The Gold Conspiracy

Ron Paul has made the gold standard a hot topic. Libertarians and people who hate all government (maybe call them anarchists?) love the idea. It gets the Fed out of their hair; it eliminates government control of banks, and of currency--or is it the other way around?

Ask yourself this question: who would benefit from a gold standard? South Africa, Russia, Brazil, perhaps; they all have lots of it; traders in the metal, brokers, and maybe a lot of peasants in India, whose wives wear it. No, seriously, who would benefit?

Gold is only one of many substances over the ages used as currency (the Yaps used stone wheels). The intrinsic value of gold was used in the Roman Empire as currency, and generally, the empires of the Eurasian continent used precious metals for their currencies (but not in the Americas where it was sacred, and not a currency). In Imperial days, the value of the currency was supposed to be the value of the metal in the coin. A denarius of silver was supposed to be the value of that amount of silver. By the fifth century, a denarius had so little silver that it looked dull brown after only a few months circulation. The reason: the empire diluted the silver more and more as it had less real money to pay anyone; it was a demonstration of the bankruptcy of the empire; it was also inflation.

Of course, gold was not so adulterated as silver, because the wealthy depended upon it for their security. They depended upon it so much, that they virtually removed it from circulation--to decorate their ceilings and their women. That was one of the major causes leading to the downfall of the Roman Empire: the disappearance of a workable currency It is preferred as a currency because it does not corrode, and it's relatively scarce. Neither stone, nor paper, (if properly cared for) corrode, either, but since they are not scarce, they only carry value as currency when ascribed a value by the state.

The first paper currencies were issued by banks, but governments began to use paper because it was infinitely expandable. Most governing elites know, however, that they can't just print money; it has to reflect real value. Inflation destroys the elites as much as anyone. But the advantage of paper money, or fiat money, is that when a nation needs more of it, it can be created. If it needs less, it can be destroyed, as well--not ripped out of people's hands and burned, but by the national bank reducing credit, or raising interest to banks.

If China had a gold standard, it would hardly be able to grow; its money would be too scarce for the incredible demands of 11+% growth this year. In fact, it probably wouldn't have had its economic takeoff at all.

If the US was on that standard now, with the huge amounts of sub-prime loans going bad, we would be hurled into a terrifying depression, not fighting off recession with infusions of credit and money from the Fed, and a stimulus package from the government.

One might ask how will that stimulus package be financed? Not by selling the ingots from Fort Knox, most of which are probably owned by China, anyway. By more borrowing, of course.

The point is this: our current system ain't too great, but basing currency on a precious metal would be a disaster. It would be an inflexible currency, which would mean there could be no real growth. Orderly growth is made possible by a moderate rate of inflation. But gold is rarely adulterated very far as coin, so the amount of money is finite; it really won't grow unless there are dramatic new discoveries of it somewhere.

Spain suffered terminal inflation because of its mounds of ingots; it had extracted so much of it, when devastating the native populations of South America, that it bought everything from elsewhere. It de-industrialized itself just as effectively as Reagan did the US with our then "strong dollar." Unlikely to happen now: there are few places left in the world that haven't already been scoured for gold, because of the greed of the Europeans and their descendants in the Americas, the Pacific--everywhere our values have triumphed.

So, Vote for Ron Paul if you want a steady-state world--after it undergoes a sharp depression. Really, gold may only be good as a hedge against complete disaster; it's no longer a realistic basis for a currency. And as for that hedge against disaster: the Senators of the fifth century, who had so much of it, they lost it to the barbarians , who carried it off quite easily after torturing and killing them.

As far as conspiracy goes, obviously the first place we should look would be to what people and nations would gain from the dollar going back to the gold standard. It wouldn't be the US; it could be Russia. It might be brokers and mining companies. As to who are the interests behind this, we should at least ask the question why.