Gold Standard

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Will the Gold Standard Return in 2017 Under Donald Trump?

By David Zeiler, Associate Editor, Money Morning • @DavidGZeiler - December 9, 2016

Several voices in President-elect Donald Trump's circle of economic advisers have expressed support for putting the United States back on the gold standard for the first time since 1971.

The idea has the support of several prominent GOP lawmakers. Trump himself talked about it during the campaign. That means a return to the gold standard may well become an issue in 2017.

But much has changed since 1971.

Here's why turning back the clock is easier said than done...

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Will the Gold Standard Return in 2017 Under Donald Trump?

By David Zeiler, Associate Editor, Money Morning • @DavidGZeiler - December 9, 2016

Several voices in President-elect Donald Trump's circle of economic advisers have expressed support for putting the United States back on the gold standard for the first time since 1971.

The idea has the support of several prominent GOP lawmakers. Trump himself talked about it during the campaign. That means a return to the gold standard may well become an issue in 2017.

But much has changed since 1971.

Here's why turning back the clock is easier said than done...

A History of the Gold Standard

By Tony Daltorio, Contributing Writer, Money Morning - July 5, 2013

If you want to know why more people are calling for a return to the gold standard, this “history of the gold standard” will explain it all… Read more...

By The 2016 Election Gold Could Be $3700 an Ounce

By Peter Krauth, Resource Specialist, Money Morning - November 8, 2012

It's now two years and two billion dollars later...

And in many ways, we're right back where we started with the same President, and a house divided.

For investors, all the uncertainty this situation brings to the fiscal cliff and its impending tax increases and spending cuts are likely to fuel plenty of volatility for the next several months.

Yesterday's almost 300 point drop on the Dow and a 7% pop in the VIX are good examples of this.

We can also expect Ben Bernanke to be in place until at least early 2014. The only change I expect from the Fed now is more frequent and still larger easing campaigns, as well as potentially extending low rates, again, beyond mid-2015. Even if Bernanke is replaced, I expect only more of the same seriously misguided policies.

In fact, just yesterday San Francisco Fed President John Williams hinted that the most recent QE3 bond buying program could well exceed $600 billion.

So what does all of this mean to investors in hard assets--particularly those with holdings in gold and silver?

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The Secret Return to the "Gold Standard"

By William Patalon III, Executive Editor, Money Morning • @privatebrief - November 5, 2012

Although it happened more than 40 years ago, many Americans still rue the day back in 1971 when U.S. President Richard M. Nixon effectively took this country off the so-called "gold standard."

Under a true gold standard, paper notes are "convertible" into pre-determined, fixed quantities of the "yellow metal."

What actually happened back in 1971 was that President Nixon - facing huge budget and trade deficits, and a plunging dollar - enacted a series of economic moves, including the unilateral cancellation of the direct convertibility of the U.S. dollar into gold.

By slamming the "gold window" shut, Nixon also brought down the curtain on the existing Bretton Woods system of global financial exchange.

The fallout was immediate, creating a situation that financial historians still refer to as the "Nixon Shock."

Proponents of the gold standard say the real damage is still being wrought: That decision four decades ago led directly to the uncertainty, volatility and irresponsibility that we see in the U.S. economy and global financial markets today.

Whether you agree or not is a topic for another time.

But what I'm here to tell you today is that the world's central banks have quietly - almost secretly - returned the world to a new version of the gold standard.

Back in 2010, the world's central banks became net buyers of gold for the first time since 1988. Buying ramped last year and net purchases exceeded 455 metric tons (tonnes). That was the largest net purchase since 1964.

But the world's central bankers will handily eclipse the 2011 totals here in 2012: They will purchase a projected 493 metric tons this year as they expand reserves to diversify away from the U.S. dollar and protect their countries' economies against inflation, Thomson Reuters GFMS said.

And GFMS said you can expect central banks "to remain a significant gold buyer for some time to come."

Real Asset Returns Editor Peter Krauth told me he completely agrees with that assessment.

As Peter explained: "You can see their thinking, Bill ... you can see them saying: "We have enough of all these fiat currencies in our bank reserves - now we want something that's going to counter those holdings, that's a valuable asset and that has all the right fundamentals in place.' And that asset is gold."

We're seeing the results of this "new gold standard" in the marketplace...

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Investing in Gold: Why the "Golden Cross" is a Big Deal

By Diane Alter, Contributing Writer, Money Morning - September 21, 2012

Investing in gold and silver already offered staggering profit potential, and the opportunities just got even brighter.

Gold this week reached a "golden cross" and silver is perched to traverse one in a matter a days, following successive weeks of bullish trends in both precious metals' markets.

A golden cross occurs when the current price of a commodity (or an equity) and the shorter term moving averages "cross" or rise above the longer term 200-day moving average.

After 18 months of tepid and sometimes lower price movement, gold and silver have formed a large foundational base while enjoying two of the longest and strongest bull markets in history, according to research from Business Insider.

Now the golden cross has delivered technical support for higher moves for both metals.

"We're going to see new highs in both gold and silver in the first half of the New Year," said Money Morning Global Resources Specialist Peter Krauth. "I don't see anything that will keep this from happening."

Here's why Krauth is so bullish on gold and silver.

Gold Bugs Love It, But a New Gold Standard is Just a Dream –For Now

By Martin Hutchinson, Global Investing Specialist, Money Morning - September 11, 2012

Thanks largely to Ron Paul, the Republicans have suddenly become enamored of gold.

And why not?...It is real money.

These newly-born gold bugs have even gone so far as to include a call for a commission to examine a return to the gold standard in the party platform.

Needless to say, we've come a long way since President Richard Nixon "closed the gold window" in 1971. Forty-one years, and a few financial disasters later, the debate has begun anew.

But it begs the question: How would the gold standard work?

What's more, what would the economic implications be, and is it likely to happen or is it all just a gold bug's dream?

In ancient and medieval times the answers were quite a bit more simple. Since there was no real banking system, there was also no argument.

Kings coined money with gold, silver, or copper, and the people accepted the money at a price based on its metal content. The idea of taking paper instead would have been thought of as sheer madness.

Only in China, an isolated and stable society, was paper money used during the Song Dynasty of the 10th through 13th centuries, but even there the Mongol invasion and fall of the Song regime caused the paper money system to collapse.

Paper money backed by gold only became possible once modern banking got going in Europe in the 16th and 17th centuries.

In fact, the British Gold Standard was devised in 1717 by no less than Isaac Newton, then Master of the Mint. Other countries soon joined Britain in linking their currencies to gold, including the United States from 1878 until its abandonment in 1933.

Of course, countries claimed to be on a gold standard under the Bretton Woods Agreement from 1944-71, but gold was only exchangeable between governments. Indeed, holding gold was prohibited in the U.S. for private individuals.

But inevitably, the Bretton Woods monetary system itself became manipulated and collapsed in inflation.

That brings us to today....

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Election 2012: Why the GOP Is Really Talking About the Gold Standard

By kdowdle, Money Morning - September 4, 2012

One of the most surprising proposals from the Republican National Convention was that the GOP platform for Election 2012 includes a commission analyzing a return to the gold standard.

Ever since the United States went off the gold standard in 1971 the U.S. monetary base has grown to its current level of roughly $2.56 trillion. With this increase has come an even more alarming rise in the federal deficit. Currently the U.S. has around $222 trillion in unfunded liabilities.

That's why many, most notably Rep. Ron Paul, R-TX, have called for a return to the gold standard and a compete audit of the Federal Reserve.

But as opponents are quick to point out, it is impractical, impossible, and highly unlikely that America's enormous monetary supply would be backed by gold.

Some on the left, such as Paul Krugman of The New York Times, called the return to the gold standard "an almost comically (and cosmically) bad idea."

So why would the GOP bring it up?

Experts have theorized that the inclusion of a gold standard commission on the GOP party's platform is just a way to encourage Ron Paul supporters to join the Romney camp.

Within the GOP there are worries that these devoted "Paulites" will not vote for Romney unless more of Paul's agenda is taken seriously. The move to "audit the Fed" and a return to the gold standard are two ideas Paul supporters care most about.

But there's more to the gold standard proposal than pleasing Paulites.

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Republicans Support Return to Gold Standard

By Diane Alter, Contributing Writer, Money Morning - August 27, 2012

Five years of liberal monetary policy have made the rarely considered notion of a return to the gold standard a genuine issue on the Republican platform.

The Republican Party is set to announce a "gold commission" to its official policy platform in Tampa Bay this week. The move will mark the first time in three decades that the gold standard has returned to mainstream U.S. politics.

A committee spokeswoman confirmed to CNNMoney that the new proposal to support "gold as money" will be officially decided upon at the RNC Convention.

"Now, three decades later, as we face the task of cleaning up the wreckage of the current Administration's policies, we propose a similar commission to investigate possible ways to set a fixed value for the dollar," reads the proposal.

Republicans' Gold Standard Proposal: A Nod to Ron Paul?

The draft calls for an audit of Federal Reserve monetary policy and a commission to explore restoring the connection between the U.S. dollar and gold.

Many credit the eyebrow-raising move to Texas Rep. Ron Paul, a longshot GOP presidential hopeful who has been a staunch advocate of returning to the gold standard. Paul, the token underdog in the race, does have a stream of loyal supporters who would support such a move.

But Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the committee, shrugs off any connection to Paul and his coveted delegates.

"These were adopted because they are things that Republicans agree on. The House recently passed a bill on this, and this is something that we think needs to be done," Blackburn told the Financial Times.

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Should Iceland's Next Currency Be the Canadian Loonie or Gold?

By Peter Krauth, Resource Specialist, Money Morning - March 9, 2012

My eyes nearly popped out of my head when I read this headline: "Iceland Considers Adopting Canadian Loonie."

The loonie is otherwise known as the Canadian dollar.

Of course, gold would be a much a better choice as I'll explain later.

But the simple fact that this tiny nation of 330,000 is even thinking about using the Canadian dollar as its currency would have been unheard of just five short years ago.

After all, we live in a world that is literally littered with fiat money. In this world the U.S. dollar has been at the top of the heap.

That the loonie may be Iceland's top choice is just stunning.

But the fallout from the 2008 financial crisis has caused increasing doubt about the long-term health of the greenback.

And with trillions of fresh new Federal Reserve Notes issued since then, it would be hard to call the Fed a friend of the U.S. dollar.

Even the euro has taken its hits. The European banking crisis caused scores of former "euro fans" to bail from that major currency, too.

And it's no wonder.

The massive debt held by the "PIIGS" has compelled the European Central Bank (ECB) and the International Monetary Fund (IMF) to bail out these countries and scores of banks with trillions of euros.

Still, all of this printing is far from over...

Greece vs. Iceland: A Tale of Two Paths

The latest installment in Europe's pathetic financial soap opera was Greece's second bailout (of which there was never really any doubt). This latest rescue totals $170 billion from the European Union, ECB, and the IMF.

The result? Financial repression and riots in Athens that lead to some deaths.

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U.S. Gold Standard Debate Heats Up on 40th Anniversary of "Nixon Shock'

By David Zeiler, Associate Editor, Money Morning • @DavidGZeiler - August 16, 2011

When U.S. President Richard M. Nixon announced on Aug.15, 1971 that the United States would no longer adhere to the gold standard - the mechanism that fixed the U.S. dollar's value to that of gold − the move was cheered.

The Dow Jones Industrial Average jumped nearly 4%, and The New York Times gushed, "We unhesitatingly applaud the boldness with which the President has moved."

But now, 40 years later, there is a new gold-standard debate and the decision is being examined anew.

Proponents say the move had to be made, since the gold standard needlessly restricted the U.S. Federal Reserve's ability to manage the money supply, particularly during times of economic distress.

To critics, however, the once-heralded decision has lost much of its former luster. They say that abandoning the gold standard has served only to devalue the dollar, making everything else comparatively more expensive.

Here at Money Morning we've talked about the implications of the gold standard debate, as well as how our readers can capitalize on gold as a safe-haven investment - especially given the "yellow metal's" ever-increasing value versus the dollar.

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