I have an open mind and would be willing to go back to the GS if there weren’t so many inherent problems associated with it – from the risk of relinquishing domestic sovereignty to foreign producers…. to the need to convince our international neighbors to also adopt the gold GS (which would never happen since it stagnates growth)….to the fact that our gold reserves (as large as they are) wouldn’t come close to covering our $17T in federal debt (liabilities). If you review the era when the GS was intact it wasn’t exactly an era of economic stability. And when the economy goes south under a GS it’s incredibly difficult to correct.

We just need to eliminate fraud and extortion as a common business practice under our current monetary system. We need to clean house. It would be easier to accomplish that, given the national will to do so, than it would be to implement a GS and make it work.

“the world does not really revolve around gold.”

Correct. It revolves around an increasingly worthless piece of paper called The U.S. Dollar which The Fed creates by the trillions out of thin air. That is exactly the problem and also the explanation for the remarkable increase in gold prices in the last 10 years. Gold hasn’t gotten more valuable, the dollar has just gotten a lot less valuable. Just wait until the world dumps the almighty buck as a reserve currency.

Low T-Bill yields DO NOT drive investors into gold because gold has no “yield”. Low bond yields drive investors into riskier investments like stocks. Gold is an entirely different kind of investment. It is a hedge against inflationary money printing and over time has shown a remarkable resilience in it’s value compared to paper currency.

Your point about the inflation adjusted price of gold fluctuating by a factor of 5 is ridiculous and shows that you are clueless about gold’s function as an inflation hedge and store of value.

The purpose of adjusting for inflation is to account for the decreased purchasing power of fiat currencies over time. Gold has no such problem and maintains a stable purchasing power over hundreds of years despite speculative activity, commodity trading and short term fluctuations in supply and demand.

At any rate, John’s point was that all of the hype about all time stock market highs is over blown MSM propaganda. You don’t have to compare The Dow Jones Industrial Average to gold to see that. As has been pointed out here before a simple real dollar analysis shows that stock market indexes are still well off of previous records.

That’s the chart that was prepared by Chart of the Day. But the S&P would show similar, albeit not exactly the same, trends.

Eric: It’s not gold that is booming and busting. Gold is the real money. Rather, it’s the dollar that’s booming and busting vs. gold.

http://www.crossingwallstreet.com/archives/2013/10/the-sp-500-matches-inflation-adjusted-high.html

This supports some but not all of your points. To the extent that the rest aren’t supported, it’s because the world does not really revolve around gold.

You can’t drive the federal debt over $17T and then keep ZIRP (zero interet rate policy) in effect forever. Voluntarily or involuntarily, it must normalize (6.5%-7.5%) eventually. All you have to do is simple high school math and quantify on the back of an envelope with your pencil the debt service payments required at a normalized interest rate and what portion of the federal budget it will consume to identify the unintended consequences.

My quess is that the interest rates won’t just normalized. They will Carterize (for those of you who remember the Carter years). That will be one of the future unintended consequences. And at that point, we’re done.

They know this too. I don’t know something they don’t know. Why do you think they’ve spent trillions to build up the police state? Why do you think the US Constitution has been violated repeatedly in the last several years? Why do you think the POTUS is being allowed to use dictatorial powers? Why do you think the ‘will of the people’ has been routinely thwarted? Why are the ones who make the laws allowed to break the laws without apology?

It’s really not that hard to figure out.