Gold as Money                                                           Prospecting Gear

In 1785, the Americans adopted a bi-metallic standard of silver and gold. In 1900, the US switched entirely to a gold standard. The US maintained full convertibility of the dollar into gold until 1933 when FDR not only banned US citizens from owning gold, but confiscated the gold that they already owned, but continued to honor convertibility by foreign central banks. This lasted until Nixon closed the gold window in August 1971, ending the Bretton Woods era, leaving the US dollar as the world's only reserve currency. The dollar from that point on has been no more than an "IOU Nothing" just another piece of paper. As long as the dollar was tied to gold, there was practically no inflation from 1785 until the formation of the Federal Reserve System in 1913. In 1967, 20 years before he was appointed Governor Alan Greenspan released a very profound statement summing up the reality of a sound money/credit system tied to gold: "As the supply of money increases relative to the supply of tangible assets in the economy, prices must eventually rise. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no store of value". In light of Greenspan's almost total disregard for the dollar's integrity over the past 18 or so years, it is hard to believe he would still stand by his statement of 1967. However, reports of conversations with the Fed Chairman indicate he recognizes gold as money and privately still embraces the gold standard.

This week the Obama government revealed its new budget deficit. If nothing goes wrong, it will reach $1.84 trillion this year - nearly 400% of the record set last year. In 2009, the US government will borrow 50 cents for every dollar it spends. Accumulated deficits to 2019 will reach $7.1 trillion, says the forecast. Moody's was so alarmed it warned that the US may lose its Triple-A bond rating, which it has had since 1917.

Debasement of the dollar during the 90+ years of Federal Reserve management is shown by the fact that goods and services obtained in 1913 for $100 would cost more than $1900 today, and the loss of the dollar's purchasing power goes on unabated. Since the 1930's, the application of Keynesian economics, later joined by monetarism and the NeoCon's, has centered on maximizing economic growth via the expansion of credit and paper money created by fiat.

Central bankers have intellectually demonetized gold, and the 34,000 tons of Gold our central bank claim to have left in their vaults is probably 50% less as the result of the forward-selling schemes of the last twenty-five years. Most modern economists express optimism that the world's evolved money/credit system, without gold. is sound and that central bank managed economies are here to stay. The problem is that the normal cycles of economic contraction are being dealt with by unprecedented fiscal and monetary stimulus, pushing debt to unprecedented levels. At present, it takes $5 of debt stimulus to get only $1 of GDP growth. With total credit market debt (government, corporations, and individuals) at over $36 trillion, debt is now over 300% of GDP and still growing. Total credit market debt had reached 260% of GDP in 1929, on the eve of the Great Depression. US total credit market debt has more than doubled over the past five years, alone.

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