Will the U.S. ever go back to the gold standard?

[thecrazyone]

Would we ever want to turn that ship around?

I often think about the Zimbabwe billion and trillion dollar notes that are now worthless..

[Recyclersteve]

The hundred trillion dollar Z notes may be worthless in that country, but are a GREAT conversation piece and quite collectible IMHO.

I’d be shocked if we’d ever go back to a gold standard. Someone here could calculate what that would do to the price of gold, but I’d imagine it would absolutely skyrocket.

[Lemon Thrower]

Yes, Nixon said this was only a temporary measure.

[Corsair]

Yes, Nixon said this was only a temporary measure.

[thecrazyone]

I guess you can take that to the bank, then!

[Lemon Thrower]

If you are interested in this issue, I call to your attention a book by Jacques Reuff titled Age of Inflation.

Reuff was the advisor to Charles de Gualle and coined the phrase "exorbitant priviledge". It discusses a lot of the history of gold including the gold pool, which was a collection of western countries (US UK Germany France Belgium Italy Switzerland Netherlands). The gold pool was set up by the Bretton Woods system to defend the price of gold at $35/oz. "Defend" in this context means manipulate the price. France left Indochina (Viet Nam, etc.) because it was tanking their budget and was chagrined that the US took over with France effectively subsidizing the American deficits. It was France's requests to convert their dollars into gold and to take their gold home that forced Nixon to close the gold window.

The book also discusses alternatives, which is by far the most interesting part. IIRC, we could have eliminated all deficits by simply revaluing gold to $70. Instead we created a fiat leviathan and one is left with the impression that this was always the purpose and planned as early as the 1870s when the Coinage Act of 1873 de-monetized silver from the original 1792 standard.

Reuff was a Frenchman but his book is available in English.

[68Camaro]

Interesting reference, thanks! There is a used volume on Amazon for $120 shipped - half that I would bite, but that's too much for a read that I probably know the conclusions from already. I see one on ebay for under $50, maybe. There is another book by the same name and topic by a US professor in the 70s, Hans F Sennholz. Do you know that one?

I ended up ordering the ebay volume, paperback (seemingly), for $58 shipping and taxes. It's a present to myself... That's a topic I will find interesting - the French view of Bretton Woods, leading up to their request to recover their gold.

[68Camaro]

...
The book also discusses alternatives, which is by far the most interesting part. IIRC, we could have eliminated all deficits by simply revaluing gold to $70. Instead we created a fiat leviathan and one is left with the impression that this was always the purpose and planned as early as the 1870s when the Coinage Act of 1873 de-monetized silver from the original 1792 standard.
...

Of course there is no "one" view in history; even when one view is predominant, there are always opposing forces, sometimes several, and if persistent, oftentimes, over long periods of several generations, the opposition can end up successfully pushing the predominant view off course "in the name of liberty and justice". We are witness to just that especially in the US - the prior opposition is now in power in all the major power centers, and has completely taken over the Democrat party, which it used for it's ends until it is no more but a veneer of a name wrapped around anarchy.

There were almost always forces aligned with fiat currency in the US, even through the 19th century. The Federalists dipped their toes into that pond during the Civil War, illegally, many would argue. However we can see especially in modern times that illegal things get done all the time by those in power, unless those opposed call them on it. And one of the unresolved short-comings of the court system capped by the Supreme Court (even when it is conservatively aligned) is that the court system works too slowly and ponderously to be the primary challenge against abuse of power. But I am straying off topic.

To the OP, we've gotten to the level of excess where revaluation of gold to balance excessive spending is not practically possible. We are past the tipping point, so a reset of some type is now inevitable. I prefer not to be present for it, but I have offspring and relatives and friends, so in the end I would rather be present to help guide my family through that morass, if possible. I have given up predicting timing - but I don't stop preparing.

[Lemon Thrower]

if you are interested in the book, I think its available in pdf free on the internet somewhere. I have a hardback copy somewhere but would take me a year to find.

Another way is to go to your local library, give them the title and isbn, and they can borrow it from another library for you. Might take 1-2 weeks to get it but its usually free!

[Lemon Thrower]

...
The book also discusses alternatives, which is by far the most interesting part. IIRC, we could have eliminated all deficits by simply revaluing gold to $70. Instead we created a fiat leviathan and one is left with the impression that this was always the purpose and planned as early as the 1870s when the Coinage Act of 1873 de-monetized silver from the original 1792 standard.
...

Of course there is no "one" view in history; even when one view is predominant, there are always opposing forces, sometimes several, and if persistent, oftentimes, over long periods of several generations, the opposition can end up successfully pushing the predominant view off course "in the name of liberty and justice". We are witness to just that especially in the US - the prior opposition is now in power in all the major power centers, and has completely taken over the Democrat party, which it used for it's ends until it is no more but a veneer of a name wrapped around anarchy.

There were almost always forces aligned with fiat currency in the US, even through the 19th century. The Federalists dipped their toes into that pond during the Civil War, illegally, many would argue. However we can see especially in modern times that illegal things get done all the time by those in power, unless those opposed call them on it. And one of the unresolved short-comings of the court system capped by the Supreme Court (even when it is conservatively aligned) is that the court system works too slowly and ponderously to be the primary challenge against abuse of power. But I am straying off topic.

To the OP, we've gotten to the level of excess where revaluation of gold to balance excessive spending is not practically possible. We are past the tipping point, so a reset of some type is now inevitable. I prefer not to be present for it, but I have offspring and relatives and friends, so in the end I would rather be present to help guide my family through that morass, if possible. I have given up predicting timing - but I don't stop preparing.

68, I fully agree with your first 2 paragraphs.

OP - no we will not go back to convertibility. That is a huge limit on the power of government and will be resisted at all costs.

68 - I disagree with your third paragraph. Here's why.

What's going on the past 2 years is the Fed raised rates very sharply and very suddenly. Banks like SVB had invested excess cash into bonds paying 3%. In a matter of months, the market was issuing new bonds paying 6%, so the bonds SVB held were worth roughly half as much as before. But SVB was not alone. There are low paying bonds and loans in portfolios across the banking sector and beyond like pension funds, insurance companies, etc. Lots of built in losses that have not been recognized. Even the Fed itself is insolvent if it had to recognize these losses. (As an aside, this is why tightening has stopped and why rates may come down in 2024. That may cause more inflation but a widespread banking collapse would be worse.)

How might the Fed address its own insolvency? Well, it has an asset (gold) on its balance sheet for $35 an ounce. If it marked it to market, the surplus would create equity on the Fed's balance sheet.

So while there have been calls since Nixon's day to revalue gold, its only been the last 2 years that the Fed was insolvent. So a revaluation is a real possibility.

There are 2 main arguments why it wouldn't happen. First, revaluing gold only helps the Fed. It doesn't help those banks with bonds or loans paying 3% or who own commerical real estate loans where the value of the collateral is suspect and the owners of the real estate can't afford to renew the loan at market interest rates. What would help these participants and the Fed is a lowering of market interest rates.

The other reason is the US Treasury. About a decade ago, someone divided the US National debt by the amount of gold the US supposedly owns. The result was that the US Treasury would need to revalue gold to more than $70K an ounce to balance its books. Since then, the debt has more than doubled so you do the math. The last thing UST wants is to call attention to the size of the deficit, the disconnect with the value of gold, and the corrolary which is the over-valuation of the dollar.

[68Camaro]

Market price isn't enough. Just the debt (not including the several multiples times that of insolvent future obligations) is, of course, 34T dollars. 34,000,000,000,000 dollars

The total amount of gold allegedly held by the government (including the FED) is "only" 261,498,926 oz. That's if they have it (no one really knows) and if it is actually not secretly encumbered by some agreement that has been kept classified (no one really knows that either).

So, at best, the price of gold needed to relieve the government of it's immediate debt is the first divided by the second. That comes to just a few bucks over 130,000 per troy oz - or about 64 TIMES the current market price (well more than 3000 times the current book value). I consider that to be a reset, if it did happen, but it won't, because the remaining holders of gold in the world, who now control the market (we don't, any longer) won't let that happen. They will insist that the dollar be allowed to collapse before they revalue their gold to prop up the dollar.

If you consider the future debt obligations, the price of gold needed to put the country back on an old fashioned gold standard would be a half million dollars an ounce.

Next, consider the congress we have (and will continue to have, under the current and future social climate). If they were magically relieved of the current debt by a gold price reset, as well as relieved of the price of debt service - you know what they would immediately do, right? Free everything for everyone! Until they ran the debt back up to where it is, or worse.

[Lemon Thrower]

Your last paragraph is what I was talking about. Reuff laid out a simple plan back in the late 60s or early 70s where all of the US debtors could be made whole and the debt paid. But we did not take it because the power to spend without limit was too great.

[pmbug]

Would we ever want to turn that ship around?

I often think about the Zimbabwe billion and trillion dollar notes that are now worthless..

I would like to see America go GAULT. Globally, the BIS and central banks are pushing to develop CBDCs. I hope America (we the people) wakes up from it's stupor on this issue and demands real money. There are some signs of hope, but I think the masses are still far too mesmerized by social media BS and political theater to really pay attention to this issue.

[natsb88]

Interesting reference, thanks! There is a used volume on Amazon for $120 shipped - half that I would bite, but that's too much for a read that I probably know the conclusions from already. I see one on ebay for under $50, maybe. There is another book by the same name and topic by a US professor in the 70s, Hans F Sennholz. Do you know that one?

I ended up ordering the ebay volume, paperback (seemingly), for $58 shipping and taxes. It's a present to myself... That's a topic I will find interesting - the French view of Bretton Woods, leading up to their request to recover their gold.

I spent $190 on a book a few years ago. It's a really comprehensive history of a local Pennsylvania Railroad branch with lots of charts and photos. It was only printed once and only shows up on eBay or Amazon once in a blue moon, usually priced around $500 My copy has what appears to be coal dust on the edges, which is fine by me, as the cleaner $500 copies are a non-starter

[Lemon Thrower]

I used to have a side hustle in used books. Amazon FBA etc.

If you want to find a specific used book, check out bookfinder.com. Beware the same book might have a dozen or more listings with slightly different titles, etc. Looks like the cheapest version in English is $110.00

If you want to browse a ton of cheap books on a variety of topics including fiction, check out booksalefinder.com. If you know books you can make some money. I flipped a rare copy of Graham and Dodd's The Intelligent Investor for a quick $400 profit.

[CLINT-THE-GREAT]

Yes, Nixon said this was only a temporary measure.

ya, and as far as I know, Nixon never lied!

-The Great

[pmbug]

Zimbabwe has announced they will be replacing their existing fiat currency (ZW) with a gold standard currency (ZiG) backed by a basket of gold and USD:

https://www.pmbug.com/threads/zimbabwe- ... post-98582