Precisely 40 years ago, then President Richard Nixon removed America from the gold standard and made the US dollar into a fiat currency — which meant the end of the precious-metal guarantee and that the dollar’s value only exists because of government regulation.
Over the last few years, and especially during the recent financial turmoil, the debate on whether nations should return to the gold standard has increased.
Over the next few years, we could see spiralling inflation rates as banks adjust to new economic conditions of a longstanding recession and uncertain world affairs. How could the gold standard help solve some of these current issues?
Inflation occurs because governments can effectively print money without restrictions. This is important because inflation means you can’t purchase as many things as you could previously with the same amount of money.
We have all seen images from Zimbabwe when a wheelbarrow of bank notes won’t even buy a loaf of bread. Just a few years ago Zimbabwe printed its first trillion dollar note. This is an extreme example of hyper inflation.
A U.S dollar today is worth about one-sixth of what a dollar was worth when America left the Gold standard forty years ago.
When your currency is tied to gold, it’s very difficult for inflation to run wild, as you can only print so much money depending on your gold reserves.
It’s been well documented that part of the reason the UK left the gold standard in 1931 was because of the advent of the welfare system.
When you start guaranteeing the population so much from cradle to grave you need more flexibility in your deficit and you simply cannot do that when you have your money supply fixed by a gold reserve.
This, alongside the effects of the Great Depression and depleted gold reserves following the Second World War, meant that a return to the Gold Standard was not practical.
Is now the time, especially during the uncontrolled riots in our inner cities by the welfare classes, to ask the question: How has the welfare system benefitted Britain? Is now the time to address the welfare state as our debt bomb continues to grow?
Of course, the UK current gold reserves leave it in an impossible position to return to the Gold standard. However, it could it be moved to a system where currency could be backed by a mix of gold and silver.
This is a debate taken very seriously by Americans as the U.S currently has very high silver reserves.
In 2008, Lewis Lehrman and John Mueller, principals of the financial-markets consulting firm LBMC LLC, laid out the advantages to returning the United States to the gold standard. They concluded that a Gold Standard:
– Makes balancing the budget economically and politically feasible.
– Increases price stability and lowers inflation.
– Brings an end to the unchecked increase of our national debt.
– Stimulates the global economy without increased debt.
– Makes American industry more competitive and decreases trade deficits.
– Reduces the pressure for trade protectionism and a higher acceptance of free trade.
– Ends the chaotic “floating” currencies which are valued against each other.
The gold standard did force some degree of discipline. Since the removal of the gold standard, there is, hypothetically speaking, no limit on the amount of currency a country can have.
This in turn means there is no limit on the amount of debt either. We have seen a succession of ever bigger credit bubbles since the 1970s onwards, ranging from the secondary bank crisis to the savings and loans crisis in the US right to the current sub-prime crisis.
These issues wouldn’t have happened if we were still linked to the gold standard. However growth seen in that period would have been affected but as we have all seen to our cost, growth has a price.
The UK is in no position currently to move to a monetary system backed by precious metal reserves however our current system is a disaster waiting to happen.
If the UK’s economy and currency is to survive over the long term on the world markets, then we must look at a long term move back to the gold standard to ensure stability.
This is particularly important at a time when we are seeing the rise of the Asian markets as a new safe haven for investors. This in turn will ensure the safeguards are put in place that will limit government’s power which will ensure that our currency still has real value.
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I saw a figure quoted that stated that should the US revert to the gold standard then the price of gold would rocket from around $1750 per ounce to $25,000 an ounce to reflect the amount of US paper money in circulation. In this scenario, if a wedding ring contained half an ounce of gold then its scrap value would be around £10,000.
Thank you for this article. What a relief that there is at least one other person in the BNP who can see the benefits of an intrinsic value currency!
If Britain were to return to gold backing for pounds Sterling using our current diminished reserves it would probably represent a devaluation of Sterling. We would find out exactly what we were worth. It would immediately choke off imports and stimulate domestic production in accordance with mercantilist theory. However, more importantly, it would put an end to the gross misallocation of resources engendered by our fiat (created out of nothing) monetary system. Exactly how the conversion would be done is an interesting question. How much gold would £1 purchase if we were to calculate using, say, the M2 measure of money in circulation? So, divide our gold reserves by the latest figure for M2 and that would give some idea of the value of Sterling.
As for backing the currency with gold and silver, it is worth noting that Britain used to operate a trimetallic system consisting of gold, silver and copper specie.
Finally, real money would put a stop to the appalling foreign wars and interventions, the bloated and destructive welfare state and the crippling levels of taxation. Creating money out of thin air is a godsend for those wishing to bribe the electorate; socially engineer a Marxist utopia both domestically and globally; and transfer wealth from the “workers and savers to the borrowers and speculators”.
How about a COAL standard. lol. We have about 400 years of reserves of the stuff, some say up to a thousand years in certain areas andwe worry about the price of oil. We could be totally in control of our own destiny with a bit of forethought.
O f course inflation can occur if governments print money in excess of the production of goods and services, but since the money supply in Britain consists of only 3% notes and coin, the printing press can hardly be said to be glowing white hot.
The other 97% of our money supply consists of loans created out of nothing by the banking system and this is where we should be looking for solutions to monetary problems, not a restoration of the gold standard.
When Churchill put Britain back on the gold standard in 1925, it contributed massively to the great depression.
The two sponsors you cite, Lewis Lehrman and John Mueller seem very much of the Internationalist persuasion. They wish to stimulate the global economy, promote more free trade and
reduce protectionism, all policies that are inimical to Britain.
For a Nationalist solution to our problems see “Britain’s Economic Recovery” on this website.
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Hundreds of years ago the shortage of gold in sufficient quantities gave rise to the formation of the present and corrupt Fractional Reserve banking system. This inherently unstable global debt based economic model has given us the credit crunch and the inevitable recession.
As Nationalists we advocate fundamental reform of the present banking system.
We say that money does not need to be backed by ‘precious metals’.
Money, be it paper, coin or in digital form is only a medium of exchange.
Money reflects a measure of real wealth created in the form of goods and services manufactured by real people in industry.
If gold, silver or any other ‘precious metals’ once again become the sole legal basis of money, then those that are without those metals will also find themselves suddenly without any money!
Bearing in mind that our new British Democratic Party are still formulating a vast range of policies ( based on Nationalist Principles ) could we consider a return to the Gold Standard or some sort of ASSET VALUE SYSTEM ?