Suddenly there is enough gold

Recently the value of all goldsmiths in the world has increased to about $ 25 trillion. Not long before Janet Yellen’s Federal Reserve presidency, even this-this stash brought only three eighth value so much. The total world gold is worth less than $ 10 trillion not ten years ago.

Now we can finally go back to having a golden model – then suddenly there is so many of them. After all, the argument for leaving the golden model, in the late 1960s and early 1970s, the act of 1971 – there was not enough of it. If a country like the United States was in the gold standard, it could be “exhausted” by it if it was really pressured to redeem the fixed price, which happened to be $ 35 per ounce. And if a golden model country ran, the golden model would have retreated, did not work, failed.

Now you can ask, as the golden market is about the deepest and the most liquid of any purchase, is it possible for a coin publisher to “exhaust” gold? Can’t this publisher buy gold on the open market like anyone else?

Of course – so it didn’t make sense to say that the United States could be exhausted. However, this seems to be because we unloaded the gold standard in 1971. There were fears that the United States would run out as they were pushing for acquisitions.

How did this go by going from gold? Press Press, the academic community and the politics world said it went beautifully. It is amazing to see the rhetoric of the game about how things went after the gold standard. A federal bank study (See page 3) A few years: “As it turned out, these new settings are running quite well.” The consensus from the mid -1970s was that there could be the worst recession since the Great Depression (1974 was a year of completely collapsing growth) and inflation is crazy (double digits in peace).

The global monetary system worked in the mid -1970s. The real economy was horrible and inflation, so it could be worse, we must assume, in addition to the efforts of these monetary officials.

And there was much more gold. There was at least five times more in 1975, such as in the late 1960s. The market price had reached $ 35 in 1967 to $ 175 to 1975 (five times the increase) and South Africa and the Soviets, among other things. To think that everyone was worried about someone who was exhausted just a few years ago.

One fact that we intuitively intuitively in the nineteenth century, when our economy was great, is that no one wants hard finally money when 1) business opportunities in the economy is large and 2) a coin holder can at any time redeem things for precious metal, gold in one word. Because of 1) people love to easily use changing money (not gold), and because of 2), when they use the easy postgraduate things that find the assurance that their finances are also returning to something nice.

It does not have 1) increases the demand for gold. Example: The Great Depression. It does not have 2) increases the demand for gold. Example: The 1970s. The point is to pound, through the natural powers, the soft power and the like, the demand for gold. Why will anyone ever want it if the business environment is large, taxes are low to non -existent success and if you want gold, the currency you have never changed in market value against it?

Episodes throughout this story abound in our new book Free money.

One important reason why the United States received the world from the gold model in 1971 was the poor quality of spiritual rhetoric about this golden model. An important entrance to this rhetoric was that there was not enough gold to rely on a large global economy. The crucial question, of course, was not how golden there was, but how much people wanted it.

When tax rates are reduced and coins are confirmed as convertible, it turns out that people do not really want gold so much. If you can earn more money with the currency and be sure that when you do the currency you will be worth the same in the classic final money (gold), your preference for this currency above the gold jumps.

We treat Free money That was the very building of Fort Knox, the gold repository there in 1936, which encouraged and protects all the misleading thought that created the slippery slope in no golden model. If, for example, Lyndon Johnson had understood in 1968 that you were saving the gold standard by increasing the refund after taxes on dollars, it would not have been increasing ten percent tax tax as it did. Would have reduced tax rates. The price of gold would have fallen, the Golden Crisis would have lifted and we would have a great 1970s – all reasonable scenarios.

But spending on Vietnam, social programs? Robert Mundell was large During the recession of 1969-70, the first of Doozies in the next decade. Increasing your tax has caused a recession that led to lost production equivalent to that of the big countries. But you say it was balanced with the budget? Loss of production is a total loss for society, people!

Growth after 1973 was like a quarter of this 1960s, when Kennedy had a mix of tax cuts and gold maintenance. There were more casual balanced budgets, such as 1974, the year in which every month it was spent on recession. For what, for the collapse of the American dream?

Permanent, decisive tax interest rates cuts-gradients, even tax eliminations-reserves the demand for gold without operating in the currency where tax reforms operate. The commitments to return to gold while you are cutting tax are even better. Jude Wanniski (who started the Bretton Woods research, which faces these issues today) made this point again and again from the 1970s to the early 2000s. When politics followed in the 1980s and 1990s, the American dream was again.