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Five Things You Need to Know: London Gold Pool, Paper Money's Value, Plunder the People, Overwhelmed, Debauch the Currency


Precious metals are NOT at 25 year highs when inflation adjusted.


Editor's Note: While we congregate in Vail for Minyans in The Mountains 3, we asked each Professor to prepare some thoughts on fiscal literacy, how to listen to the market and their area of expertise.

1) The US$850 per ounce Gold price of 1980 is the equivalent of US$2300 per ounce in 2006 dollars. The US$50 per ounce Silver price of similar time is the equivalent of $130 per ounce in today's dollars. Precious metals are NOT at 25 year highs when inflation adjusted.

The Gold Confiscation Act of 1933 – Governments will go to extraordinary lengths in a crisis whereby property rights can become irrelevant.

The London Gold Pool of the 1960's.- Central Banks cannot control the price of gold without suffering massive loss of physical metal for their efforts. The Pool of Central Banks (US, Bank of England, West Germany, Belgium, France, Italy, Netherlands, Switzerland and Luxembourg) lost many thousands of tones of physical metal from 1962 until its collapse in 1968. When fiscal and monetary policy is highly inflationary, the masses soon wake up and rush to tangible, real, honest money. How are we looking in 2006?

"Paper money will eventually return to its intrinsic value - nothing". – Voltaire. (1694-1778)

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people." - Friedrich A. Hayek (1899-1992) Austrian Economist, Author and 1974 Nobel Prize-Winner for Economics.

Random Thoughts

  • "We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people." – Daniel Webster, 1833.

  • "Where would we be if we had I.O.U.'s scrip and certificates floating all around the country?" Instead he decided to "issue currency against the sound assets of the banks. [As opposed to issuing currency against gold.] The Federal Reserve Act lets us print all we'll need. And it won't frighten the people. It won't look like stage money. It'll be money that looks like real money." Treasury Secretary Woodin, 3/7/1933 (Source: 'Closed for the Holiday: The Bank Holiday of 1933', p20 - Federal Reserve Bank of Boston).

  • "Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose." John Maynard Keynes, The Economic Consequences of the Peace, 1920, pg 235.
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