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Gold and Standards

US Presidential nominations for a seat on the board of the Federal Reserve – America’s central bank – rarely attract the kind of media attention as did that of Judy Shelton, President Trump’s nomination for one of two vacant seats in early July.

Shelton is an economic adviser to President Trump, and currently the USA Director to the European Bank for Reconstruction and Development (EBRD).

The USA’s indifference to the EBRD, which it (correctly) regards as a vast waste of time and money, is registered in Shelton’s attendance record at EBRD Board meetings – she has missed 42% of them in her first year in the job. That kind of behaviour irritates all those who feel the West has a duty to assist the ‘economic development’ of the satellite states of the former USSR. This flow of taxpayer funds from West to East shows no sign of letting up, almost 30 years since the taps were opened. When will the former Soviet empire be ‘developed’? It’s a rhetorical question…We know what Shelton thinks though: “It’s the wasteful government spending that ends up being the problem.”

Be that as it may, the nomination of Judy Shelton is fascinating choice for anyone interested in gold. Her choice reveals a great deal about President Trump’s view of the way the world is, and perhaps should be. For Shelton has made no secret of her interest in putting the USA back onto the gold standard.

Put simply, if a country is on a gold standard that means the government of that country can only print as much money as it holds in gold. Having a gold standard therefore enforces fiscal discipline – and removes the resource which all governments resort to in times of crisis, the printing press. The clue is in the name – standard.

It’s conventional to argue that standards are not what they used to be, but in the case of central banks and the governments who run them, standards were never what they used to be. Since time immemorial governments have been fiddling with money, from shaving slivers from gold coins to running the banknote printing presses until they start steaming. We all just accept as natural that the Federal Reserve, the Bank of England, and other central banks, set their sights on annual inflation of 2%. It never seems to occur to anyone to ask why we accept any inflation at all. After all, inflation is corrosive; 2%/year is like pancreatic cancer – a silent killer.

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Governments and conventional economists everywhere start frothing at the mouth whenever someone mentions going back to the gold standard. “Whoever today dares to hint at the possibility that nations may return to a domestic gold standard is cried down as a lunatic. This terrorism may still go on for some time…What all the enemies of the gold standard spurn as its main vice is precisely the same thing that in the eyes of the advocates of the gold standard is its main virtue, namely its incompatibility with a policy of credit expansion.” So wrote the great Austrian economist Ludwig von Mises more than a century ago.

It’s not surprising therefore that Judy Shelton has come in for mainstream and social media attack; the accusations, by and large, are abusive – “Another lazy, do nothing entitled Republican” is one – but they are really letting off steam against the American President. Shelton herself seems thoughtful, modest, and balanced. What she wants – like millions of others – is an end to governments playing fast and loose with the money supply. She wants a currency that is not debauched. She wants to have certainty that a dollar is a dollar and that it will buy the same amount of goods today, tomorrow, and always. She wants a standard that people can live by and have faith in. Good luck with that. The USA has more than 8,133 tonnes of gold in its reserves but that isn’t anything like enough to pay off its debt owed to foreign investors. When gold hit $1,895/oz in September 2011 China, Japan, and other countries owned $4.7 trillion in U.S. Treasury debt. That was 10 times more than the $445 billion in gold reserves at Fort Knox. So a return to the gold standard is a good idea in principle but a non-starter in practice.

Looser monetary policy – pumping more freshly printed cash out – is on the cards for as far as the eye can see; even supposedly responsible newspapers such as the Financial Times are calling for precisely this. This is a catastrophic situation, like being locked in a room whose walls are gradually moving inwards, with no escape.

Fortunately there is a way out, a way of protecting one’s wealth; a universal gold standard may not be feasible and exist only as a fantasy, but one can have one’s very own gold standard. That personal gold standard is called Glint. With Glint you can save in gold; you can spend in gold; you can put all your wealth into gold. And then you can sit back and watch with indifference the madness of the banknote printing presses working over-time in the USA, Europe, anywhere.

 

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