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.

Yellen’s Missing Jobs

March 31, 2014

The new Federal Reserve chairman, Janet Yellen, gave a policy speech today at Chicago, where, in a startling gesture, she mentioned three working individuals by name — Jermaine Brownlee, Vicki Lira, and Doreen Poole. They lost their jobs the Great Recession and have been struggling ever since. It was a refreshing, even affecting demarche by Mrs. Yellen, who has made a return to full employment a public priority. She underscored her sincerity by telephoning Mr. Brownlee and Ms. Lira and Ms. Poole before delivering her speech.

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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

Who Was Jacques Rueff?

... Trained in science and mathematics at the Ecole Polytechnique, Rueff devoted his first theoretical work to showing that the same scientific method applies to “moral” or “social” sciences like economics as to the physical sciences (Des Sciences Physiques aux Sciences Morales, 1922). In both cases, he pointed out, individual acts can be “indeterminate,” but the pattern of large numbers of individual acts can be predicted as a matter of probability. And so in economics no less than physics, as he later wrote, “A scientific theory is considered correct only if it makes forecasting possible.”

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Excerpts From:

by Lewis E. Lehrman

"Forerunners of man lived upon the planet several million years ago. But the unique, modern, social order of man – civilization – emerged only four to five thousand years ago. Historical and archaeological evidence suggests that the institution of money evolved coterminously with civilization. From the standpoint of the 100,000-year history of Homo sapiens, civilization and money are but young and fragile reeds. Today their very existence is threatened by financial disorder."

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Turkey’s Cut-rate Expectations

Kathleen Packard  |  Apr 18, 2014
There is a lot of bad behavior in the global political and monetary world. Much of it comes in countries that should know better. Recep Tayyip Erdogan’s Justice and Development Party (AKP) easily won municipal electons in Turkey but the party’s candidates won far short of the nation’s votes. The Wall...
Hostility toward gold has a long pedigree.  19th century depiction of Pliny the Elder courtesy of the Library of Congress Gaius Plinius Secundus, commonly known as Pliny the Elder, in his The Natural History, Book 33, section 3, writes: Would that gold could have been banished for ever from the earth, accursed by...
Jacques Rueff, a key figure in European economic circles from the 1930s until the 1970s, was, first and foremost, an...
Jun 17, 2008
Key Monetary Writings
John D. Mueller

Elements of Economic Theory and American Political Economy

Economic theory began in the natural law philosophy with elements from Aristotle and Augustine, first integrated by Thomas...
Prosperity Through Gold
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