading and capital systems. But even they are facing increasing strains and will continue to do so unless policies are changed.
What the Fed is doing through its binge buying of bonds is enabling Washington to consume our national wealth. Instead of creating new wealth we are beginning to destroy that which exists. No wonder tens of millions of people feel—rightly—that their real incomes are declining and their financial situations are coming under more pressure. In real terms the stock market is lower today than it was in the late 1990s, and even in absolute terms it still isn’t where it was in 2007.
Can we move forward on a gold standard before a real catastrophe à la the 1930s results?
A big part of the problem is that economics classes no longer teach the fundamental importance of stable money. The gold standard, if men tioned at all, is derisively dismissed as a relic, like the Egyptian pyramids or the Ford Model T.
Unless Mitt Romney educates himself quickly on the need...