Gold Myth #1: Not Enough Gold to Go Around

We’re not running out of gold. And perhaps one day, we will run out of myths about the gold standard. One of the most prevalent myths is that there is not enough gold around to support a gold standard in today’s complex economic markets.

“Is there enough gold in Fort Knox to return to a god-redeemable dollar at the current price of gold?” asked George Mason Professor of Economics Lawrence H. White at the Cato Monetary Conference in November. “Yes,” he answered. “At a market price of $1600 per fine Troy oz. (To choose the low point of the last 30 days) the US government’s 261.5m ounces of gold are worth $418.4b. Current required bank reserves are only $83b. Looked at another way, $418.4b is 19.9 percent of current MA (the sum of currency and checking account balances), a more than healthy reserve ratio by historical standards.”

White continued: “Combined with the likelihood that US citizens’ hedging demand for gold will shrink by more than banks’ reserve demand will grow with larger real demand for M1 balances, I expect that the denationalization and remonetization of the US bullion stock at the current price would allow the US economy to export some excess gold.”

The production of gold is never constant in any one place. Production in South Africa, for example, has dropped off considerably since the 1980s while production in China has risen dramatically. Indeed, China is now the world’s biggest producer of gold.

But remember, Christopher Columbus left Spain in 1492 hoping to find gold. He landed on the island of Hispaniola where he was disappointed to find no gold. Now, companies like Barrick and Everton Resources are active in gold mining there. It may have taken more than five centuries, but gold is still worth looking for. A new book, Cities of Gold by Bill Yenne, details how the pursuit of gold drove exploration by Europeans of the New World.

Still, there are fits and starts in gold exploration and production. For example, an American company Newmont, which was planning a big gold mine operations in Peru, recently decided to stop the project because of protests.

But the pursuit of gold goes on. Even in the United States, new opportunities for gold mining are appearing. Recently, Harriet McLeod reported for Reuters: “A Canadian mining company and a tiny South Carolina town are leading what could be a modern gold rush to the southeastern United States.” This in a mine where gold was first found in 1827.

Nearly two decades ago, Lewis E. Lehrman gave a speech at Hillsdale College in which he said: “Over the long run, production statistics show that the values of the supply and demand for gold are stable. The alleged volatility of the price of gold is a curious inversion of the truth. It is not gold which is unstable. On the contrary, the steady long-run value of gold is recorded today by the extraordinary and unstable fluctuations in the value of paper and credit and money.”

So true. Still true. We’re not running out of gold. We’re running out of excuses not to return to the gold standard.

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The Most Important Thing Holding Up the US Dollar

by Ron Paul

Today’s economic conditions reflect a fiat monetary system held together by many tricks and luck over the past 40 years. The world has been awash in paper money since removal of the last vestige of the gold standard by Richard Nixon when he buried the Bretton Woods agreement — the gold exchange standard — on August 15, 1971.

Since then we’ve been on a worldwide paper dollar standard. Quite possibly we are seeing the beginning of the end of that system. If so, tough times are ahead for the United States and the world economy.

Piketty’s Gold?

April 21, 2014

In terms of public policy, though, we favor honest money. It works out better for more people. And there is a moral dimension to the question of honest money. This was a matter that was understood — and keenly felt — by the Founders of America, who almost to a man (Benjamin Franklin, a printer of paper notes, was a holdout), cringed with humiliation at the thought of fiat paper money. They’d tried it in the revolution, and it had been the one embarrassment of the struggle. They eventually gave us a Constitution that they hoped would bar us from ever making the same mistake.

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The Rueffian SynthesisJohn D. Mueller

Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.

By John D. Mueller

Rueff Restates the Quantity Theory of Money

... Rueff argued that the real problem with the monetarists is not that they focus too much, but rather too little on the supply of money; namely, they assign too little importance to the concrete mechanisms by which money is actually created. Most monetarists adopt the convention that the government can control the nominal supply of money, while demanders of money control its value. Rueff pointed out that under a properly functioning monetary system, even the nominal supply of money is determined by people’s demand for it.

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Excerpts From:

by Lewis E. Lehrman

"The economist defines money as a medium of exchange. It is the token we supply in order to effect payments for the goods we demand. Money is especially a standard like a yardstick – a unit of measure by which we value and price economic goods. Money units express prices which are the vital information necessary for efficient exchange. Money is surely a store of value."

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Laksmi, The Goddess of Prosperity

Ralph J. Benko  |  Apr 24, 2014
Indian culture long has held a high appreciation for gold.  The Vedic faith records four historical ages, the highest being the Satya Yuga.  Per Wikipedia, "when humanity is governed by gods, and every manifestation or work is close to the purest ideal and humanity will allow intrinsic goodness to rule supreme.

So Long, So Slow: IMF Not So Optimistic on World Recovery

Kathleen Packard  |  Apr 23, 2014
“Here’s the short story: The U.S. has exited from financial crisis: Asia and Europe have not,” wrote Rana Foroohar in TIME at the beginning of this year. “China, the second largest economy in the world, is pretty much where the U.S. was five years ago – deeply in debt...Japan, where...
Apr 22, 2014
World Press
George Melloan

In Going Long, the Fed Is Short-Sighted

Stock and bond traders spent most of last year in a state of high anxiety over what would happen when...
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Key Monetary Writings
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Paper tigers

A new high in the prestige of modern central banks was recorded two Fridays ago when Britain waylaid the gold...
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