. The futility of the policy of gold valorization.

The world has been witnessing the pathetic attempts of governments and central banks “to keep the gold price in check” since the 1971 fraudulent default of the US government on its international gold obligations. To be sure, a default is always followed by a depreciation of the dishonored paper, so the futility of the policy of gold valorization has always been a foregone conclusion. But what we have is far more than this self-defeating effort to keep gold out forever from the monetary system. What we have is a veritable brain-washing of the whole world about the role of gold in the economy, and blaming gold for results that only keeping gold in the system could have prevented.

It is alleged that gold has disqualified itself from playing the role as the monetary anchor and source of credit in the economy. ‘Gold is far too volatile for that’. This is puerile because it ignores the fact that the so-called volatility of gold is just the mirror image of the volatility of the irredeemable dollar in which the price of gold is quoted.

It is also ignored that the debt crisis is a direct consequence of exiling gold from the international monetary system. Gold is the only ultimate extinguisher of debt. It cannot be replaced by the dollar or any other irredeemable currency. Under the dollar system debt simply cannot be extinguished. Total debt can only grow, never shrink. All the bad debt and “toxic sludge” stays in the system and is merely kicked upstairs into the balance sheet of the US Treasury. There it remains, representing a great threat to the world. Like radioactive material, when its quantity exceeds the threshold, a chain-reaction starts triggering an nuclear explosion. The world needs gold as a safe way to eliminate bad debt.

Through a system of bribes, blackmail and intimidation research on questions relating to gold has been discouraged to the point that it is practically non-existent. The world continues to live in a fool’s paradise. It believes the size of government debt does not matter because it can always be rolled over. Nor would it cause inflation or deflation because competent and honorable gentlemen at the helm can safely navigate our monetary ship through the strait of Scylla and Charybdis. They have a sharp tool, the printing press, and with its judicious application they can fine-tune the quantity of money in circulation as well as the rate of interest for the benefit of all. But the virtual elimination of research on gold will strike back. These ‘competent’ and ‘honorable’ gentlemen at the helm are complete ignoramuses when it comes to gold. They have no notion of the erosion of the gold basis and the irresistible march of the gold futures markets into the death valley of permanent gold backwardation. When disaster strikes, gold will not be available at any price. What this means is that the world is insidiously slipping into barter. But you cannot feed the world’s present population on the basis of a barter economy. Poverty, pestilence, famine threatens society, not to mention the breakdown of law and order. All this, and more, because government leaders have allowed the suppression not only of monetary gold itself, but also the research on monetary gold.

Ben Bernanke, the Chairman of the Federal Reserve Board introduced a new phrase into the vocabulary of economics on July 11, 2011, in his testimony at a Congressional hearing. The new phrase is: tail risk. He defined it as the “really, really bad outcomes” in the economy, as if they were completely outside of human control on the pattern of floods, earthquakes, volcanic eruptions and tsunamis.

But ‘tail risk’ in reality is the wholly unnecessary risk taken with human lives by a parasitic, contemptuous, conceited, and yes, ignorant ruling class symbolized by Bernanke, that has hijacked the Constitution, in particular, turning the Constitution’s monetary provisions upside down which define money in terms of gold and silver. They are only interested in their own self-aggrandizement, in perpetuating their power, and in preserving their superstitious faith in irredeemable currency a monetary system that has failed miserably every time foolish leaders in history experimented with it.

Mises was a great warrior fighting these usurpers and monetary hijackers with the sharpest weapon there is: human reason. We must follow his lead even if it sometimes means that we have to add new ideas that go beyond Mises’s opus.
The day of reckoning for monetary insanity is on hand. The Constitution is there for the protection of all. If we fail to preserve and uphold it, and meekly succumb to the monetary hijackers’ and usurpers’ tactics, then we shall have only ourselves to blame for the consequences.


March 20, 2012.