Gold Standard

Posted: February 6, 2010 in Uncategorized

“In absence of the gold standard there is no way to protect savings from confiscation through inflation. 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.” – Alan Greenspan 1966

Can you believe that was the same Federal Reserve Chairman that put us in this situation.  What happened to his principles? It is important to understand why the gold standard forces governments to manage a balanced budget and why the removal of the gold standard ultimately creates an out of control government that ultimately becomes unsustainable.  Actually it is very simple to understand.

Ex.  If a government has $5 Billion dollars in gold reserves, that governments money supply of fiat currency (Dollars) can never go higher than $5 Billion dollars.  In other words it forces governments to be discipline, their expenses could not exceed $5 Billion dollars in this example.

These wildly out of control deficits ( that can never be repaid would never happen if the gold standard was still in place. Why?  The reason is gold cannot be printed or created out of thin air.  Gold is a tangible product with real value.  For the most part all the gold in the world has been found.  With the gold standard the only way a government could increase their money supply would be to find more gold to back up that increase.

Let’s fast forward to today where you have no gold standard.  Well with no standard in place governments create as much fiat currency as their hearts desire.  Referencing the Alan Greenspan quote at the top of this page it is easy to understand what is happening.


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