Now I understand that it leads inexorably to ruin. It creates a situation where you have to invest in markets, which removes the link to value, e.g. "the market always goes up." Growth investing is an oxymoron and just a variation of a Ponzi Scheme.
We're at a watershed moment in modern history. In the coming months and years, countries will have to return to a gold standard and when they do, they will have to either limit gold sales, deeply penalize it, or just like in 1934, confiscate it. This has all happened before.
Care to put a number of years on that?
I asked you for a concrete prediction, so I'll give you mine. On January 1, 2040, the number of countries that have adopted the gold standard since 2021 will be either 0 or 1.
There is no way any government is going to let the value of their currency be tied to how much metal is extracted from the ground, let’s be real.
I'm not a soothsayer; I'm not trying to time anything. I'm saying the steering wheel and pedals have come off the car and it's going 80 and so in the coming months and years, this won't end well.
It seems to me that the discussion is the car, not what day of the week it will hit the wall.
All of those things happened as the gold standard was breaking down to and countries were trying to escape its constraints, as part of the process of getting to fiat and the control of money supply it allows.
> This has all happened before.
No, a return to the gold standard after its general global rejection has not happened before.
European nations dropped the gold standard during WW1 and then mostly returned to the gold standard afterward[2]:
"During World War I, most major countries abandoned the gold standard in order to use fiat currency to fund the war effort. As a result, those nations experienced high rates of inflation. The desire to bring inflation under control and restore monetary stability led most countries to plan on returning to the gold standard at some point after the war. Unfortunately, many of the international monetary difficulties of the late 1920s can be traced to decisions regarding the resumption of the gold standard in the mid-1920s. "
There is an interesting history here[1]:
"Britain had left the gold standard in 1914 and responded by increasing the supply of money to stimulate the economy. Production was limited due to substantial decreases in working hours agreed at the end of the war. In 1919 increased consumer demand caused inflation and a price boom.
By early 1920 the Government was more concerned with a desire to return to the gold standard and with the high rates of inflation than with unemployment. In December 1919 the Cunliffe Committee on Currency and Foreign Exchange Rates recommended an early return to the gold standard. The overall objective was to restore pre-war British predominance in international trade, which depended on stabilising the value of sterling around the pre-war dollar exchange rate. This required equilibrium in the balance of payments and the reduction of the money in circulation..."
[1] https://www.nationalarchives.gov.uk/cabinetpapers/themes/eco...
[2] https://cpb-us-e1.wpmucdn.com/sites.dartmouth.edu/dist/c/199...
But only because a general global rejection didn't happen before. Remember that the "general global rejection" only started with the Nixon Shock in the US in 1971.
Every single one of the 200+ countries left the gold standard since the evidence on how bad economies fared tied to the rate you can dig up gold became irrefutable. Hopefully no major countries get dumb enough to revisit that fiasco.
For example, read the academic work showing that trying to stay on the gold gold standard during the great depression lengthened and deepened the depression with solid data across over 100 countries.
There is no question now that tying your economy to digging up rocks is a bad idea.
Second, they've only left it since the 1970's in the current era and that was because the US could use its dominant position to do so (the Petro-dollar).
Third, it doesn't matter if it's a "rock" or not, as long as it's scarce. In this case, this rock has all of human history recognizing its use in this capacity. You have to remember that the monetization of a scarce material, such as precious metals, is a Nash equilibrium. It's the long-term answer, by definition. The markets don't actually always go up, but gold stays gold.
> read the academic work showing that trying to stay on the gold standard
Like Bernanke's PhD dissertation? Sure. Or I can just wait. Because since his tenure we went from $3 trillion to $28 trillion before the Federal Reserve stopped reporting money supply.
Or just compare the US to Germany in the same time period with its hyperinflation. Which fared better?
A year earlier, in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins.
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Like how much jewelry?
My initial thought is that this move would be seen as deeply unpopular, but clearly it wasn't. This seems to be the first step in moving from gold-backed currency, and that process took about 40 years. Which means that this policy was not only popular, but broadly seen as necessary by five subsequent presidential administrations.
I cannot imagine any sort of project taking 40 years of bipartisan collaboration succeeding in today's climate.
