{"id":64657,"date":"2014-12-03T15:20:33","date_gmt":"2014-12-03T20:20:33","guid":{"rendered":"http:\/\/countingpips.com\/?p=64657"},"modified":"2014-12-03T17:51:29","modified_gmt":"2014-12-03T22:51:29","slug":"new-signs-gold-and-silver-are-returning-as-monetary-assets","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/12\/new-signs-gold-and-silver-are-returning-as-monetary-assets\/","title":{"rendered":"New Signs Gold and Silver Are Returning as Monetary Assets"},"content":{"rendered":"
December 3, 2014<\/div>
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Much to the chagrin of the financial elite, gold and silver are reentering the American consciousness and starting to shake the wing nutty image of their recent past.\u00a0 But it\u2019s taken a global financial crisis to get the public\u2019s attention \u2013 one that could wipe out our nation at almost any moment.<\/p>\n

The U.S. government\u2019s role in the economy is on a seemingly interminable upward trajectory.\u00a0 The government\u2019s official debt balance that just crossed the $18 trillion mark (with additional unfunded liabilities estimated at more than $100 trillion).\u00a0 Half the population now lives in households that receive government payments.<\/p>\n

Even as private sector jobs disappear and workforce participation rates languish near generational lows, the corporate sector is seemingly thriving.\u00a0 Corporate profits as a percentage of the economy are at record highs.\u00a0 Fortune 500 corporations are using cash hoards and cheap financing \u2013 not so much to invest in capital assets or business expansion, but to buy back their own shares and send their stock prices higher.<\/p>\n

All these dangerous excesses and distortions are made possible by our free-wheeling fiat monetary system.<\/p>\n

What\u2019s occurring now \u2013 endless proliferations of paper flowing into the Treasury and banking sector from the central bank \u2013 is precisely the sort of thing our Founding Fathers sought to prevent.<\/p>\n

The Coinage Act of 1792 authorized the minting of the nation\u2019s money.\u00a0 It defined a \u201cdollar\u201d in terms of a specific quantity of grains of silver (equivalent to about three-fourths of an ounce).\u00a0 Few people today even realize that the dollar bills in their pocket were originally intended to be silver.<\/p>

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The de-monetization of silver was effectively complete in 1965, when the U.S. Mint ceased producing dollars, half dollars, quarters, and dimes containing 90% silver (from 1965 to 1970, half dollars still contained 40% silver).<\/p>\n

Of course, you can still buy U.S. 90% silver coins minted in 1964 and earlier.\u00a0 They are priced based on the current value of their silver content, plus a small premium. \u00a0You can even use them as money in legal barter transactions<\/a>.<\/p>\n

The last real link the U.S. still had to sound, Constitutional money was finally broken in 1971, when President Richard Nixon suspended gold convertibility.\u00a0 Henceforth, no foreign government could redeem their dollar reserves for gold.<\/p>\n

After the dollar became a purely fiat currency 43 years ago, it began a course of massive depreciation.\u00a0 Since 1971, gold prices have moved from $41 per ounce to as high as $1,900.\u00a0 Silver went from $1.40 an ounce to $49.50 at its peak in 1980 \u2013 a high mark hit again in 2011.\u00a0 Gold and silver prices<\/a> have pulled back from their 2011 highs, but are likely to rise higher still.<\/p>\n

Meanwhile, government debt and profligacy have reached epic proportions.\u00a0 \u00a0In 1971, the national debt stood at $398 billion, 34% of GDP.\u00a0 Today\u2019s $18 trillion debt load represents 99% of GDP.<\/p>\n

Total credit market debt comes in at an astonishing 330% of GDP \u2013 and that\u2019s off from its peak in late 2008.\u00a0 Since the 2008 financial crisis, the Federal Reserve has been waging a battle against credit market deflation, which is the market\u2019s way of unwinding a credit market bubble.\u00a0 The Fed has bought more than $4.3 trillion worth of bonds and tried to reignite a financial bubble in the stock market by holding rates at ultra-low levels.\"Credit<\/p>\n

Ironically, the promulgators of this financial madness will often try to portray advocates of hard money as loony!\u00a0 Yet under a gold standard, we had stable price levels, a more restrained government, and less severe booms and busts in financial markets.<\/p>\n

The movement to return fiat currencies to sound money has gained momentum in recent years.\u00a0 On November 30th, Swiss voters went to the polls to decide on a referendum to force Switzerland\u2019s central bank to dramatically boost its gold reserves<\/a>.\u00a0 (The Swiss franc had been the last remaining major country to operate on gold standard until 1999, when the franc went fiat.)<\/p>\n

The \u201cSave Our Swiss Gold\u201d referendum failed.\u00a0 Even so, other countries in Europe are eyeing gold as a monetary asset.<\/p>\n

The Dutch central bank in November moved a fifth of its 612.5 metric tons in gold reserves from the Federal Reserve Bank of New York back home to Amsterdam.\u00a0 \u201cThe Dutch Central Bank joins other banks that are keeping a larger share of their gold supply in their own country,\u201d the central bank said in a statement.<\/p>\n

France may soon make a similar move to repatriate its gold reserves.\u00a0 The leader of France\u2019s largest opposition party, the National Front, called on the French central bank to take full possession of its gold held abroad and called for an independent audit of the country\u2019s gold reserves.<\/p>\n

A member of the European Central Bank Executive Board, Yves Mersch, recently gave a speech discussing the potential benefits of the ECB buying real assets, including gold.<\/p>\n

Russia this year became the world\u2019s largest regular buyer of gold. \u00a0In October, the Russian Central Bank bought nearly 20 tons of gold, or around 8% of total world monthly gold mining production.\"France<\/p>\n

Sound money efforts are spreading in the U.S. at the state level.\u00a0 Earlier this year, Oklahoma joined Utah, Texas, and Louisiana in passing a legal tender law that removes state taxes on transactions made with gold and silver coins.\u00a0\u00a0 These states have asserted their power under Article I, Section 10 of the Constitution to recognize gold and silver as legitimate currency alongside the dollar.\u00a0\u00a0 Similar legislation is now under consideration in several other states.<\/p>\n

Granted, it seems unlikely that the U.S. or any major country will return their currency to a classical gold standard anytime soon.\u00a0 But signs abound that precious metals are re-entering the public consciousness \u2013 and will be playing a more prominent role in monetary systems as geopolitical tensions rise, debt levels become more unmanageable, and public confidence in political institutions wanes.<\/p>\n

\u00a0<\/span><\/p>\n

\u2013Stefan Gleason is President of <\/em>Money Metals Exchange<\/em><\/a><\/span>, a national precious metals dealer with over 35,000 customers. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.<\/em><\/span><\/p>\n

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Much to the chagrin of the financial elite, gold and silver are reentering the American consciousness and starting to shake the wing nutty image of their recent past.\u00a0 But it\u2019s taken a global financial crisis to get the public\u2019s attention \u2013 one that could wipe out our nation at almost any moment. The U.S. government\u2019s […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-64657","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/64657","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=64657"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/64657\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=64657"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=64657"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=64657"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}