Richard Russell, who lived through the Great Depression, writes the following in the November 26 issue of his newsletter, “Dow Theory Letters” …
‘… if the government wants to inflate in a time of deflation, and the dollar’s viability is under attack, the government could back the dollar with gold. The government could unilaterally raise the price of the gold it owns to say $5000 an ounce. The government could then say the dollar is partly-backed by gold, every dollar is worth one five thousandth of an ounce of gold. In other words, if the dollar falls under suspicion, the US might find it expedient to return to a version of the gold standard.’
More on this topic
(What's this?)
World Gold Production
(Gold World, 11/26/08)
Junior Gold Stocks
(Gold World, 12/3/08)
Gold Could Take A Breather; Where To Place Stops
(market folly, 11/12/09)
Why Gold Will Reach a Record $2,000 in 2010
(Money Morning, 11/19/09)
Related posts:
- Inflation, the dollar, gold and more … There’s a lot happening in the markets from inflation, to the dollar, gold and more … — Record Oil: On...
- More Bernanke BS! In a speech this morning at an international monetary conference in Spain, Fed Chairman Ben Bernanke took the unusual step...
- Gold rallies to 2 1/2 month high – where to… While the dollar dropped to a two-and-half month low against the euro yesterday, gold closed at a fresh two-and-a-half month...
{ 7 comments… read them below or add one }
Agreed. And thanks for the kudos.
Didn’t I read somewhere, that back during the ‘29 depression, gold and the Dow were both at 40, and during the ‘80 gold rise, didn’t gold and the Dow both hit 800 at the same time? Whats to keep the dow from being at 5000 and Gold at $5000?
Larry Edelson Reply:
February 3rd, 2009 at 1:27 pm
Answer: There’s nothing to prevent that from happening. It could easily happen. However, I believe the more accurate historical ratio between the Dow and gold is to be found in the post-1971 period, when gold started freely trading. Since 1971, the average on that ratio is 9.6 to 1, meaning the Dow could bottom at a much higher level than 5,000 – and both gold and the Dow could go MUCH higher once the inflationary effects of all the money creation works its way into the system, via a dollar devaluation.
Don’t you think the government’s first step in restoring a gold backed currency would be to confiscate privately held gold? This is how Roosevelt did it in the 30s (paying the established rate of $20.67 per ounce then revaluing gold to $35 an ounce shortly thereafter) I think they would cash privately held gold out at the market value ie $900 oz and then revalue to the $5000 an oz you suggest.
Larry Edelson Reply:
February 9th, 2009 at 7:38 pm
It is HIGHLY likely that we will see gold revalued much higher. However, I do not believe authorities will try to confiscate it. There would be riots in the streets, from Mumbai to Main Street, USA.
Larry,
Please comment on what I call “Casino Games”. The prime example being the Forex (FX) or currency exchange that has an average volume of 1.5 Trillion dollars a day, more than our national debt last year in one day. These are pure bets not related to any productive work at all. Now imagine this, which I think is inevitable, create a global currency tagged to gold that would put the Forex exchange out of business and return 1.5 trillion dollars to productive work. We must stop this nonsense of “Casino Games” and reward workers, inventors and entrepreneurs. These Casino games created by, the rotten to the core, financial types needs to be outlawed. If all our investments were for productive work then they would retain their value and all global workers would benefit. This depression is destroying pensioners and who is going to pay for their retirement? The average worker has never heard of the Forex and does not realize his future is being bet on every day by the big funds. You could start educating the public.
Larry Edelson Reply:
February 9th, 2009 at 7:53 pm
Well, I do agree that the world is headed toward a single currency one day. But it’s years off.