Aaron answered them, “Take off the gold earrings that your wives, your sons, and your daughters are wearing, and bring them to me. So all the people took off their earrings and brought them to Aaron. He took what they handed him and made it into an idol cast in the shape of a calf, fashioning it with a tool. Then they said, “These are your gods, O Israel, who brought you up out
of Egypt.” — Exodus 32:2-4 (NIV)
It seems to me that in this day and age of economic/social/political uncertainty, more and more people are frightened and have started clamoring for something away from the Old System of our economic norm: principally fiat currency (i.e. money with no tangible assets backing it, but just the good faith and credit of the government). These people are alarmed by the recent decline in monetary values and the specter of inflation and possibly hyper-inflation. Increasingly, they use the examples of runaway inflation in Argentina in the 1990’s and Weimar Germany in the 1920’s to prove that fiat currency is inherently evil and unreliable. So, in their fear they turn to a substance which they believe is indeed right and true, gold, in order to return us all to what we want: a bull market and good times.
While there are indeed many problems with the status quo, I firmly believe that a rush by the people to call for a resurrection of the “golden bull” of a gold standard in the United States may lead to inevitable ruin, just as it did for those who strayed in the Hebrew Bible. As much as the gold-standard proponents tend to point to history, I too will take a cue from the pages of days gone by. Following the establishment of the Federal Reserve System in the U.S. in 1913, the American people were promised economic stability and prosperity. Instead, they underwent two recessions and The Great Depression within 25 years, all while under a Gold Standard. The Panic of 1907 was instigated during a Gold Standard, as were recessions, depressions, and bank runs throughout the 1800’s in our country.
In times of antiquity, many countries can attribute rising economic periods and prosperity for the majority of their citizens while using fiat currencies. The Romans (copper and bronze coins), England (tally sticks), and the American Colonies (Colonial Scrip) are but a few examples of economic prosperity and development under stable fiat currency systems, some lasting for centuries.
So, why the sudden push for a return to a Gold Standard?
I believe there are two reasons, primarily. One, the average citizen today is not aware of the economic setbacks under gold standards in the past and is lulled and enticed by terms such as “solid,” “stable,” “real,” and “inherent” when describing gold’s value. They often point to gold’s scarcity to highlight its inherent value to societies throughout history, stating that it will not lead to inflation or hyper-inflation. However, I submit that it is specifically because of gold’s scarcity that it is a dangerous commodity to base one’s economic hopes. Gold’s scarcity makes it easier to control and manipulate by a small number of powerful elites, which leads me to the second reason for the recent push for a gold standard: Central Banks.
While publicly central banks around the world appear to downplay the value of gold and its role in establishing a “stable” currency anytime in the near future, their actions seems to discredit their assertions (in recent Congressional testimony, Federal Reserve Chairman, Ben Bernanke went so far as to say “No,” when asked if gold is money). In the past decade most central banks around the world have turned from being net sellers of gold bullion to net buyers. The largest single holder of gold bullion today is the International Monetary Fund (IMF, the central bank of central banks). And there is substantial evidence to suggest that the gold thought to be in Fort Knox, Kentucky is no longer there and has been transferred to the control of central banks, out of the hands of the American people.
So, while the American people may run to their high priest of finance and cry for a new golden calf to be made so that they may worship at its feet, we should all remain vigilant of the need to steer away from anything that takes more power out of the hands of the American people and puts it into the hands of a select group of über-rich bankers. Perhaps instead we should wait for the prophet, who right now is getting the divinely inspired word that yes, indeed, we can have economic prosperity, if only we will take the power to create money out of the hands of the big banks and put it back into the hands of We the People. I think I see him coming down off the mountain now…
What we need instead of a Golden Calf is an end to the debt-standard of money creation. Currently, when the American government issues more money, they do so by borrowing it into existence, issued out of nothing, by a small group of mega-banks. And while that system may work for a while, it is inevitably doomed to collapse, as you can never get rid of debt by borrowing your way out. Instead, we need to get back to what our government is constitutionally mandated to do: coin money and regulate the value thereof. It’s been done before in America. President Abraham Lincoln won the Civil War with debt-free currency (the “greenback”). The colonies prospered under a debt-free fiat-money system.
If the American people are tired of economic uncertainty, depression, and stagnation, we should indeed consider the past – and not consider a gold standard.
By Torin Nelson