“Fiat Gold” / Fool’s Gold (May 2, 2011)

. . .

F          “Remember that back in 1933, President Franklin Roosevelt confiscated all gold, devalued the dollar and decreed that the United States no longer allowed U.S. citizens to convert dollars into gold.  On August 15, 1971, President Richard Nixon decreed that the United States no longer allowed for the convertibility of the dollar into gold.  At the same time, federal spending and dollar creation grew and continues to grow exponentially.  Gold is an unworkable and irrational benchmark and restraint, yet it was a brake.”

G          “You still believe that the rest of the world will decree that the dollar is no longer the world’s reserve currency.”

F          “Don’t lose faith.  In time, it is only a matter of time.  Even with careful explanations, the public will not understand the consequences.  If there is a ‘slinky slide’ rather than a sudden drop, ‘fiat dollars’ may be accepted for a few months or perhaps longer if there is still some residual faith in the greenback.  The buck is familiar and will be readily available, but it may stop here.  Some members of the public will shed their habit and shift their faith from ‘fiat dollars’ to gold and silver.”

G          “Moving from money to Morgans.”

F          “Then the Great Revelation will be revealed when they discover that they are now holding ‘fiat gold’ and ‘fiat silver.’  The half life of the fascination with the shiny stuff may be two or three months.  Then everyone will discover that the stuff is generally useless, although gold may be useful for some electrical connections and silver for our electrical devices.”

G          “And maybe the stuff is not really as necessary if there is limited delivery of electricity.”

F          “A garden shovel will be much more valuable than a golden bar.”

G          “And knowing how to use a garden shovel.”

F          “And being physically able to use a garden shovel.”

. . .

[See the “e-ssay” titled “Is The Gold Standard Really The Gold Standard? (January 18, 2010)”]   

Bumper stickers of the week:

Why is gold always priced in . . . dollars?

Fiat = Fiat = ?

All that glitters is not a medium of exchange, a store of value, and a unit of account. 

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