Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.
Can we save the dollar before central banking kills it?
Yes. It’s surprisingly easy. And, as you might expect, it involves gold.
As federal deficits hit 8% of gross domestic product—unprecedented in peacetime—and our national debt hits $35 trillion—unprecedented in the history of man—even the central bankers realize that this isn’t sustainable.
That we are coming to the day our paper money utopia crumbles.
Historically, from Song Dynasty China to Weimar Germany, when paper dies we return to hard money. Because hard money is the only way to finally kill the money printer.
Happily, we can actually do this without the crash.
The other day Fox Business financial journalist Charles Payne sent me a quote by 1970s Federal Reserve Chair Paul Volcker, who wrote, paraphrasing: It is a sobering fact that central banking has led to more inflation, not less. We did better with the 19th-century gold standard, with passive central banks, with currency boards, or even with “free banking.” The power of a central bank, after all, is the power to create money and, ultimately, the power to create is the power to destroy.
This is a fairly striking admission of failure from—by all accounts—the best Fed chair we’ve had since 1913.
A central bank is indeed an extraordinary thing: It’s a privately owned, federally licensed counterfeiter the regime can use to seize literally everything in the world by printing money.
It’s why we have inflation and recessions. It’s why we have Wall Street bailouts and a colossal national debt. It’s why the government has grown to dominate our economy and our lives.
In contrast, under the gold standard we had zero cumulative inflation over 124 years. We had a federal government that was seven times smaller as a percent of GDP. In 1913, we had a national debt of 8% of GDP. Today, it’s 140%—in fact, it’s rising by almost 8% per year.
So how do we get back? Simple: Back the dollar with gold at today’s price—$2,500 per ounce—then mandate that if gold flows out, the Treasury has to buy it back in before the Treasury does anything else—before it pays Ukraine, before it pays interest on the national debt.
Presto.
Why? Because if they keep printing money it creates inflation and gold goes to, say, $2,600 an ounce.
Now, people can make free money by trading $2,500 for an ounce of gold from the Federal Reserve and reselling it for $2,600 on the open market.
Gold flows out, now Treasury has to buy it in at 26.
In other words, they lose money on the money printer.
That means the Fed and Treasury are forced to keep money creation low enough for zero percent inflation—for stable gold.
This means interest rates above inflation—no more paying hedge funds to borrow. It means no more quantitative easing to buy up rich people’s assets, leaving inflation for the poor. It means no more Wall Street bailouts. And, above all, it chokes off the spending cancer of the welfare-warfare industrial complex.
So what’s next? Neither the gold standard, bitcoin standard, or full reserve banking are remotely on the bingo card for the foreseeable future. And, historically, it takes a crisis to put them there.
But it’s important to remember how easy it is to solve our financial catastrophe if and when we get a politician brave enough to try.
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