Through an executive order, President Roosevelt made the possession of monetary gold a crime in 1933.
Under this system, the dollar is defined as a fixed weight of fine gold, and the monetary base consists of gold coins.
Yes, a belief in gold requires this too as the non-monetary value assigned to gold is probably no more than 5% of its market price.
After all, commodity prices remain depressed as does the price of that most sensitive monetary barometer, gold.
Regarding the first advantage, some believe that humanity has already found the ideal monetary standard in gold.
Participants who see higher prices said given the long-term fundamental backdrop of ultra-loose monetary policy, gold will be underpinned.
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In addition to stretching the gap between rich and poor, the non-gold monetary system had one other notable consequence.
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Among the most sensitive asset classes to monetary easing is gold, the yellow metal that trades inversely with the U.S. dollar and is seen by many as an inflation-hedge.
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The real reason for the plunge in the gold is speculation that International Monetary Fund (IMF) will be selling gold.
You can see below the strong correlation between the rising U.S. monetary base and growing gold value.
It helps, too, that the world has abandoned the monetary straitjacket of the gold standard it wore in the 1930s.
Any monetary system that uses gold as money will produce deflation, as the economy grows faster than the supply of gold.
But the relationship between gold and monetary expansion is not that simple.
The ultimate goal was for America lead the world toward a stable, international monetary system based on gold, with the dollar again defined as a unit weight of gold.
The Dow sunk one more time, all the way to 770 in 1982, when the Federal Reserve began targeting the price of gold in monetary policy and the big Reagan tax cuts started to phase in.
Further monetary easing also helps gold since it adds to worries about inflation whenever an economic recovery takes hold, plus it means a low so-called opportunity cost, or the loss of interest earnings that investors might have gotten instead by holding yield-bearing assets.
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Others who are bullish said once the market gets past the year-end holidays, gold will return to trading on its underlying bullish fundamentals of central bank monetary stimulus and that will allow gold to rise.
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When gold was replaced by whim, international monetary chaos reigned: Oil prices gyrated uncontrollably, gold prices soared, interest rates spiked, and food prices spun out of control.
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Bulls cite the underlying fundamentals for gold, including the ultra-loose monetary policy by most global central banks as keeping the gold supported for the time being.
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With monetary stability assured by the gold standard system, bond yields fell everywhere to very low levels.
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For other countries, we can refer to Monetary Policy Under the International Gold Standard: 1880-1914, by Arthur Bloomfield.
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So it was on August 15th, 1971, that President Nixon radically changed the global monetary system by nixing the gold standard.
It is just a matter of adjusting the monetary base according to a gold target, rather than a Keynesian interest rate target.
Namely, the central banks and other sundry monetary authorities strove to hoard gold, to collect it like they had a fetish for it.
This is not the first emergence of authoritative attention to the power of gold as the monetary unit by China in recent years.
And while this columnist considers the gold standard to be the gold standard of monetary policy it will need to make its case empirically, rather than doctrinally, before a neutral body.
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Already, Rannestad said, there is a renaissance of gold as a monetary tool, as reflected by increased buying in recent years from central banks looking to diversify away from major currencies such as the dollar.
Just as central banks in China, India, Russia and many other nations view gold as a monetary reserve protection against the falling dollar, major academic institutions are looking for new asset classes like precious metals and commodities to produce returns that can be put to work as a source of funds for a large portion of college operating expenses.
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