"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."
George Washington, in letter to J. Bowen, Rhode Island, Jan. 9, 1787
"You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."
George Bernard Shaw
"The best way to destroy the capitalist system [is] to debauch the currency."
Vladimir Illyich Lenin
ZeroHedge has a nice piece reminding us that it was on August 15, 1971 that Nixon unilaterally destroyed the Bretton Woods System, sweeping away the last vestiges of the gold standard. If you didn't already hate him for wage & price controls, abandoning the South Vietnamese (despite the tide turning in our favor), signed baseline budgeting into law (making it harder to actually cut spending) or Watergate, here's probably one of the best reasons to hate him. Nothing did more to perpetuate government largesse, unlimited government spending and the demise of the dollar (which has devalued 98% vs. gold since 1970). It has also led to a misallocation of resources as instead of the best and brightest going into businesses that actually create something, like they used to, they decide to take advantage of the easy credit and high leverage that not being on a gold standard allows and go into finance. Finance is definitely necessary, don't get me wrong, I wouldn't have a job without it, but financial engineering is no way to really grow an economy. The 2000's were all financial engineering based growth, how'd that work out for us?
Anyway, to conclude, here is a great piece about gold, written by Alan Greenspan before he decided that Ctrl-P is easier than sound money (again h/t ZeroHedge):
"Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.
They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of society lose value in terms of goods.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [in 1933]. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Alan Greenspan, 1966
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