Monetary Discipline And Intrinsic Link To Gold
Gold is the only metal in the world that seems as if it was specially designed to maintain monetary discipline. It is the only element you can rely on to impart value to the paper or even digital currencies of any country. Once a currency is linked to gold by an explicit rule, the amount of currency that you can print is controlled by that rule and monetary discipline is assured.
Monetary discipline is critical to the health and spirit of a country. Among many other things, it means the country must grow through increased productivity and new technologies. A long-term perspective becomes essential as major breakthroughs in science and technology can take a lot of time. Since 1971 America has been untethered to gold and therefore free to print unlimited amounts of fiat currency.
Delinking the United States currency from the gold standard has utterly shattered the spirit of the country. America is no longer defined by Thomas Jefferson’s words in the Declaration of Independence about a creator endowing all of us equally to certain ‘inalienable rights’ such as life, liberty, and the pursuit of happiness.
Today’s United States of America is a grotesque transformation of what Jefferson had in mind. We have become a type of plutocracy defined by the deification of money. Money became a blasphemous way of growing in which equality and inalienable rights has given way to a hideous stratification.
As Good As Gold…
Gold is prized for its beauty rather than industrial uses. It’s virtually indestructible. If pure gold is alloyed with any other metal or dissolved in certain acids, there are procedures for retrieving the exact amount of gold dissolved or combined with another metal. There are procedures for making gold only two atoms thick, a fraction of a nanometer. Impossible to tarnish or destroy- gold’s intrinsic beauty is eternal. And for this reason, it is the only finite element on this planet that can be exchanged for goods in any part of the world. Few things on this planet can be deemed as “as good as gold.”
What role can gold possibly play in giving equal weight to these two perspectives that define every human being?
I want to share with you a true story. Back in the mid-90’s I was writing a book about changing market strategies. What I remember most clearly is that when it came to discussing inflation, I felt I had to say something about gold. I had never been a gold bug and in fact did not know much about its history other than its performance in the 1970’s when in the context of a market that over a decade barely managed a real return above zero, gold and gold miners rewarded investors with real returns of over 20%. So, I assumed I had to say something about gold. But what? I knew a number of clichés such as gold holds its value over time much more than any other metal, which made it the best store of value.
But why gold rather than any other metal?
Here is the part which I remember most clearly. As I was thinking about how little I knew or had to say about gold, I got up to stretch my legs. Remember in the mid-90’s the Internet was a shadow of what it is today. Thus, it was not even clear where I could look for answers. Among magazines that I have read – and despite their availability online – are arguably the most authoritative sources on scientific study, the British publication, Nature, and the leading publication of the American Association for the Advancement of Science (AAAS), Science. Often short walks would help me work out problems and this one proved to be no exception but in a totally unexpected way. My brief walk took me to my mailbox. The contents included my latest issue of Nature. And on the cover of the magazine was a picture of a chunk of gold and inside a description of the extraordinary chemical properties that make gold so special. If memory serves, this was the only time that either Nature or Science had a cover story on a particular metal.
The authors of the Nature article, which appeared in the July 20, 1995 issue, B. Hammer and J.K. Norskov were associated with technical universities in Denmark and Japan. The article dealt only with a few of the metals remarkable properties, such as its inability to bond with gas or liquid, which makes it nearly impossible for the metal corrode, while at the same time the metal can bond with other metals such as silver, titanium, and copper.
Incidentally, there is one acid which will dissolve gold called aqua regia. But any bond between gold and another metal or the single liquid in which bonds are created can be completely reversed. In the case of the used of the acid aqua regia, it was used in WWII to hide gold Olympic medals from the Nazis. Years later, all the gold metals that were dissolved, were recovered and the medals recast. The fact that gold is hard to oxidize is related to an extraordinarily unlikely combination of repellant and attractive forces. A full explanation for why gold can be fully recovered after bonding with another substance is not stated.
Another extraordinary property of gold that is not fully understood is its exceptional malleability. Gold can be beaten to a thinness that is less than the wavelength of visible light. The wavelength of light is measured in nanometers, while the thickness at which any other metal will start to fragment is measured micrometers, which is 1000 times thicker than a nanometer. As an example, an ounce of gold can be beaten to the extent that it can cover 300 square feet. Translation; there is virtually no shape that cannot be made out of gold. One consequence of these various properties, gold cannot be destroyed. So, when someone tells you that all the gold ever mined still exists, they have a point.
Gold is a metal whose properties are so special that unlike any other resource or commodity, it is prized because of its remarkable intrinsic characteristics. Lasting and indestructible beauty is something well beyond the limits of our sciences to create. Even the sun, due to its ongoing nuclear reactions, can synthesize many metals but not gold!
Some theorize that the metal was born before our solar system formed by collisions between neutron stars and supernovae. Clearly that is an hypothesis that can never be validated. Chemically the properties of gold are so special, so unlikely to have occurred together in a single metal as to make an argument that gold is a kind of sacred metal, a Platonic ideal of beauty.
Ironically, the purpose of gold in a monetary system is to assure that the evil which stems from a ferocious greed remains suppressed. Gold, when a central part of a monetary system, restricts the amount of money a country can spend. It instills monetary discipline and encourages long-term projects so as to create the technology that keeps productivity rising.
The Worship of Money: Exodus 22:20
Even the most cursory glance at America circa 2023 makes clear why one of the oldest laws in society whose provenance is the bible, states that money represents greed, which inexorably leads to evil. The old testament clarifies the first and most important commandment was that humanity must not worship any other god, other than the Lord. It seems there are few things that Americans hold sacred any longer, other than their unbridled worship of money.
Yet since the United States infamously left the gold standard 50 years ago, Americans have believed that money is the solution to pretty much every problem. Humans have a tendency to learn by osmosis. When Americans watch our government run the printing presses 24/7, when we witness our politicians continuously raise the debt ceiling to avert national debt crises, we tend to get the impression that if money solves our governments problems… Then it must solve our problems too.
As a result, from GenX to Millennials and later generations (who never lived under the monetary discipline once imposed by the gold standard) collectively think that money is a deity rather than a currency. People who have a lot of money are revered and worshiped in American culture much like one might worship a god or deity. You need look no further than the lifestyles of the rich and famous to see that money is worshiped. And the decadence of the worship of money has been indoctrinated and infiltrated into every recess of society.
From roughly the late 70’s to present day- four decades of America’s offspring have no conception of the sound value of money. Fiat currency is paper money- backed by thin air. After all, that’s what the word ‘fiat’ means- backed by nothing; no thing.
Another biblical truth comes to mind, namely that those that worship false religions will reap the whirlwind. Well, the economic whirlwind has begun and unless we change our ways, we will face an utterly catastrophic existential crisis. Here is an unquestionable example of data that makes this clear.
The Real Reason No One Wants To Work Anymore
A recent survey of small businesses, those with fewer than 500 employees, shows why the Fed must accept that much higher inflation is inevitable. For investors, it’s one more reason to prepare for greater market turbulence.
Small businesses account for more than 50% of all U.S. jobs, and over 99% of businesses are considered small businesses with less than 200 employees. In the mid-1970s, a leading trade group began a regular survey of small-business conditions. There were scores on 10 questions about different aspects of the economy plus an overall score. Typically, the scores for the 10 questions move in the same direction. The overall score, and any deviations among the 10, have provided good guideposts for policymakers. Today, the overall score is the third-lowest ever, while anomalies among the 10 are off the charts.
In the past, when finding workers was difficult, business owners were still optimistic. Today, this is not the case. Collectively, business owners have little optimism they can find the work force necessary to sustain their business. Although inflation is rising at an unprecedented pace, it doesn’t mean that small business owners suddenly have the ability to double their employees hourly wage to keep on the level with current inflationary conditions. In fact, most people with a single income are struggling financially and even those with a dual income are finding it hard to survive, much less invest or save for their future.
Furthermore, people who are actually willing to work are scarce because hourly wages are simply not keeping up with the sharp rise in inflation. Most average people who make less than $55k per year are seeking secondary, part time jobs just to make ends meet.
As a testament to this statement, Bank of America recently released data that over 75% of Americans are already in credit card default or have maxed out their credit card limit… With savings the lowest it’s been in decades.
Worker scarcity reflects various factors… Including inadequate education, of which all factors cannot be quickly remedied. As a result, even in the midst of the worst economy ever, there is no solution to inflation. Real wages decline and the cost of living and basic essential goods and foods continue to rise so sharply that 50% of Americans will default on home, personal loans, credit card debt, and their standard of living will drastically decline.
Meanwhile, rising gas prices are literally adding more fuel to the inflationary fire- no pun intended. OPEC+ continues threatening to cut oil production. As diesel and gas prices continue to rise, so will our food supply, so will the cost of essential goods and discretionary spending will trickle to create an absolute and total recession here in the United States and beyond.
In a world of growing resource scarcities – arguably the greatest threat humanity has ever faced – we find ourselves on the verge of becoming totally powerless.
America’s last chance is to join a new currency bloc, which is being developed by Southern and Eastern countries, led by China. It will clearly be a threat to the dollar not just because the countries involved control the vast majority of the world’s resources but because it will be backed by gold. If we continue to fight rather than cooperate I fear our fate is that we will become something akin to a totally isolated third world country wanting for basic necessities.