Gold News

Gold vs. Debasement

Even the Financial Times is starting to discuss gold at $5000 per ounce...

IN HISTORY, gold and silver were the money of choice, writes Toby Baxendale of the Cobden Centre, freely chosen by the people as the most marketable commodities.

The value of your labour was measured in these precious metals. But wicked kings through the ages debased the people's money for their own profit. The last English king to do this was Henry VIII. Our money was free from debasement for many years thereafter; the value of our work undebauched.

Today, governments around the world assume the powers of kings of old as they embark on the "monetisation" of their debt, minting new money from nowhere. They call it QE – quantitative easing.

Since August 1971, when US president Richard Nixon severed the last link to gold (struggling to pay for the latest war), paper currencies have been the most extreme derivatives, resting on a mere memory of underlying value. CDO squared has nothing on paper fiat.

So the people are voting with their feet, and returning to ancient currency – to gold and silver.

How much does an ounce of gold buy you today? $1800 worth of goods and services. And a year ago? $1200 worth of goods and services. How much purchasing power has been taken away from you? It depends on your gold holding.

How long will governments around the world, with no political will to tackle their dangerous debts and zombie banks, be able to maintain confidence in their paper systems? I do not know, but I feel that we're fast approaching a day when the whole western monetary system will fundamentally change.

I hope the new paper will be redeemable in gold or silver. Governments can't mint this stuff up like magic. They will be forced to raise money through taxation alone, according to what the public will bear. No longer will they be able to kick the can down the road, while stealthily confiscating the fruits of our labour.

I am delighted that even the FT, that stalwart of conventional economics, is now asking 'how high could gold go?'. Let us hope they consider the fundamentals, and recall our long, sorry history of debasement.

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Built on anti-Corn Law radical Richard Cobden's vision that "Peace will come to earth when the people have more to do with each other and governments less," the Cobden Centre promotes sound scholarship on honest money and free trade. Chaired by Toby Baxendale, founder of the Hayek Visiting Teaching Fellowship Program at the London School of Economics, the Cobden Centre brings together economists, businesspeople and finance professionals to better help these ideas influence policy.

Cobden Centre articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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