The international trade system, 1815 to 1914, rested on an agreed-upon gold standard by major nations. They agreed to redeem their nations' currencies in gold coins.
This kept power in the hands of the people. The person holding a receipt from a bank or a bank note could demand gold coins for these paper receipts. The veto power was in the hands of citizens.
After World War I began and the central banks stole the depositors' gold in the commercial banks, this veto power was renewed only briefly in Europe: England, 1925 to 1931. It ended in the United States in 1933, by Roosevelt's Executive Order. He confiscated the people's gold at $20 an ounce. Then, in 1934, he hiked gold's price to $35.
That act of national theft unshackled the bureaucrats. Before this, the bureaucracies had to be funded by governments. There were limits on this funding: tax revenues and the interest rates on borrowed funds. With the end of the various government-enforced gold standards, nation by nation, the governments reduced these restraints. Their central banks could always buy the governments' debt by creating fiat money.
The great winners have been the bureaucrats. They have escaped vetoes by governments, because governments have escaped the public's vetoes that were created by gold-redeemable currencies.
Power, bureaucrats, the Fed and gold. Gary North connects the dots. This is required reading.
Hi Bumpy Road, I have been comming back sporadically, ever since your inviting comment "back then" but never commented. I also follow Gary North sporadically, but had missed this particular piece, thanks. I think gold is still highly undervalued and all efforts to talk it down won't be sustainable, however, this begs the question once again if they'll then resort to confiscation as before ...
ReplyDeleteFDR convinced gold owners in 1933 to turn in their gold for fiat money by appealing to their patriotism. Then, in 1934, he devalued the dollar by raising the price of gold and, in the process, swindled the naive "patriots". Now that citizens are again "free" to buy gold (and silver and oil), can it happen again? Depends. If the gold owners have learned the lessons of 1934, they will not send their gold to DC without a struggle. If the government is willing to send their thugs door to door to retrieve the contraband, rebellion will be in the air. We would like to think it is more likely that DC will capitulate and return us to a system of honest money.
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