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Has Gold Become A New Reserve Currency?

For decades, the U.S. dollar has been the reserve currency of the world.  This has given the United States an extraordinary amount of economic power, but as the U.S. economy has started to come apart over the past decade, other nations have increasingly sought to move away from the U.S. dollar and find other alternatives.  For a long time it was thought that the Euro would become the next great reserve currency of the world.  However, the recent Greek debt crisis, along with massive financial instability in nations such as Portugal, Spain and Italy, has caused investors to rapidly lose confidence in the Euro.  In fact there are even some whispers that the Euro may not even survive the sovereign debt crisis as it sweeps across Europe.  With both the U.S. dollar and the Euro looking shaky, investors have been searching somewhere safe to put their money.  Increasingly, they have been turning to gold.  So has gold now become a new reserve currency?  Will all of this new demand drive the price of gold into unprecedented territory?

Well, the truth is that as long as paper currencies around the world continue to show instability, gold will continue to be a preferred choice.  Nations all over the world are looking for ways to diversify their very large foreign exchange reserves.  For example, China now has approximately $2 trillion in foreign exchange reserves, and has been wanting to reduce its position in U.S. dollars for quite some time now.

But where should they put their money?

The Euro is coming apart like a 20 dollar suit.  There is a very real fear that Greece is only the first domino to fall and that soon nations like Italy, Spain and Portugal will be begging the IMF for assistance as the sovereign debt crisis sweeps across Europe.

Well, what about the British pound?  The truth is that the pound is not very appealing right now because the U.K. is facing a massive government debt crisis as well.  In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so intense that whatever party wins this election will be out of power for a generation.

Well, how about the Japanese yen?  Ironically, there has been a move towards the Japanese yen in recent days, but the truth is that the Japanese debt situation is one of the worst in the world.  Japan's gross public debt has reached 201 percent of GDP and  Japan's battle with deflation dragged into its 13th straight month in March.  No, the yen is not safe at all.

So does that bring us back to the U.S. dollar?  No.  There is a reason why nations all over the world have been wanting to get out of the U.S. dollar.  The United States has piled up the biggest mountain of debt in the history of the world, and even official U.S. government reports admit that the U.S. government is on a financial path that is not even close to sustainable.  The U.S. economy is caught in a death spiral, and that makes the U.S. dollar very unsafe.

So, what is safe at this point?

Well, gold is.

The price of gold rose to $1,210 an ounce on Friday.  The terms "flight to quality" and "safe haven" are increasingly being used for the precious metal as investors flee all of the major global paper currencies.

Just consider some of the recent comments about gold by financial experts that have shown up in the news....

Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago:

"The sovereign-debt panic is spreading and forcing a flight to quality into gold."

Citigroup analyst David Thurtell:

"Gold is now enjoying safe haven status, partly because bonds, particularly peripheral euro zone government and bank paper, is no longer a safe haven."

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter:

"There is a clear flight into quality to the gold market as frightened capital seeks a haven of any sort while confusion reigns."

So will this move towards gold continue?

Sure.

Although anyone who follows the gold market knows that big financial institutions regularly work to suppress the price of gold.  In fact, one industry insider recently decided to be a whistleblower and came forward with "smoking gun" evidence of price manipulation in the precious metals markets, but the CFTC didn't do a thing about it.

Fortunately, the overwhelming demand for gold is now pushing the price up despite efforts to suppress it.

In addition, once it becomes apparent that most of the "gold" that is traded in the world is not backed by the actual metal itself, the price of gold will go even higher.

For years, almost everyone has assumed that the London Bullion Market Association (LBMA), the world's largest gold market, had actual gold to back up the massive "gold deposits" at the major LBMA banks.

But that is just not the case.

People are now starting to realize that there is very little actual gold in the LBMA system.

When most people think they are buying "gold", what they are actually buying are just pieces of paper that say they own gold.

Egon von Greyerz of Matterhorn Asset Management in Switzerland recently elaborated on this point.  He says that "a lot of people who have studied it closely are convinced that there is a major shortage in physical gold at LBMA. LBMA trades around 700 tons net of gold daily. That is 25% of world annual production and around $6 trillion annually. To back that amount of trading on a 100% reserve ratio basis, it would need several year’s production of physical gold, which they definitively haven’t got."

So what is going to happen when investors start demanding physical delivery of the gold that they purchase?

It is going to create a huge mess.

Needless to say, if you are investing in gold make sure that you take physical delivery of the gold.

As the paper currenices all over the globe continue to unravel (as all debt-based paper currencies always do), all precious metals, including gold, will be increasingly in demand.

In fact, the idea of gold being a "reserve currency" is not anything new.

Gold has been a "reserve currency" for thousands of years, and those who understand history know that it will always remain one.

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  • Lenny Pike

    IMF SDRs enforced through the very real threat of imprisonment or worse versus Gold.

  • http://www.thecactusland.com Robert Bonomo

    Excellent article and good sources. I have a feeling we are close to reaching the tipping point, and when we reach it, all hell breaks loose. The whole house of cards is beginning to sway, and I really don’t think even some of the very big players realize how even they have been manipulated into this giant ponzi scheme. Please give this article a read, I would love to hear your feedback. http://www.thecactusland.com/2010/02/ayn-rand-barack-obama-and-jar-of.html

  • Dan

    Id say it has but I am amazing someone has created an online exchange like ebay but for bullion, if the average person wants to sell Gold they lose loads via ebay and paypal fees.

    There needs to be a bullion exchange from people to people you could create a subsection for buying and selling all other things using gold/silver.

  • http://www.tremblethedevil.com Matt Damon

    It definitely is, but the biggest economic story is gonna be when economics finally overtake California:

    http://www.tremblethedevil.com/2009/06/overtaken-by-events.html

  • Scott V

    No comments….this bull has a long way to go

  • http://www.forecastfortomorrow.com Man With All The Answers

    Go and listen to this spooky audio Stock Market Crash Pit Audio As Market Goes Into Meltdown 2010
    on May 6th 2010…..INSANE!!!

    Listen Here => http://www.youtube.com/watch?v=4jUzigCDavU

  • http://lunaticfringe-brian.blogspot.com/ Lunatic Fringe

    It has and always will be class warfare. Greed and power, with whatever Halloween costume you choose to put on it, boils down to class warfare. Elite v the rest of us.

    That is how it has always been. From the dawn of time. Cheap labor, making the elite wealthy. The tactics change, illegal aliens or cheap Pac Rim labor, have the-but it is always the same.

    Try to make the most money, with the least amount of work. If work has to be performed, find the cheapest workers. Cloak all this greed and power in some politically correct rhetoric. Make people believe that it doesn’t exist.

    The greatest trick the devil ever played on us, was convincing us that he didn’t exist.

    2000 dollar gold will be here sooner than you think. Why? Because the world’s unbacked currency is simply toilet paper. Worthless paper and people will quit accepting it. Really. It is different this time. We are going to have to default on debt and the government cannot pay the entitlements we owe. This has never occurred in our history.

    Very simply, we have written a check we cannot cash. It’s going to be fun to watch.

  • Stephanie

    Regarding the LBMA – I have to wonder if it’s true what someone said about it – that the reason it doesn’t have gold to back up those trades is because there is never any intention whatsoever to stand for delivery on gold. Where is a schoolteacher’s pension plan going to put the gold? In the tornado cellar at the school house? I think the intention is to track the price, win on the upside, and get out at that point.

    I believe, and I truly believe that the only way you’ll ever see $2,000 gold is when all 4,000 coin shops have been cleaned out of their gold and silver. Paper is paper and will continue to exist until the current governments collapse, because the governments are supporting this exact sort of thing.

  • http://www.nicepuff.com Nice.Puff

    Great article! Also, in technical analysis, both gold and silver had form a major inverse head and shoulder, this pattern is very bullish. So it seems everything (fundamental, people’s sentiment and technical) is pointing toward Gold becoming more crucial in the coming years.

  • http://www.paulrye.blogspot.com Paul

    Stephanie, at its current price a block of gold a little over 3 inches per side would pay for a $400,000 house. Storage is not a problem with gold. Banks store cash. What makes you think that any number of institutions could not securely store gold?

  • Cayman

    The article is fine except all the stuff about the LBMA. LBMA is a professional physical gold market (not retail) and 99% of LBMA trades are in forwards that help to finance mining activity. This is not a futures market or a retail market and it certainly is not a market based on vaulted gold. It is a market that trades the rights and obligations associated with forward contracts that are written to be settled in physical gold. That is why it is called a “physical” market. “Physical” does not mean “vaulted”. The forwards extend out to five years. The portion of the forwards market that are delivered inside 2 days is called the spot market.

    Can anyone please show me a single “depositor” in an LBMA bank who holds a forward of any duration, but believes he holds vaulted gold? I submit that there aren’t any, and all this talk about the LBMA misrepresenting forward contracts in physical gold as if those contracts represent vaulted gold is complete nonsense.

    Can anyone show me a single LBMA spot order that didn’t deliver inside two days? Nope. They are so incredibly rare (i.e., logistical delivery problems), that there might as well not be any.

    Can anyone show me a single bar *inside* the LBMA system that doesn’t meet the LBMA standards of purity? Nope.

    Is everyone aware that the refiners so trust the LBMA system that they guarantee the purity of every bar by replacement?

    The article gives some good reasons for gold to go up, but LBMA banks aren’t one of them.

    If you want to scare people about investing in paper gold that appears to be in a vault, but really isn’t, look no further than the financial products that have been sold as “physical” at retail without the absolute right of withdrawal. That’s where massive confusion lies. ETF forward purchases have been correctly advertised as “physical”, but the term has been misinterpreted by the retail investor to mean “vaulted”. The big surprise will be when the retail investor finds out that his ETF only secured rights to future production via forwards, that 99% of his ETF investment is not vaulted, and the fine print of that investment never allowed for retail withdrawal because the investor indirectly owns rights to future production of physical gold.

    Vaulted gold will trade higher and higher above future production, and that spread is going to scare a lot of people who thought their ETFs represented vaulted. They will watch the spread open up and they won’t know why. As gold gets more valuable in nominal terms, the nominal spread might get pretty big in absolute terms, and everyone is going to run around screaming “the gold isn’t in the vault!!!!” Of course it’s not. It wasn’t supposed to be.

    But even when that happens, the retail investor still holds first claim to real mine production, so he’s positioned way above the mining stockholder – positioned as a first purchaser from the mine – a contract to be settled in gold long before stockholders start seeing dividends (if ever). So it’s not a bad place to be.

    But still – people are going to freak when they realize that 99% of the “physical” market *never* meant vaulted in the first place.

    In a post above, someone asked about a gold exchange based on *vaulted* gold. Go to bullionvault.com.

    It’s just my opinion, but retail investor priorities (in order of descreasing risk) should be (1) keep in hand whatever gold you can safely keep, (2) vault gold in Switzerland and outside the banking system, (3) consider forwards if your into buying new production at a discount (that reflects the risks of mine finance), and (4) consider owning mining stocks if you want to speculate that mines will produce more than the forwards they wrote in order to finance production and that they will do so profitably.

    The other big shock for retail investors is going to be gold confiscation. Think it won’t happen to you? Watch the capital gains, estate and expatriation taxes. Want to take a guess where those are going? Q: So if capital gains take 30%, and estate taxes take 60% and expatriation taxes take 50%, where does that leave the gold investor whose gains are 100% nominal? A: With much less gold than he bought. That’s confiscation – institutionalized and constitutionalized. It’s already in place. Just need a few tax rate hikes and Uncle Sam will be confiscating huge amounts of real wealth that the retail investor thought he was protecting in gold. (Can anyone see a benefit of keeping in hand as much gold as you safely can?)

    One more real problem to watch out for. DTCC doesn’t settle trades properly, so there are tons of brokerage statements that show settled trades, but the shares are not actually in custody. So any ETF or mining stock you buy has massive custodial risk in there until you take custody. Thin of if like buying paper gold vs. taking physical delivery. It’s the same kind of problem. Be sure to request and receive all your share certificates to force out that risk. Otherwise you are exposing yourself to counterfeits that are inherent to the clearing system. When that shakes out, lots of people who don’t hold their own share certs are going to be in for a nasty surprise.

    In short, stop worrying about the LBMA. The complainers don’t seem to even understand what the LBMA is. Chase after the real problems. Heaven knows there are is shortage of those!

    I hope this helps. Best of luck to everyone.

  • Cayman

    Typo – Heaven knows there *is no* shortage of those!

    In case anyone is interested, I should add that the LBMA does vault gold, but the vaulted gold is only a tiny portion of total trading activity, similar to the way that 2 days of spot trading is only a tiny portion of up to five years of forward durations. This is why LBMA vaults contain only a small amount of gold relative to total trading activity. It is not a conspiracy or a fraud – it is by design. If you want vaulted gold, then don’t buy an ETF that invests in forwards. Buy vaulted gold. I recommend buying LBMA spot and taking delivery, which happens in two days. Then vault the gold with a non-bank member of the LBMA system under a custody agreement (not a deposit agreement). The gold will truck from an LBMA bank vault to an LBMA non-bank vault, but will never leave the LBMA system. This is key to maintaining trust in the purity of the gold, and that is key to maintaining the liquidity of the investment.

    You can do this yourself or you can use a company like bullionvault to do it for you.

    I hope that helps. All the best.

  • Vess

    Oh, puhleeese! Not the “markets are running out of physical gold” story again! First it was the COMEX and now the LBMA? What next? Advise us to take physical delivery? Have you morons ever tried to do that?! And, have you tried to sell back the gold bars you have taken delivery of? Nobody will take them unless they have been re-assayed – and do you know how much it would cost you? Not to mention the costs of transportation, guarding, storage and insurance? Even the jewelers won’t take them (except at a huge discount), because they aren’t the right purity (they are 0.9995 pure – nobody wants that; they want either 0.9999 pure, or 14-carat “jeweler” gold).

    Not to mention that those who are thinking “gold’s price is going up, I own gold, I’m getting rich” are deluding themselves. Gold’s price is “going up” in what? That’s right, in fiat money. You aren’t “getting rich” – you’re just avoiding getting poor by inflation. And that’s if you’re lucky and your so-called “profits” aren’t taxed into oblivion… Gold isn’t a way for poor people to get rich – it is a way for rich people to remain rich. You can’t “invest” in gold, since it has no return (but has costs) – all you can do is *save* in gold.

    As for the LBMA not having in storage several times the amount of traded gold – well, duh! They are essentially market makers. If Bob wants to sell 1000 ounces of gold and Alice wants to buy 1000 ounces of gold, LBMA doesn’t need to have a single gram of gold – all they need to do is match Bob with Alice (and collect a commission). If Bob isn’t selling, there won’t be a trade and the LBMA still doesn’t need to have any gold in storage. Of course, that’s in a perfect world, when buyers and sellers are always matched exactly. Since this isn’t always the case, the LBMA has to have *some* gold as a buffer – but certainly not several times the traded annual amount!

  • Lenny Pike

    Hey Vess

    What if Bob doesn’t have 1000 ounces of gold and what if Bob is the people behind the Federal Reserve who control the world through their paper money. Would they have any reasons to keep the price of gold from rising? And would people like Alice be victimized in the process? Everyone who contributes to this blog welcomes people like you and Cayman so that the contrast between the truth and lies can be seen for people just now gaining an understanding of how completely controlled and corrupt the fiat money system has become.

  • TruthHunter

    One factor that isn’t discussed much is Worldwide
    Gold ownership. Central banks only account for a
    minority percentage of above ground Gold. Who owns the rest? There is more than enough Gold out there to allow certain unknowns to control the market. [B]There won’t be a Gold bubble unless
    someone who’s agenda we don’t know wants it.[/B] They also have sufficient Gold to crush it. I wonder if even governments know who has it…

    Unless there is a solid international movement towards true monetization of Gold(“Free Gold”) its just a dangerous commodity or collectible. Thats not happening yet.

    I believe that Gold will go above $5K/oz but don’t get caught holding it.

    Like the old Kenny Rogers song: “You got to know when to hold ‘em, know when to fold ‘em
    Know when to walk away, know when to run”

  • Karen Gooding

    I am Canadian, so buy and sell gold through Kitco. You can access it through kitco.com
    You don’t lose much at all this way- and you can easily get it delivered. You can also have kitco store it for you- and they DO actually have the physical gold- at least they did a few months ago.
    I think gold will continue (not in a straight line of course) to go up until the dust settles on the currency issues around the world. There is suppression of gold price, but with central banks buying it, they may eventually allow it to “float” as it will, ultimately, be in their best interests. The banks will use this wealth to establish more stable currency systems.

  • Jon Goelke

    I am so sick of all these idiots who claim there is a shortage of physical gold. What a joke. Please give me one example of an investor who wanted physical gold and could not find it. There is plenty of gold. The COMEX and LBMA have huge amounts of gold. Call your local coin dealer and ask for a gold coin. Trust me, the coin dealer will have the gold available. There is no shortage of gold (never has been).

  • Mike

    Facinating reading!
    Would a knowledgeable person please tell me what happens when a sovereign nation defaults on its debts?
    If I can’t pay my mortgage the bank takes my house & then sues me. What is the process for a bankrupt state?

  • Lenny Pike

    Jon Goelke:

    Is it possible that there is a shortage of gold compared to the dollar amount of gold represented in futures contracts and ETF shares that have been sold and are currently outstanding? A very small percentage of these buyers demand physical delivery and if they all did at once there would be a massive shortage of gold being held by the ones who sold it. This is fraud and the people behind the central banks of the world who remain in control through their control of fiat money short the gold market to keep gold (their competition) at a low price and threat the best they can. They will create all the fiat money necessary to short gold as much as need be. You should come up with the answer to this question and then report back to this blog with the answer so that you are not the one that comes across as an idiot. Give us the approximate dollar amount of all futures contracts and ETFs outstanding and then the dollar amount of historical gold mined and the estimates of gold still in the ground which will be mined in however far out in the future you choose. Do it for silver also while you’re at it. Larry Summers has written a little bit on this scheme so you will be getting it straight from the horse’s mouth and then you can get you’re mind right, that is unless you would prefer not to because you gain some sort of advantage over your fellow man for not doing so.

  • Bruce

    When a state goes bankrupt, the corporation is taken over and controlled and it goes through a reorganization. The people who believe that they are property of the state by way of citizenship (citizen = subject = slave) pay in austerity measures and through blood sweat and tears.

    The United States is a bankrupt corporation. The banks own the president and congress. That’s why nobody seems to care that Obama refuses to prove eligibility.

    Political states are constructive trust organizations. Political nations are a gathering of people who live upon a certain land mass. They are distinct from one another.

  • amp7

    In 1933, US president Roosevelt enacted executive order 6102. It became illegal for Americans to hoard gold. What would prevent G20 member states from adopting a similar strategy if monetary objectives were seriously hampered by gold? China and Russia have supported the use of SDRs as the new reserve currency. Whatever governments end up using as the new reserve currency, SDRs, gold, or something else, I suspect they will want to exercise tight control over it.

    If I cannot use gold as a legal currency, how is it useful in keeping a roof over my head? It seems to me that just the mention of executive order 6102 by a G20 member state would cause gold to plummet. There are so many ways in which governments can manipulate the price of gold that I fail to see how it can be considered a safe haven.

  • rpt

    They can manipulate gold. They can manipulate the dollar. They can manipulate the stock market. They can digitize all money. They can do whatever they choose.

    And no, gold may not keep a roof over your head. But equally uncertain these days are 401ks, pensions, stocks, Social Security, and bank accounts. All we can do is not put all our eggs in one basket, and hope for the best.(and maybe try taking our govt. back).

  • Lenny Pike

    If we do take our country back and install a majority of representatives who represent the average American and not the banksters and ruling elite, a sufficient number of those representatives will be threatened with death or killed if necessary if they can’t be bought or blackmailed. With a new breed of representative the fight can be won. Any volunteers out there? I know there are still a lot of people that have what it takes out there.

  • http://survivalrealestate.com Hank

    What ever happened to all of Bill Clinton’s gold plated tungsten? When the piegons try to claim their promised gold and they find out that there was really no gold only a “promise” of gold, TSHTF. They will need to google “survival real estate.com” for sure.

  • Greek

    Dear Lenny Pike,

    greetings from sunny Greece,

    Greeks seem to be the first victims from the debt crisis but a global war has already started…

    I found my self in searching the web for a safe “monetary” heaven..when i read you comment..

    So please share this info with as many as you can:

    In Democracy the representatives are chosen among all citizens by lot (in chance).

    This is the basic rule to distinguish if a certain constitution is a democratic system of government or not.

    Please share this truth with others.
    This truth is the real gold for our prosperity.

    Although this is a well known historical truth only an extremely low minority of people all over the world that are able to read Aristotle from the prototype have access to this knowledge.

    According to “politica” a book written by Aristotle the basic contrast in democracy compared to other government systems is that in democracy representatives are chosen by lots among the whole population.

    And that’s why they are called representatives because in a parliament of 500 these 500 people are not an elite but is just a representative sample(due to the lot process) of the whole society.

    Even in Greece less than 1% know this truth about Democracy!

    The word ballot is a deliberately misinterpreted word!

    To explain what ballot really means is LOTTO.

    And if all people in all fake-democracy countries find out about this true then they will ask for democracy and then the parliaments will be filled up with people like average man!!
    The representatives will be real representatives of citizens and not representatives of their sponsors (as also Aristotle explains as the major advantage of democracy)

    And average man will give solutions in favor of people and not in favor of banker’s gold and elite in general…

    Real Democracy is the only solution!

    Greeting from Greece!

  • http://www.thunderdrake.com/blog/ Aury (Thunderdrake)

    I won’t be surprised if the price of gold suddenly explodes. That and silver, too. The latter, which I’m glad I own. I wouldn’t be surprised if the price of those two metals have been artificially deflated either. Because if they were to REALLY expose the prices of those metals, there’d be chaos in the market tomorrow.

  • Lenny Pike

    Dear Greek, I have seen you Greeks protesting out in the streets on tv and it gives me a great feeling of admiration for the people of your country. Most people there must have a good ability to think for themselves and to know when they are being victimized and then realize there is only one thing that has to be done and then have the courage to do it. Americans have lost that ability and the majority will just sit there and do nothing and not even know they are being abused. They have been conditioned to be like that though and it is not entirely their fault. The only other country I have seen that has a population like ours is North Korea where everyone cried and were heartbroken with the death of their leader who was starving them to death and enslaving them. I did not know that with a true democracy elections were decided by chance and any citizen could be the winner. That sounds a lot better than the way elections are decided in the U.S. where most of the time the Ruling Elite have the means and tactics to have the candidate they want to win elected. A Democratic Republic is the way to go though I think just in case two wolves and a sheep vote to decide on what’s for dinner. Some laws should never be allowed to exist and the one that does exist now and that is the source of Greece’s trouble is the one that allows central banks, mainly the United States central bank in Greece’s case to create money out of nothing.

  • Lenny Pike

    Greek,

    Let me correct that last thing I said because there is no law that allows The central bank in the United States to create money out of nothing. At least not a law that is legal.

  • kymbo

    Even people such as myself who are not American know what F.D.R. did with the `New Deal’. The owning of gold was outlawed and taken out of the hands of private posession. There will be nowhere to hide this time around! Particularly if a global depression of such a scale results which will make the 30′s depression seem insignificant by comparison. That will then give “them” the power to form a One World Government through sacrificing equity for debt – and the sovereign rights of the nations of the world as well. And what if you dissent? I leave that to let you answer it yourself.

  • Sioan Stephen Bethel

    MEMORANDUM #3

    August 31, 2009

    To: President Barack Obama
    From: Sioan Stephen Bethel

    Subject: Issuance of restricted U.S. Gold Notes: A Regional Gold Standard
    There exists a third persuasive, perhaps binding, precedent for the creation of U.S. representative money (100’s billions – trillions), after the French assignat (1790) and German rentenmark (1924), presented in Memos 1 & 2. That, of a single, restricted issue of U.S. gold notes, backed by Gold Bullion fractional reserves with an acceptable cover ratio. The new gold notes, separate and apart from Federal Reserve Notes (fiat money) in general circulation, would be used to amortize or re-purchase significant portions of the U.S. National Debt, fund or reimburse funds for stimulus packages, bailouts, and additional initiatives as warranted. To date, there has been no significant asset-based monetary innovation to address the nation’s financial crisis and chronic financial instability. Gold is a more conventional and traditional backing, than land or commodity based representative money, though any and all serve the requisite purpose.
    Course of Action
    The historical, persuasive precedents of French assignats and German rentenmarks, were presented in Memos 1 & 2. The binding precedent for new, restricted U.S. Gold Notes is provided by the 1922-1923 “stable valued” currencies, price indexed to gold or silver, by the German issuing bodies: Rheinland-Main-Donau, Neckar, Suddeustche Festvertband Stuttgart, Schleswig-Holsteinische Elektrizit, Baver Grosskraftwerk, State of Hamburg (Silver) and the City of Lubek (Swedish Crown) [Attachment A].
    An issue of U.S. Gold Notes separate and apart from Federal Reserve Notes in general circulation, would function as a means of payment or repurchase of significant portions of the U.S. National Debt, and fund or reimburse funds for stimulus packages, bailouts and additional initiatives as required. U.S. Gold Reserves once covered all dollars in circulation. Now, the amount of notes in a re-issue would be predicated on existing U.S. gold reserves [8,133.5 tons] with an acceptable cover ratio [Attachment B]. No doubt, the new issue would be substantial, in the hundreds of billion, if not trillion dollar levels; a significant alternative to present central bank gold sales.
    Assessment
    “In light of the history and development of money, however, it would not be surprising if a movement to return to a gold standard were to arise (although whether that would be advisable or not will not be so clear). The study of economics is about the study of cycles, and perhaps there is a decades-long cycle in which societies swing back and forth from a gold standard to fiat money. Because the cycle can last as long or longer than a human lifetime, it is perhaps inconceivable or even nonsensical for a person living in the fiat money era to acknowledge the possible reality of the alternative. So, the return to a gold standard may sound like something from the fringes of reality to the contemporary reader. If it is a cycle though there may be a time in the near future when questions about fiat money increase at the same time that a desire for something tangible also increases.”
    Professor John J. Chung, “Money a Simulacrum: The Legal Nature and Reality of Money”
    Targeted, regional gold standards would facilitate parallel time cycles regarding fiat and representative money. In a December of 2008 address before the United Nations, President Sarkozy of France called for the revival of a Bretton-Woods type agreement; a return to an international gold standard. The problem of available gold reserves supporting the present and future expansion requirements of money in worldwide circulation no doubt still exists. The localized use of gold standards, however, by the United States and the European Union, for instance, avoids this dilemma and provides a targeted solution to the financial crisis and provides a new underpinning for long-term financial stability.
    Again, the use of gold and/or public land backed representative money (trillions) requires no additional taxation or borrowing nor risks hyperinflation with excessive issues of fiat money. A measure perfectly suited to the temperament of the American body politic.

  • http://www.trustablegold.com Christian

    Re: Stuff about LBMA

    Also retail investors can buy vaulted gold through a range of providers, including some banks.

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