Gold won't work as a Solution for Monetary Reform

I suppose a debt free issued note would be the way to go but there is no way the bankers will allow that to happen. So what are the choices? You could back it with all forms of PM's (gold, silver, platinum, etc.) or even throw in some industrial metals but the fiat currency is just too easy to manipulate.

Thanks Dr....great idea to point this idea.  This video points to some very important points, which are very well explained in the referenced book Web of Debt (highly recommended).  During the days after Lincoln, the gold standard was heavily manipulated and leveraged just like banks leverage deposits and create money out of thin air now.  There really would be little different between going to PMs compared to fiat currency.  The idea that the government should print money and not incur debt in the process is brilliant and bypasses many of the glaring issues going to a PM standard has.

I agree. 

Gold is an financial asset (an investment)....not money itself.

When oil was closing in on $150/barrel, people invested in it because of Peak Oil fears. Now we know that was bull market propaganda. In the same way, people invest in gold today because of macro-economic fears. Someday, these fears will be considered bull market propaganda as well.

Is there anyone who invests in gold that doesn't think that it should be the next monetary standard and/or believe the whole financial system will come crashing down? 

I invest in gold because its the only intact bull market left. Can't we just be grateful for that fact and not overlay macro-economics and/or personal identity onto the act of investing? When this bull market in gold comes to an end, the goldbugs are going to make the dumb money look like geniuses (my apologies if you consider yourself a goldbug and this statement offended you).

(edit:sp)

How should we reconcile the notion that a return to the gold standard won't work with fact that it is the only currency authorized by the Constitution.

This statement from JAG also seems to conflict with the original intent of the Founding Fathers, the Constitution and with Congressman Ron Paul:

Gold is an financial asset (an investment)....not money itself.

This from Ron Pauls website:http://www.ronpaulforums.com/showthread.php?t=109560

The Gold Standard and the Original Intent of the Constitution "The only substances ever declared as money within the U.S. were gold and silver, in coin form, with copper/nickel serving in token capacity only. See: 12 USCA 152 re. "lawful money" and Coinage Act of April 2, 1792, at Sections 11, 16, & 20; re. copper/nickel tokens, see Sec. 9, and 31 USCA 460." Original U.S. Constitution Art. I Sec. 8 Cl. 5 [Congress shall have Power ...] To coin Money, regulate the Value thereof, and of foreign Coin, ...; Art. I Sec. 10 Cl. 1 [No State shall ...] make any Thing but gold and silver Coin a Tender in Payment of Debts; ... Note that there is no such prohibition against Congress, or any delegated power to make anything legal tender. This is primarily because Congress was originally understood to have no power to make anything legal tender outside of federal territories, under Art. I Sec. 8 Cl. 17 and Art. IV Sec. 3 Cl. 2, but in 1868 a Supreme Court packed by Pres. Ulysses S. Grant, in the Legal Tender Cases, allowed Congress to make paper currency issued by the U.S. Treasury, backed by gold, legal tender on state territory, a precedent that remains controversial to this day, when courts allow paper currency not backed by anything to be considered "legal tender". http://www.constitution.org/cs_money.htm For all the details of Grant's court packing scheme and their unconstitutional ruling see here - this is a MUST READ. More info: "The founding fathers were concerned about the unrestrained control of the money supply. One thing they all agreed upon was the limitation on the issuance of money, Thomas Jefferson warned of the damage that would be caused if the people assigned control of the money supply to the banking sector, "I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country" Thomas Jefferson, 1791 Many of the founding fathers experienced the damage caused by fiat currency. Most of the revolutionary war was financed by worthless currency called "Continentals". # The Continental Currency ("Not worth a Continental") that American colonists issued for the Continental Congress to finance the Revolutionary War was replaced by the US Dollar in 1785 when The Continental Congress adopted the dollar as the unit for national currency. At that time, private bank-note companies printed a variety of notes. After adoption of the Constitution in 1789, Congress chartered the First Bank of the United States and authorized it to issue paper bank notes to eliminate confusion and simplify trade. The U.S. Constitution (Section 10) forbids any state from making anything but gold or silver a legal tender. The Federal Monetary System was established in 1792 with the creation of the U.S. Mint in Philadelphia. The first American coins were struck in 1793. The U.S. Coinage Act of 1792, consistent with the Constitution, provided for a U.S. Mint, which stamped silver and gold coins. The importance of this Act cannot be stressed enough. One dollar was defined by statute as a specific weight of gold. # The Act also invoked the death penalty for anyone found to be debasing money. # President George Washington mentions the importance of the national currency backed by gold and silver throughout his initial term of office and he contributed his own silver for the initial coins minted. # The purchase of The US Mint in Philadelphia, was the first money appropriated by Congress for a building to be used for a public purpose. It was purchased for a total of $4,266.67 on July 18, 1792. Link Here's the Coinage Act so everyone can read the truth for themselves: "SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death."

It would seem to me, in my admittedly elementary understanding of economics, that the gold standard would be the best way out of our mess. Apparently I'm in good company.

Facts: 

• The U.S. currently holds, at most, 8,100 metric tonnes of gold  (it may be less than 3,100 tonnes - see my earlier post "U.S. Gold, Going or Completely Gone?"
• 8,100 metric tonnes of gold is worth around $312 billion at $1,200/oz
• The U.S. money supply (M3) is almost $15 trillion  - Shadow Stats
• Q - How do you back up $15 trillion with 312 billion?  A - You don't!

This is quite easy.  15,000,000,000,000 / 260,421,047 troy ounces (8,100 metric tonnes) .  So a troy ounce is $57,599.  Ideally you would  probably do a 1 for 100 or 1 for 1000 change out of currency to get us back down to reasonably sized numbers.  Then we start over with a gold backed currency and do not ever allow a central bank to be in power again.

The constitutional issue of money is largely ignored today.  I don't think that's proper and I would hope that when we get serious about monetary reform that we make this more clear through admendements if needed.

• Article I, Section 10, Clause 1: No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

I take this to mean that states may not issue coins and "Bills of Credit" unless they are gold and silver.  I don't know the last time a state made payments in gold or silver but I suspect it's been many years.  I think it is safe to say that we ignore this clause.

• Article I, Section 8, Clause 5: The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

I think that the framers intended that only government should have the power to issue money and to fix the standards.  Ellen Brown makes the following argument:

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

I once read that if you divide ALL the gold in captivity right now by the total wealth of the global economy (remember we're here too!) then gold would be worth $220,000 an ounce; and that was at least 12 months ago, maybe 18.....

Mike

You mean that there is some place besides America???? Well I am shocked. You learn something everyday.

The constitutional issue of money is largely ignored today.  I don't think that's proper and I would hope that when we get serious about monetary reform that we make this more clear through amendments if needed.

• Article I, Section 10, Clause 1: No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

I take this to mean that states may not issue coins and "Bills of Credit" unless they are gold and silver.  I don't know the last time a state made payments in gold or silver but I suspect it's been many years.  I think it is safe to say that we ignore this clause.

• Article I, Section 8, Clause 5: The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

I think that the framers intended that only government should have the power to issue money and to fix the standards, not private banks.  Ellen Brown (an attorney) makes the following argument:

Congress has been given the power to coin money, but minting coins is not the same thing as issuing paper money, checkbook money, accounting-entry money, or electronic money – the forms of money used most often today. Arguably, "to coin" money was an archaic way of saying "to create" money, but then what is to be made of the clause stating, "No state shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debt"? "Coin" here clearly means precious metal coins, period.

(10th admendment)  X - Rights of the States under Constitution: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that "No State shall . . . emit Bills of Credit"? According to "the 'Lectric Law Library," "bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day." Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as "legal tender" – the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money – whether in paper, electronic or accounting-entry form – so under the Tenth Amendment, this right is reserved to the States and to the People.

One important distinction that I think needs to be made is that credit and debt are two distinctly different things.  Federal Reserve Notes are "debt" certificates issued by private banks and as such are not money by constitutional terms.  On the other hand, Lincoln's Greenbacks were not debt certificates, they were sovereign credits issued by the Federal Government. 

rhare wrote:

This is quite easy. 15,000,000,000,000 / 260,421,047 troy ounces (8,100 metric tonnes) . So a troy ounce is $57,599. Ideally you would probably do a 1 for 100 or 1 for 1000 change out of currency to get us back down to reasonably sized numbers. Then we start over with a gold backed currency and do not ever allow a central bank to be in power again.

But if you artificially decree that a troy ounce is worth $57,559 dollars; aren't you creating the fiat money that you object to?

Theoretically, our current money supply, around $14.7 trillion dollars, could buy just over 381,000 tonnes of gold ($1,200/oz).  I say theoretically because that is magnitudes more gold than has been mined from this planet.  You would essentially be devaluing our money by 97%.

Our current public + private debt is around $57 trillion - how do you repay the total outstanding debt (not including interest) with so little gold money?

There are three other problems that may be created as an unintended consequence:

1. The interest on the national debt would drain our gold reserves inside of a year.
2. Our trade imbalance would drain the 8,100 tonnes of gold in the treasury in just over a year if redeeemed.
3. The economy would be restrained by the amount of gold held by the treasury instead of by the productive power of the people - how would you grow the economy without going into debt to add gold reserves?

I just don't see how a gold based system is desirable or doable.  Look forward to other comments,

Larry

Note: Sorry 'bout my Post #6, it was an accident to publish before it was done - go to Post #9 to see the real deal

Larry