Who’s Got the Gold? by Jeff Thomas -
LewRockwell | May 12, 2015
In 1971, the US abruptly
went off the gold standard, and in making the public announcement,
US President Richard Nixon looked into the television camera
and said, “We’re all Keynesians now.”
I was a young man at the time and had previously
bought gold, albeit on a very small scale, but I recall
looking into the face of this delusional man and thinking,
“This is not good.”
However, the world at large apparently agreed
with Mister Nixon, and within a few years, the other countries
also went off the gold standard, which meant that, from
that point on, no currency was backed by anything other
than a promise.
It didn’t take long before countries began
playing with their currencies. At one time, the German mark,
the French franc, the Italian lire, and the British shilling
had all been roughly equivalent in value, and four or five
of any one of them was worth about a dollar.
That had already begun to change prior to
1971, but following the decoupling from gold, the governments
of the world really began to see the advantages of manipulating
their own currencies against the currencies of other nations.
From that point on, a currency note from
any country, which was already no more than an “I owe you,”
was increasingly degraded to an “I owe you an undetermined
and fluctuating amount.”
This fixation with monetary manipulation
began much like the 1960s youths’ experimentation with drugs,
and by the millennium, had morphed into something more akin
to heroin addiction. Unfortunately, those who had become
the addicts were the national leaders in finance and politics.
Well, here we are, in the second decade
of the millennium. The party has deteriorated and is soon
to come to a bad end.
As we get closer, those of us who have,
for many years, predicted an eventual realisation that Mister
Keynes and Mister Nixon were dead wrong and that the world
will once again look to gold are, at this late date, gaining
a bit of traction.
We’re seeing an increase in the number of
people who recognise that all fiat currencies eventually
come to an end and gold will continue to shine.
But there are two remaining questions that
have even the best of prognosticators puzzling.
1. What Will the Role of Gold Be
in the Future?
When currencies collapse, will there be
an immediate and complete switch to gold? Unlikely.
Will further fiat currencies be put forward
as solutions to paper money? Almost definitely.
Will future currencies be backed by gold?
Probably, especially as so many governments and banking
institutions are quietly scrambling to buy gold whilst trying
not to let on the extent of their stockpiling.
Will gold-backed currencies stabilise money
for the rest of our lives? Quite unlikely.
Even those countries who may agree to audits
to demonstrate they own the gold they claim to own will,
at some point in the future, look for ways to “do a Nixon”
and once again get off the gold standard. (The short-term
benefits of fiddling with currency is too tempting.)
2. Who’s Got the Gold?
Currencies come and go in the world with
remarkable frequency (the last hundred years has been witness
to over twenty hyperinflations worldwide).
In that quiet scrambling we were talking
about, no one is being really truthful about how much gold
they have. In addition, even between the foremost experts
on the subject (and here, I refer not to the pundits on
television, but to those economists that I personally hold
in the highest regard), there is broad speculation as to
who holds what.
One school of thought has it that, although
the US has long claimed that it possesses roughly 8,000
tonnes of gold in Fort Knox, there has not been an audit
of Fort Knox since 1953. (That’s not encouraging.) Is it
8,000 tonnes? 4,000? None? We’re unlikely to ever get a
truthful answer on this question.
In addition, the US has held roughly 6,000
tonnes of gold for European countries since the Cold War.
Now that the US has become the world’s foremost
debtor nation, Europe is getting a bit antsy, and some are
asking to have it back. In response, the Federal Reserve
has sent Germany a small portion of their gold but avoids
shipping the remainder and denies them even the ability
to inspect the remainder. (Again, not encouraging.)
On the other hand, we have equally astute
economists—US government insiders—who state that they are
fairly certain the gold is there—in both Fort Knox and the
New York Federal Reserve Bank’s underground vault. In the
latter case, they state that, although much or all of the
gold has been leased to the bullion banks, it has never
left the building.
What does this mean to the rightful owners?
There are multiple legitimate claims on the very same bars
Might the Fed burn the rightful owners—the
European nations—and burn the bullion banks? Might they
just confiscate the gold (assuming it’s still there) to
create a new gold-backed currency for the US, and thumb
their collective noses to all other claimants?
And does the People’s Bank of China hold
roughly 2,500 tonnes of gold, as has been suggested? Or
do they hold 5,000, or even more? Certainly, it’s to their
advantage to claim the lowest amount that might be believable
at present. Some US government insiders have insisted that
the low number is the true number.
The argument over this question may seem
moot, but it is not. “Who has the gold” may very well decide
which countries will recover from the currency crashes with
their skin still on.
Whoever holds the most gold will hold the
most real wealth and, by extension, gain the most prominent
seat at the bargaining table for decades to come. Whether
that table will be the IMF, the new AAIB (Asian Infrastructure
Investment Bank), or any future central economic entity,
the future will go to the player with the most metal, as
he will be able to create the most currency, in whatever
form it may take.
Editor’s Note: Gold and silver have served
as money for centuries and across many different civilizations.
They have always been inherently international assets. There
is nothing at all particularly American, Chinese, Russian,
or European about gold or silver. Buying gold and silver
is perhaps the easiest step you can take toward internationalizing
your savings. The next step is to store your precious metals
in a safe foreign jurisdiction.
It is now easy and convenient to own and
store physical gold and silver offshore in places like Singapore
and Switzerland in a non-bank private vault.