After I wrote “The Economics of the Pure Gold Standard” (FEE, 4th ed., 2010) — click here to order — many subscribers have asked me if we are going back to a gold standard.
I don’t think so, unless we have a complete meltdown of our monetary system — and that’s a big if. I think runaway inflation is a greater risk right now, as well as austerity across the board. Our monetary system, based on fiat paper money and fractional reserve banking, is unstable, but we’ve survived with this paper money standard for several generations.
But a big change has happened since the financial crisis of 2008. Central banks are no longer selling gold, but are accumulating gold as a primary reserve asset. That list of central banks includes Mexico, Turkey, Ukraine, Russia, Saudi Arabia and India. Russia has added 400 tonnes of bullion to its reserves. Mexico has more than 120 tonnes. Turkey added more than 120 tonnes to its official reserves. And bullion imports into mainland China through Hong Kong have been reaching all-time highs. In fact, China is now the largest producer of gold, passing South Africa two years ago, and is the world’s largest importer of gold.
But creating a gold reserve is not the same as going back on the gold standard, where the price of gold is fixed to the price of each paper currency, as was the case under the classical international gold standard (ending in 1914 with the breakout of World War I).
Gold will remain a major asset among other currencies, but the dollar is still the world’s reserve currency and that’s not changing any time soon. Foreign reserves will include the dollar, the euro, the yen, the yuan, and even gold. At best, gold will serve as a monetary target — if gold prices rise, it means inflation is out of hand; if gold prices fall, it means inflation is under control.
Here is the last call for FreedomFest, July 11-14, Bally’s in Las Vegas. More and more analysts are worried that the central bankers and government leaders are losing control of the economic and political situation. That’s why I have called for an “emergency session” on the first day of FreedomFest, July 12, with top free-market economists and political forecasters from around the world giving you the straight scoop on the real dangers we’re facing and how best to protect yourself. Hear Judge Andrew P. Napolitano, Steve Moore, Steve Forbes, Peter Schiff, John Mackey, Rick Rule, Bert Dohmen, Keith Fitz-Gerald, David McAlvany, Wayne Allyn Root — more than 100 experts in all. I urge you to call Tami Holland, toll free 1-866/266-5101, to sign up, but please be patient. She’s getting more than 100 calls a day! It may be better for you to sign up online at www.freedomfest.com.
You Blew It: Judge Roberts Plays a Dangerous Game
Today’s “You Blew It!” has to go to U.S. Supreme Court Chief Justice John Roberts.
Apparently, the Chief Justice made a last-minute switch to support the Constitutionality of ObamaCare, and used some tortured logic to justify it. There’s even a rumor that he wrote the opinion of the dissenting free-market view!
As I said last week, you can rationalize any law via a broad interpretation of Article 1, Section 8, of the U.S. Constitution.
What a sad commentary on American justice. So, this is how monumental decisions are made at the highest level of government?
In a cynical way, one can explain Justice Roberts’ strange behavior by a simple application of game theory.
After the arguments, Roberts recognized that the court was divided on ideological grounds, 4-4. If he sided with the pro-market court members, the media would credit Associate Judge Anthony Kennedy as the swing vote in the landmark case (Kennedy had already appeared on the cover of Time magazine as “The Decider”). Everyone would be talking about Kennedy, not Roberts.
But by siding with the pro-government court members, suddenly Roberts becomes the deciding vote. Viola! In one dramatic act, Roberts establishes himself as the swing vote, the Supreme Court’s fulcrum, the one-man show… the real Chief Justice.
And that’s what happened. Everybody is talking about Roberts. Kennedy is out of the picture. Interestingly, all four dissenting judges unanimously agreed that the entire health-care law was unconstitutional. Has Roberts lost his conservative credentials?
And surprise, surprise. Guess who is on the cover of Time magazine this week? You guessed it. Chief Justice Roberts.
“The world’s largest gathering of free minds”
July 11-14, 2012, Bally’s/Paris Resort
(Just think 7-11 in Vegas)
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P.S. I just found out that my book, “Economics on Trial” is up for Freedom Book of the Month for July. To vote, go to http://freedombookclub.com/vote.html.
• Today’s challenging market conditions require even more knowledge than ever for investors and traders like you to keep pace with the latest market intelligence to safeguard your portfolio and to profit from opportunities that only may be available for short periods of time. Join me at this year’s MoneyShow San Francisco, August 24-26, at the San Francisco Marriott Marquis to hear recommendations and advice about how best to profit in 2012 and beyond! Register FREE today by clicking here, by going to MarkSkousen.sanfranciscomoneyshow.com or by calling 1-800/970-4355 and mentioning priority code 027882.