The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard

The U.S. will never go back on a gold standard.  The notion that a U.S. Dollar backed by gold would solve our financial problems is pure folly.  Why?  Because, if the U.S. Empire didn’t abandon the gold standard in 1971, it would have collapsed decades ago.

Unfortunately, some of the top experts in the precious metals community continue to suggest that revaluing gold much higher, to say…. $15,000-$50,000 an ounce, would bring confidence back into the Dollar.  Not only will this not happen, it wouldn’t save the Dollar even if it did.

Why?  Well, that is the $10.5 trillion question, isn’t it?  I provided that exact $10.5 trillion figure for good reason… which I will get to shortly, but the innate value of the U.S. Dollar died decades ago and will never come back.  Basically, it is a DEAD MAN WALKING.

However, the market hasn’t figured that out yet, but it will.  It is just a matter of time, and time is running out.

Hugo Salinas Price Was The Motivation For Writing This Article

As I mentioned in prior articles, Hugo Salinas Price has been keeping an eye on International Reserves for many years.  In his recent article, A Reversal In The Trend Of International Reserves, he stated the following:

International Reserves peaked on August 1, 2014, at $12.032 Trillion dollars, and as of October 28, 2016 they stood at $11.066 Trillion dollars.

When a trend has been firmly in place in the world for 45 years, a reversal of that trend must be the result of a profound change which will produce a new trend that will not be easily altered, just as the previous trend was unalterable for 45 years. The new trend is deflation, contraction of credit.

According to my analysis in a recent article, The Implosion Of The Global Markets Has Started & Can’t Be Stopped, the reason the International Reserves peaked and declined, was due to the price of oil falling below $100 in August 2014 and then crashing to $30 by the beginning of 2016:

As we can see in the chart, when the price of oil fell below $100, it gutted the oil and goods producing countries economies.  Thus, these countries had to sell off their Reserves (U.S. Treasuries and etc) to offset the losses from a collapsing oil price.  Indeed, this was the very DEFLATION Hugo Salinas Price stated in his article.

Since that article, Hugo and I have had several email exchanges.  In one of our exchanges, he brought to my attention the amount of gold the U.S. would have had to liquidate just to import one million barrels of oil per day.  Looking at his calculations, it turned out to be one hell of a lot of gold.

So, I decided to look into this in more detail to get a better idea of HOW MUCH GOLD would have been liquidated and sold into the market to support the U.S. Empire’s insatiable oil consumption.

Let me tell you, it’s a great deal more than I ever imagined.

The Total Dollar Amount Of U.S. Net Oil Imports Was Quite Large

If we totaled the Dollar amount of U.S. net oil imports since 1973, the figure is staggering to say the least.  According to the U.S. Energy Information Agency (EIA) data on U.S. net oil imports, the United States spent a stunning $4.8 trillion on its net oil imports from 1973 to 2015.  I wanted to provide data going back until 1971, but the EIA’s data for U.S. net oil imports only went back until 1973:

The figures in this chart were calculated by taking the annual average daily net oil imports, multiplying it by the average Brent Crude oil price and then by 365 days per year.  For example, the U.S. spent a record $394 billion on its net oil imports in 2008:

2008 = 11,114,000 barrels per day (x) $97.26 (x) 365 days = $394 billion

While this may not seem like a lot when we compare it to our highly inflated Gross Domestic Product (GDP) of $14.2 trillion in 2008, it turns out to be one heck of a lot of gold when we consider it in respect to our balance of trade deficits.

But, before we get into that, let’s look at a chart of annual U.S. net oil imports since 1973:

As we can see from the chart above, U.S. net oil imports peaked at 12.5 million barrels per day (mbd) in 2005.  According to the EIA, the U.S. consumed 20.8 mbd of petroleum in 2005.  Thus, our net oil imports of 12. 5 mbd were roughly two-thirds (60%) of our total demand that year.

Furthermore, U.S. net oil imports totaled 124 billion barrels from 1973 to 2015.   Again, the total Dollar amount of these net oil imports during that time period was $4.8 trillion.  Even thought that figure may not even raise an eyebrow today, if we consider what it means in “Gold terms”, it’s off the charts.

U.S. Net Oil Imports Cost More Gold Than Entire Global Gold Holdings

If we look at the data provided by the United States Geological Survey (USGS), total global gold holdings were 171,300 metric tons in 2011:

If we include the global gold mine supply from 2012 to 2015, it totaled 12,200 metric tons.  So, if we add that figure to the world gold holdings of 171,300 metric tons, we end up with a grand total of 183,500 metric tons.

Yes, this is just an estimate of all known world gold holdings.  While some readers may believe there are more like 1-2 million metric tons of gold in the world, due to the work of several precious metals analysts… I DON’T BUY IT.  Why?  Because the facts provide the real answer when we look at cumulative gold production since 1493:

Even though this stirs up fanciful “conspiracy theories” such as Yamashita’s massive gold treasure as well as the supposed hidden Nazi gold hoard, the world cannot hold more gold than it could produce.  Well, maybe it could if we had the help of Aliens from distant planets.  While some readers may actually believe Aliens would come down here and mine gold for us, logic suggests that they would likely have much more important things to do with their time.

Anyhow, the chart above reveals that 166,640 metric tons of gold were mined between 1493 and 2014.  If we add what was mined during ancient times, it is logical to assume (estimate) that the world may contain the 183,500 metric tons of gold.

Unfortunately, even though logic can easily destroy lousy conspiracy theories, folks continue to believe them as fact, regardless.  When I get into a logical debate with someone who continues to believe in a lousy conspiracy, I shut up, because there is no use in going further.  While conspiracies do take place in this crazy world of ours, not everything is a conspiracy.

That being said, let’s look at how much gold the United States would have had to liquidate to pay for its net oil imports.

First, let’s look at the table below that shows the Gold-Oil price ratio from 1970 to 1980:

The table displays the gold price, oil price and the ratio on the right.  If we average the Gold-Oil price ratio for the 1970’s decade, we can see that one ounce of gold could purchase 14 barrels of oil.

Second, if we consider that the U.S. average net oil imports were 8 million barrels per day for the 43 year period (1973-2015), that would equate to a staggering 279,500 metric tons of gold:

Yes, that is correct.  If the United States stayed on the gold standard, it would have had to fork over 279,500 metric tons of gold to pay for its net oil imports during that 43 year period (1973-2015).   This is much more than the 183,500 metric tons of known world gold holdings.  Matter-a-fact, the U.S. would have needed almost 100,000 metric tons more of gold to pay for its net oil imports.

This is precisely the reason President Nixon had to abandon the convertibility of the U.S. Dollar into gold.  While there are more factors to consider in the dropping of the Gold-Dollar Peg in 1971, oil was a leading cause.

Okay… I can hear it now from some readers.  Yes, it is true that the United States took this oil and created goods or services that they exported.  So, it makes some sense that not all of of our net oil imports would consume 279.500 metric tons of gold.  However, when we look at additional information…. the situation is even worse.

The U.S. Cumulative Net Trade Deficit Since 1973 Was Far Worse Than Our Oil Import Cost

To make those who “doubt” the figures above, I decided to research the U.S. balance of trade since 1960.  When I added up the total net trade deficits, I was more surprised than the figure of the net oil import cost.

This chart below represents the annual U.S. Balance Of Trade in Goods & Services since 1960:

Looking at the top left-hand part of the chart, you will notice the tiny green smudges on the chart.  These represent the U.S. trade surpluses.  Here are a few of the annual trade surpluses (and deficits) during the 1960’s and early 1970’s:

U.S. Balance Of Trade

  • 1965 = $4.7 billion
  • 1966 = $2.9 billion
  • 1967 = $2.6 billion
  • 1968 = $250 million
  • 1969 = $91 million
  • 1970 = $2.2 billion
  • 1971 = -$1.3 billion
  • 1972 = -$5.4 billion

Well, look at that.  In 1971, the U.S. began to suffer trade deficits.  Even though the United States enjoyed a few more trade surpluses in 1973 & 1975, it ran consecutive deficits for the next 40 years, starting in 1976.

You will notice the trade surpluses were quite tiny compared to the deficits, especially after 2000.  If we add up all the U.S. annual trade deficits from 1976 to 2015, it totaled an amazing $10.5 trillion.  Basically, the U.S. Empire was able to bamboozle the world by exchanging worthless U.S. Dollars or Treasuries for energy or real goods and services.

Furthermore, the $4.8 trillion in U.S. net oil imports from 1973-2015 accounted for nearly 50% of the total U.S. trade deficit of $10.5 trillion.  Which means, the U.S. Empire would have needed to FORK OVER even more gold if we consider the total cumulative $10.5 trillion trade deficit since 1976.

Does anyone actually believe the U.S. is going to make good on its $10.5 trillion in trade deficits.  I am making an assumption here (as I have not taken the time to look at the data), but I image the $11 trillion of International Reserves shown in Hugo Salinas Price’s chart above, are mostly accumulated IOU’s from the U.S. Empire.

According to this article on Global Currency Reserves, the U.S. Dollar comprised 63% (in green) of the $11.6 trillion total as of the second half of 2014:

Thus, 63% of the $11.6 trillion equates to $7.2 trillion in U.S. Dollar denominated International Reserves.  Now, where is the other $3.3 trillion of U.S. IOU’s to account for the $10.5 trillion in the total U.S. trade deficit, I have no clue.

The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Drop The U.S. Gold Standard

As I stated in the beginning of the article, the U.S. Empire would have been TOAST decades ago if it didn’t drop the Dollar-Gold peg.  In order for the United States to continue spreading its SUBURBAN LEECH & SPEND ECONOMY, it desperately needed to come up with a better way to do business than to fork over the rest of its 8,100 metric tons of gold reserves.

Actually, according to the data, U.S. net oil imports that averaged 8 million barrels per day during that 40+ year period, would have liquidated approximately 6,500 metric tons of gold a year.  Here is that table again:

Which means, the U.S. Government had to drop the gold standard, or it would have gone the way of present-day Venezuela decades ago.  That may seem like a stretch to some readers, but keeping the world believing in the “ALMIGHTY U.S. DOLLAR” is job number one for the U.S. Treasury and government.

Now, I am not trying to be harsh against the U.S. government for its U.S. DOLLAR DIPLOMACY POLICIES… I am just stating the facts as I see them.  When we look at the data and figures presented in this article, it is clear to see how vital it was for the United States to continue importing oil, without the cost in REAL MONEY… GOLD.

Again, the only way the U.S. Empire could continue business as usual, was to exchange worthless FIAT DOLLAR IOU’s for oil, rather than fork over gold that it didn’t have.

Especially, when the figures show that the U.S. Empire needed 279,500 metric tons of gold just to pay for its net oil imports.  This turned out to be 100,000 metric tons more gold than the world holds.

This is why the Federal Reserve and Central Banks continue to manipulate the paper price of gold.  Why?  Because, the day the MUSIC FINALLY STOPS, the world will realize there is only one gold chair for the 100 people holding paper IOU’s.

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63 Comments on "The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard"

  1. Oil producers cannot produce when there’s no demand, and consumers cannot cosume when there’s no production. Who blinks first in this prisoners dilemma as soon as the thermodynamic decline becomes visible to all?

  2. The thing is we are on a gold standard, free floating determined by the market (while sort of anyway) you can at anytime turn your fiat dollars into gold = gold standard. Of course if even a handfull of people made a run on the bank the US dollar and most other fiat currencies would tank and of course that day is coming, but I’m thinking still years out.

    • Yukon Free Press,

      Actually, NO WE AREN’T. I gather you didn’t read the GATA Wikileaks news release providing evidence that the U.S. Govt and the British Govt conspired together to start GOLD FUTURES TRADING in 1975 to keep the public out of buying PHYSICAL GOLD.

      Thus, they also stated in the cable, the VOLATILITY and LIQUIDITY would be moved to the futures paper price instead of the physical market.

      I will be discussing the details in new articles and interviews.

      So,… ABSOLUTELY NOT… we have no read gold value standard. TOTAL MANIPULATION, and has been for more than four decades.

      steve

      • Steve, as an adjunct to your article, when Nixon took the USD off the gold standard, it had to be replaced by some other “commodity” as a standard.
        Enter the “Petrodollar”.
        Arrived at by Henry Kissinger’s efforts to hammer an agreement with the Saudi’s, whereas they would price and sell their oil in US dollars. In return the US would provide a safe financial space for them to invest their oil profits in, and the US would also provide physical military security, along with military equipment plus training, in addition to petro-chemical tech assistance.
        This long term trend is now breaking down (as per your article) as the Saudi’s now pivot away from the US dollar and towards the Chinese yuan. While selling US Treasuries.
        A great article, thanks Steve.

        • You might like to check out Grant Williams recent article over at ZeroHedge (which is an excerpt of last month’s newsletter, that is also embedded in the article) that is titled “Things That Make You Go Hmm… Like The Death Of The Petrodollar, And What Comes After” (things like a new global monetary system, oil payments being conducted in Yuans and Rubles, sales of US treasuries, US deficit spending, baby boomers, foreign gold holdings / increases, gold trading at its all-time low relative to US treasury supply and a whole lot more) –

          http://www.zerohedge.com/news/2016-12-27/things-make-you-go-hmm-death-petrodollar-and-what-comes-after

          • OutLookingIn | January 9, 2017 at 5:37 pm |

            Mike, thank you for the link.

            Another nail in the Petrodollars coffin!

            China buying Russian oil and paying with yuan, with which Russia uses to buy gold bullion on the Shanghai gold exchange. Each party equally satisfied with the deal. The ironic thing being, that the gold was owned in the west and bought at the manipulated low Comex digital gold price!

      • Hey I don’t disagree that there is plenty of manipulation in the gold market. No Question! I personally have all of GATA’s video’s sitting on my movie shelf, Adrian Douglas stands out in my mind as one of the best and in interviews on youtube has the lbma on record admitting that the gold market is leveraged over 100 to 1. But the fact is I can take my $1186 fiat dollars or whatever the current rate is, go on to goldsilverbull.com (or whatever whoever you preferred bullion dealer is) and have a gold coin in my hand by the end of the week. This implies that fiat dollars still have some perceived value relative to gold however tenuous that perception may be. THE DAY I CAN’T trade my fiat dollars for gold at any somewhat stable price will be the day the dollar is dead and we truly no longer have a gold standard.
        What you need to Understand is that in 1971 Nixon didn’t default completely on U.S obligations to redeem U.S. dollars in gold, He RENEGOTIATED what the U.S. obligations would be. Very similar to a company paying 10c on the dollar to creditors for bad debt.
        THERE MOST CERTAINLY IS STILL A GOLD STANDARD. IT IS JUST THAT THAT STANDARD IS CONSTANTLY BEING DIMINISHED.

  3. Hi Steve

    This is my first comment ever after several years of reading all your articles. I must say that this article really put icing on the cake out of all the articles ever read especially with this

    Which means, the U.S. Government had to drop the gold standard, or it would have gone the way of present-day Venezuela decades ago. That may seem like a stretch to some readers, but keeping the world believing in the “ALMIGHTY U.S. DOLLAR” is job number one for the U.S. Treasury and government.

    Now, I am not trying to be harsh against the U.S. government for its U.S. DOLLAR DIPLOMACY POLICIES… I am just stating the facts as I see them. When we look at the data and figures presented in this article, it is clear to see how vital it was for the United States to continue importing oil, without the cost in REAL MONEY… GOLD.

    Again, the only way the U.S. Empire could continue business as usual, was to exchange worthless FIAT DOLLAR IOU’s for oil, rather than fork over gold that it didn’t have.

    No wonder our government has to lie and deceive the public because truth be told there would be a panic that i don’t think people can described how serious this is. It will get to a bad situation. And yes oil does drive our economy without oil means no gas, diesel etc and every transportation weather car, truck, ship or plane everything would come to a complete stop IF there is none left. Know wonder why the government spends $$ trillions of dollars on the military to take over other country’s for more oil is to keep the dollar alive without oil there is no US dollar. And i will say no oil means most companies cannot hire employees which means no functioning economy.

    I remember in high school back in the early 80’s one of the brightest history teachers i ever known even though i hated history told us this. They called the UNITED STATES “pigs” and we asked why?
    His answer was the United States are consuming oil like it was never going to dry up!

    People have different ideas on how the US is going to collapse but your article shines the light on the darkness.

    Great article Steve

    • Abe,

      I appreciate your taking the time to leave a comment. Yes, I agree that this does put the ICING ON THE CAKE. The more we look into the details, the more we can CONNECT THE DOTS.

      The problem today is that many in the alternative community have been GONE UNDER THE SPELL that Trump will make America GREAT AGAIN. This is just another delusion and a series of delusions.

      However, the negative energy fundamentals are slowing kicking in, and will likely pick up speed during Trump’s Presidency.

      steve

      • Trump was talking about bringing back the great depression when he spoke of making America great again.

      • Though we wish him well (Trump), it now is plain to see. Both Democrats and Republicans are no longer in control of the tidal wave that is the present economy. It can’t be stopped, or impeded more than a small bit. That leaves “lying” as the only real political answer to what is coming.

        Expect more talk of spending “Money”, usually thought of as transported by helicopters. But in reality it comes in the form of spending programs, most aimed loosely at “infrastructure.”

        Remember, in a Tsunami situation, it doesn’t matter if you flee with your bare feet, buy a bicycle, hail a taxi, or rent a limo… money would not matter… the point is to simply leave the beach.

        Today you can see that money being spent. Everywhere. Yes it may eventually be worthless, but for now, and the (very) near future I would suggest just taking it where you can…

        JUST PLEASE LEAVE THE BEACH.
        (big cities, and east/west coasts)

  4. Hi Steve,

    Thank you for this great article. It is hard to swallow as someone who would like to see the dollar go back to a gold standard but the truth is closer to what you are saying in this article. I imagine this means the US will have to issue a different currency and turn into a 3rd world nation as our credit card would be cut off. What are your thoughts on how this problem would be fixed? Thank you!

  5. Excellent as usual I’m definitely not a gold or silver bug simply because you can’t eat it. But you’ve landed on the true crux of the problem net energy. There is a horrendous crash coming. The interesting thing is in hindsight Nixon’s moves were vital to keep the US system propped up. I don’t think he could have thought this thru on his own or with administrations help.

  6. Steve,

    This is a great example of the thing that I love about this site. Your unencumbered perspective and resulting insights in to the world of gold, silver and oil.

    It looks like we owe Tricky Dick, Volker and Burns a 46 year debt of gratitude for the relatively easy and prosperous life we have had. Either they were a lot smarter than I thought or were incredibly lucky for all the wrong reasons.

    This article also makes it clear to me that the alleged “Manhattan Plan” may be real and that Trump’s only path is one of massive inflation and concomitant massive devaluation of the dollar. A 2000% increase in the dollar price of gold ($25,000/oz,) which would be a 2000% devaluation of the dollar. Then reissuing a new gold backed dollar to attempt to restore the faith.

    This, of course, will not save us from from the ultimate collapse and apocalypse but would buy a couple of years until oil depletion finally knocks the wheels off.

    The question that remains in my mind is; If there is 184,000 tonnes of gold and 780,000 tonnes of silver (http://www.zerohedge.com/news/2013-03-01/visualizing-all-silver-world) available above ground, is it really possible that the price of silver will settle anywhere near the available above ground ratio of gold to silver of around 1/4-5 or $25,000/$6,250-$5,000?

    Thanks,

    SteveW

    • “…until oil depletion finally knocks the wheels off.”

      Relax.

      There’s plenty of oil.

      http://www.cnn.com/2016/11/17/us/midland-texas-mammoth-oil-discovery/index.html

      Don’t drink the ‘green koolade’ propaganda funded by the house of saud…that wants us to quit frackin’, so they can keep their lion’s share of the global market.

      • Joe tentpeg,

        I gather you are new to the website, so I will excuse you for making an incorrect assumption. Furthermore, I am amazed that a person who reads “Alternative Media” is quoting the CNN Mainstream media.

        Do you actually believe that KOOL-AID???

        steve

      • LOL.

        Do you even know how oil is refined and made into derivative energy liquids? Probably not.

        From the CNN Kool-Aid fake news article you just posted:

        “The Midland Basin of the Wolfcamp Shale area in the Permian Basin is now estimated to have 20 billion barrels of oil and 1.6 billion barrels of natural gas, according to a new assessment by the USGS.”

        Um, excuse me, but do you know how much OIL the US let alone the world consumes each year?

        According to the Energy Information Agency:

        “In 2015, the United States consumed a total of 7.08 billion barrels of petroleum products, an average of about 19.4 million barrels per day.”

        THAT TEXAS FIND WOULDN’T LAST AMERICA MORE THAN 5 MONTHS.

        So how is that “plenty of oil???”

        Stop drinking the media Kool-Aid. Please. For your own sake.

  7. Could it be, i i think it is, that gold does play a role in big oil? A few bars here and there for princes and dictators? While the rest fights over the crumbs aka fiat currencies? Transactions partly in $, partly in physical gold. ‘Another’, and after him/her, Foa and Fofoa, already wrote about this 20 years ago. And they are doing this, let me guess, since 1971? Lots of speculation, i know. The west cannot solve everything through military force, so a few tons of gold is added in the mix. With exponential depreciating currencies more and more gold has to be added as time goes by.
    My two cents, but i keep hearing voices in my head telling me this. Maybe i should go see a doctor.

  8. It’s very simple Kissinger and Rockefeller and company needed cheap energy to set up their corporate empire but they knew this country wouldn’t be able to provide that so they used someone else’s energy.

  9. Steve,
    Wondering if your calculations take in to account that the dollar was not fully backed by gold when Nixon slammed the gold window shut?

    Brief History of the Gold Standard in the United States
    Congressional Research Service 14
    Conclusion
    This brief history, although essentially factual in nature, yields a number of observations relevant
    to claims about the gold standard. U.S. monetary history is not one of steady commitment to gold
    suddenly abandoned in favor of a fiat standard. Nor were the metallic standards of the 19th and
    early 20th centuries without paper money or other characteristics abhorrent to some advocates of
    gold.
    First, a genuine gold standard existed only from 1879 to 1933. Prior to that was a bimetallic
    standard in which silver was dominant from 1792 to 1834, a bimetallic standard with gold
    dominant from 1834 to 1862, and a fiat money system from 1862 to 1879. After 1933, it was a
    quasi-gold standard that gradually became a pure fiat standard over the period 1967-1973.
    Second, even under the gold standard, the United States had paper money. For most of the time
    the standard was in operation, this money was issued by banks. Until the Civil War, none of the
    paper money was legal tender; yet, it circulated. Moreover, the gold reserve behind paper money
    was never more than a fraction of the total. This is a common characteristic of metallic standards.
    Third, a metallic standard is no guarantee against currency devaluation. The definition of the unit
    of account can be changed. This was demonstrated by the currency depreciation of 1834, which
    occurred without ever leaving the standard. Similarly, under a bimetallic standard, depreciation
    can occur as a consequence of the changing availability of the two metals.
    Fourth, even under a metallic standard, the United States issued legal-tender coins that were less
    than full-bodied. As early as 1853, coins were minted with less silver than called for by the
    official mint ratio.
    Fifth, the Federal Reserve system did not replace the gold standard. The Fed operated under the
    gold standard for nearly 20 years. A central bank and a metallic standard are not mutually
    exclusive. Indeed, central banks historically were set up to help the gold standard operate.
    Sixth, the classic gold standard ended in 1933; what followed was only a partial—and not full—
    gold standard. A definition of a dollar as a given amount of gold does not make a real gold
    standard. A genuine metallic standard is one in which the public is able to freely shift gold from
    exchange to other uses, and paper issued by the government freely convertible into gold.
    Seventh, the final move to a fiat money was not deliberate or purposeful. It occurred by default as
    links to gold became impossible to maintain. Nor did the final abandonment of gold occur
    suddenly or cleanly. The United States began to halt its redemptions of dollars into gold for
    international transactions in 1967 and 1968. The actions of 1971 and 1973 were not the adoption
    of floating exchange rates and fiat money, but the loss of the ability to redeem dollars at a fixed
    price. Floating occurred by default.

    http://gold-standard.procon.org/sourcefiles/crs-brief-history-of-gold-standard-in-us.pdf

    • “The Fed operated under the gold standard for nearly 20 years.”

      Unfortunately, that wasn’t a real Gold Standard. There is no currency in a true Gold Standard because one buys and sells in Gold coin.

      As long as they can print currency they will print more paper than there is Gold to back the currency.

      In a true Gold Standard the price floats freely and is controlled by the Market not the Fed or the government!

  10. Great article Steve. Another way to further explore this data would be to look at the OECD countries as a whole and compare their rise in total debt alongside deteriorating oil production all the while consumption rose.

    The following link has some data but it’s limited uptil 2011. http://crudeoilpeak.info/oecd-imports
    As we can see quite clearly import dependency has grown heavily in the OECD nations since the 80’s

  11. Diogenes Shrugged | January 9, 2017 at 3:44 pm | Reply

    Just my opinion, but THE MUSIC WILL NEVER STOP, at least not in our lifetimes. Only two things could possibly make the music stop. One is hyperinflation, a dead issue considering the astronomical debt the Fed created to (unsuccessfully) even hit a paltry 2% inflation target. The other thing would be international laws forbidding governments and banks from owning gold (because authentic money rightfully belongs in the hands of the people, and only the people). Of course, that will never happen because the central banks intend for precious metals to forever remain commodities, not competing currencies.

    The paper price of gold is rigged to keep pace with its cost of production at the mines. That will not change until one of those two conditions is met, and my money is on neither ever happening. But an ounce of gold will always buy an expensive three-piece suit and tie, even if the cost of that suit and tie falls during a monetary deflation.

  12. US Empire is on the Uranium Standard.

    Or the Enriched Uranium Standard.
    Or the Nuclear Missiles Standard.

    Some people believe that US Empire is on the Petroleum Standard. But in reality, it’s the Uranium that backs the US Dollar, not petroleum, and definitely no silver or gold.

    US Dollar is NOT a fiat currency. It’s backed by tangible, physical resource of “Enriched Uranium”.

    • So-called nuclear power generating plants are dump loads, big kettles that boil off the excess energy produced by the big utils. They don’t generate any energy they dispose of it so the big utils can justify high domestic energy rates. By hiding the surplus this way they are creating the illusion of an energy shortage and they can keep your electricity bills as high as possible. Plus they make billions selling these huge kettles as so-called nuclear power generators.

  13. Great report, Steve!

  14. SilverBullRider | January 9, 2017 at 6:57 pm | Reply

    The “missing” $3.3 trillion are most likely Saudi “reserves” that never left the U.S. hidden in the Exchange Stabilization Fund.

  15. I have some problem with this analysis. Trade deficits were enabled by going off the gold standard, were they not?

    The epic gold price spike was a product of de-pegging the dollar from ounce of gold.

    So how do you price post gold standard deficit in post gold standard floating gold price? If you have gold standard you have to curb your deficit, this is the whole point of it.

    The valid analysis would state amount of deficit to reduce should the US had remained on a gold standard. This might be a large number, but still. It is always possible to do at an expense of global superpower ambitions.

    So I think your conclusion and the headlines are correct, but backing is weird

  16. Once again, great work and details incorporated in to the article…..thanks a lot Steve….regards.

  17. one thing that i don’t get is allure that gold promises … if it is valued in dollars, and the dollar collapses in value, it remains unclear to me that a metal purchase will ultimately be worth much of anything. i mean, to exaggerate a bit but to make a point, if 1/1 = 1 and 1/0 = infinity …. to have gold and have it ‘appreciate’ against a destroyed fiat currency is a bit of a fallacy in measurement to define what it is worth forward in time.

    • shawn –
      You answered your own question.
      Gold is true money.
      All the rest are currency.
      Currency can be conjured out of thin air into being.
      Gold must be found first. Dug out of the ground. Then refined for it to come into being.
      Therefore gold has intrinsic value, whereas ALL fiat paper currency value is eventually zero.
      Gold has been money for thousands of years and will be money for thousands more.There have been thousands of currencies that have come and gone. Most long forgotten.

      • understand. but the new world currency can’t be gold or silver because there isn’t enough bullion to go around. who is to say that the sdr’s of the imf will have a value with a gold basis – like the usa did when they ditched bretton woods and printed currency / issued debt against the faith and full credit mantra that has been dispensed for years and years now? ie// just issue another fiat currency without backing but with a ‘clean’ credit sheet so they can print at will?

        • You apparently haven’t seen the grams of physical gold and silver available. To take it a step further there is now smaller slivers that you can get on plastic card housings. See Peter Shiff’s plan.

        • SilverBullRider | January 10, 2017 at 11:57 am | Reply

          There is plenty of gold and silver to backstop a currency system. We could even once again use a gold-exchange standard. The major problem however is always ACCOUNTING and BANKER FRAUD. Re-hypothication is still rampant. You have to be able to prevent or manage the printing of hundreds of paper IOUs (dollar,yuan,sdr) for the same 1 ounce of gold. That’s why the drive to seize control of precious metals is going to increase. The elite want as much of it in their hands as possible before the great revaluatuon. Because it is all going to have to be openly accountable in some way in order for the new currency system to be non-fraudulent SOUND MONEY. There may need to be a new system of metal assay/accounting houses that are more equally monitored by all users… banks in the old sense cannot be trusted to do this function. International Metal Exchanges will be needed, with monitor and accounting HIGHLY REGULATED, and fraud resistant..

          • There is no currency in a true Gold Standard because one buys and sells in Gold coin.

            As long as they can print currency they will print more paper than there is Gold to back the currency.

            In a true Gold Standard the price floats freely and is controlled by the Market not the Fed or the government!

  18. I think there are some flaws in your analysis:
    -> Under the petro dollar system established in 1971, U.S always has to run trade deficits. The world would not have dollars if U.S ran trade surpluses.
    -> If the amount of oil is too much and there is limited gold, prices of the oil measured in Gold would crash.
    So the fact that U.S cannot buy oil because there is not enough gold in the world is wrong.
    U.S, would do great again on gold standard and with the removal of regulations by Trump we will be on the path to prosperity.

  19. I agree with the statement that the Gold standard is very unlikely to ever return again. There was certainly a “good” reason for the US why to abandon it some 46 years ago. Would it be possible to re-introduce a Gold standard. I think yes. It’s just a matter of how Gold would be priced but that number would have to be so huge that no government in the world would like to go for it

    Just have a look at the US dollar to Gold / Silver ratio published in real time on usdebtclock.org.
    Gold stands at 9110US$ per oz. while Silver stands at 1007US dollars per oz. as by today 9th. of January 2017. And this is only the amount of above ground reserves plus annual estimated production devided in M2 but what about all other paper currency plus credit in circulation? So the number of 50’000 an oz. Gold as forecasted by Jim Sinclair seems to be more reasonable allthough probably still too low Will if ever happen? Most likely not as governments will go cashless before it happens and once cashless is in place you have full control over the PM prices again and you can easily.ban it’s trade or apply windfall taxes.

  20. Take a look at this: https://youtu.be/2ssrcD5GdPQ conspiracy theory or fact. What do you think.

    • That’s no conspiracy, it’s all fact. In fact, that entire series is top-notch research & should all be watched together. Exchange Stabilization Fund is indeed tied @ the hip to Bank of International Settlements in Basel, Switzerland (Central Bank of Central Banks, essentially sits above ALL of Federal Reserve, Bank of England, Bank of Japan, European Central Bank). John Titus is doing groundbreaking research on these murky topics & he’s expected to release his next in the line top-notch video about this topic sometime soon. If you search for a Youtube channel “Shadow of Truth”, you’ll find high quality work by John Titus in the past. None of it dealt with Exchange Stabilization Fund yet.

      Apparently Eric de Carbonnel has re-surfaced. He had gone underground for many years after making these videos, and nobody had a clue what happened to him. I noticed he liked some other unrelated Chinese movie trailer video a month ago.

      (Only caveat I have: Somewhere in the middle of the video series on Exchange Stabilization Fund, Eric de Carbonnel strays away from financial topics & starts talking about the HIV AIDS virus, and how according to his “research” it’s all a conspiracy & no such virus really exists. I don’t want to express any personal statements about him stating so. All I know is, as a result of mixing bunch of non-financial “conspiracies” in the middle of his important videos, Eric risked losing part of potential audience for his research on financial topics.)

  21. Good article, Steve. But isn’t the whole point of having a monetary system based on real money (gold & silver as opposed to a system of currency created out of thin air, like virtually all world currencies today) is to prevent a nation from consistently importing more goods & services than it exports? Yes, that would mean no U.S. Global Empire. But wouldn’t that have been a good thing, not a bad thing? We would never have racked up $20 trillion in debt. We would not have a monster, out-of-control Federal Government like we do today. We would have lived within our means. We would not have robbed wealth from future generations in order to squander it on overconsumption today. We would not be on the brink of world economic & financial collapse today if we had stuck with gold & silver as money, as our Founding Fathers wanted in the Constitution!

  22. Good analysis. The other way to to look at it, is that remaining on the gold exchange standard would have forced the US to live within its energy means. End of empire, use a lot less oil but have a sustainable future.

    Bob
    https://investingwithnature.com/

  23. The notion that any foreign nation will engage the U.S. in trade without a replacement U.S. dollar that is not backed by a physical assets, once the U.S. FIAT backed dollar collapses, is folly. As a U.S. bare foot peasant there are only a few things that come to mind… “Silver”, “Gold” maybe “Realestate”. Therefore, As I see it, the notion that gold and silver are not currency is folly.
    Just look at Russia right now who is trading with China for their Yuan which Russia turns around and buys gold from China. Gold most assuredly is a currency. After all, if it wasn’t for gold the CIA would have had a hard time paying for Al Qaeda/ISIS. I will agree that the U.S. Dollar would have collapsed if it had not been unpegged from gold. This doesn’t take an economics doctorate to figure out. Saying that a gold backed dollar will save the U.S. economy is comparable to saying that a person who is indebted millions to Vegas will be saved by using his labor at the casinos to pay back his gambling debts. Maybe Sammy Davis Junior but your average person who doesn’t have a foundation in their name will never have enough money/labor to cover their debts, just as the U.S. has overspent it’s gold reserves (if they’re still there).
    In conclusion as a bare foot peasant I put physically owned precious metals on a short list behind: 1) Zero debt, 1) Food/Water/Shelter and 3) Physical protection for my family.

  24. Your premise is all wrong, so naturally your conclusion is all wrong, but I think it is meant to be wrong to distract us from the truth. You’re like a magician’s assistant, except without the curves or the tits.
    Ignoring your false premise, the problem is not with a Gold Standard, the problem is that setting Gold’s Price at $35 per ounce was ludicrous!
    Setting the price of Gold is nonsensical, at any price. We cannot try to control the Markets. Commodities in general and Gold and Silver especially, must be allowed to float freely allowing the Free Market to determine the Price!
    The United States has never been on a Gold Standard. If paper currency is involved then it is not a Gold Standard. A Gold Standard means one buys and sells using Gold Coins! A Bi-Metal Standard means one buys and sells using Gold or Silver Coins.
    This is what The Constitution means when it says: “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;” It also says: “To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;”
    “The Coinage Act or the Mint Act, passed by the United States Congress on April 2, 1792, created the United States dollar as the country’s standard unit of money, established the United States Mint, and regulated the coinage of the United States.[1] The long title of the legislation is An act establishing a mint, and regulating the Coins of the United States. This act established the silver dollar as the unit of money in the United States, declared it to be lawful tender, and created a decimal system for U.S. currency.” (“Federal Reserve Bank of Philadelphia: Money in Colonial Times”. Federal Reserve Bank of Philadelphia. Archived from the original on November 21, 2011. Retrieved 2008-04-02.) Wikipedia
    “The Act defined the proportional value of gold and silver as 15 units of pure silver to 1 unit of pure gold. The Act also specified the dollar as the “money of account” of the United States, and directed that all accounts of the federal government be kept in dollars, “dismes”, cents, and “milles”, a mille being one-tenth of a cent or one-thousandth of a dollar.” Wikipedia
    “The most perfect monetary system humans have yet created was the world gold standard system of the late 19th century, roughly 1870-1914. We don’t have to hypothesize too much about what a new world gold standard system could look like. We can just look at what has already been done.” (Nathan Lewis, Forbes)
    “Contrary to popular belief, people generally did not conduct commerce with gold coins. Yes, gold coins existed, but people mostly used paper banknotes and bank transfers, just as they do today. In 1910, gold coins comprised $591 million out of total currency (base money) of $3,149 million in the United States, or 18.7%. These gold coins were probably not used actively, and served more as a savings device, in a coffee can for example.” (Nathan Lewis, Forbes)
    Confidence Men have a rule that says never try to run a game on a Banker, because Bankers have a game of their own going on.
    Our biggest mistake was allowing the creation of the Federal Reserve!
    “The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch. 3) is an Act of Congress that created and established the Federal Reserve System, the central banking system of the United States, and which created the authority to issue Federal Reserve Notes (now commonly known as the U.S. Dollar) and Federal Reserve Bank Notes as legal tender. The Act was signed into law by President Woodrow Wilson.” Wikipedia
    The Federal Reserve was created by an Act of Congress which was TREASON because Congress did not have the Constitutional Authority to hand their Coinage Authority to a PRIVATE CORPORATION, like the Federal Reserve!
    Remember the Constitution; “To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;” The Federal Reserve is counterfeiting because it is issuing Unconstitutional script, which is not Money, but is actually an instrument of debt, a `Note’.
    The only real workable solution is to outlaw the printing of Paper Currency and require that Banks deal strictly in Gold and Silver Coin. We have the technology to create Gold Currency. Gold and Silver are malleable and can be pressed into a flat thin sheet and encased in plastic, thus producing a `flat coin’ or Gold and Silver Currency.
    If Nixon had simply allowed the price of Gold to rise to its true value, we would not be in the s*it hole we are in now and we would not have any debt, let alone the 20 trillion dollars of debt we have now. Yes, Gold and Silver do tie the hands of Government, which is good because it prevents the government from spending more than it has in its possession and thereby prevents the creation of debt!
    We need to default on our debt, wipe the slate clean and start over with REAL MONEY!

  25. While this may well be true, I think it’s also fair to say the collapse then would have been FAR less severe than the one we will get when the nations 200 trillion dollars of unfunded liabilities finally blows up. Printing funny money only makes things worse.

  26. Excellent travail

  27. And good riddance to the Empire! I wish it had ended in 1971. Millions of people would be alive today if the gold standard had been preserved because we could not have gone to war so frivolously. Savers would be enjoying a comfy retirement and capital would be spent creating peacetime jobs and friends overseas.
    I totally agree that the politicians and central bankers would never willingly go back to it: they like to think they can manipulate our lives, and being able to devalue the dollar is how they fund their “fun.”
    Please name one person who has suggested that “gold should be revalued” higher. I don’t think you can. There have been suggestions that the true value of gold in dollars should be (and is) much higher measured in dollars (absent manipulation), but that refers to a market value, not a government mandate. There have also been suggestions that one way to forcibly create the inflation the manipulators want to liquidate debt is to manipulate the market to cause an increase in the number of dollars required to buy gold, but I call that revaluing the dollar lower–and it would be done by pegging the price of the dollar to gold, not by an official gold backing. I don’t think you fully understand what people are saying about gold’s value, but you are correct that it is the Empire that is prevented by gold in the People’s hands. Only Emperors like fiat.

  28. Nature is a wonderful thing, and as the commercial told us, `It’s not nice to fool Mother Nature!’

    As long as men determine our monetary policies there will be problems.

    Nature is a wonderful thing and reaches beyond trees, animals and even humans, Economics are part of Nature and that is why Nature gave us Gold and Silver!

    As long as men continue to try to fool Mother Nature with Keynesian Economics we will have hell to pay! Keynesianism is a Religion NOT Economics. Keynesianism is a nightmare dreamed by a fool!
    We need to follow Natural Law, Natural Economic Law or Says Law which states that economic stability is derived from macroeconomic activity. In other words, the entire economic system has to be able to function FREE of government intervention in order to create a Free Market Economy free of shortages or over production.

    I repeat: As long as men determine our monetary policies there will be problems. However, Nature gave us Gold and Silver, and as long as we allow the price of Gold and Silver to float freely we have the perfect Economic System. There will always be enough Gold and Silver to accommodate the economy because the of the law of Supply and Demand, or as I like to say, Price and Demand; as demand increases so will the price.

    Take oil for example, right now there is little demand for oil, so the price drops. As the economy picks up, so will the demand for oil and therefore, so will the price!
    Gold is presently at about $1200 per ounce, but as the demand for Gold increases so will the price. If we reintroduce Gold into the monetary system the price of Gold will naturally increase. Or more correctly, if we scrap our bogus, artificial and Un-Constitutional monetary system and return to a Constitutional monetary system based on Gold and Silver, the metals will naturally find Economic Price Equilibrium!

    There is a video online that explains it clearly:
    https://www.youtube.com/watch?v=hCXjS04xEZk
    About 3/4 way into the video a gentleman explains that 1500 years ago One Dinar (Gold coin) bought two head of goat and today One Dinar STILL buys two head of goat!

  29. Steve, the oil gold dollar premise is false if the world had said in 1971 that we dont accept dollars as D’Gaulle did in 1965? without being able to redeem them in gold, the us would have to have to have curbed the their spending and increase their productivity and be less wasteful, instead the opposite has happened. The US used it military and industrial might to force the counterifet dollar on the rest of the world and those who rejected it. Didn’t last. This suited many countries, who had similar problems with deficits and they willingly joined in with the fraud.
    The dollar is a liability using debt as an asset what can possibly go wrong?, take a look at this great chart documenting the history of the Fed.
    http://www.financialgraphart.com/history_of_fed_free.pdf
    Gold and silver manipulation, thats not the only manipulation try peoples perceptions and emotions the stock market and the restriction of information and propaganda as leagalised in the us in2012.

    • Money is plain and simple, deferred spending and this is how the concept of interest came into being. Gold is money, whenever credit is expanded, its basicly theft off the existing holders of the former. The more credit thats created, the less work gets done because theres more profit in chasing up asset values as existing credit is devalued.
      If there is no restraint by a fixed money supply created through labour, the currency becomes worthless as less and less is done and more and more debt is created. As less work is done less oil?energy is needed, so in a free martet prices fall. This will continue until supply and demand dynamics are re constituted by the reintroduction of mpney. Gold/silver will definitely be remonetised because at the conclusion, nothing else will be trusted.

      • P.S Physical gold will go up to infinity against the dollar, and sooner, rather than later, if they dont stop expanding the feds balance sheet, but that wont happen because that takes restraint and thats one commodity thats in short supply. The question that should asked is, which comes first ww3 or a gold standard?

  30. Thank you for your comment. And yes a lot of people are going to be tossing their cookies, Trump or whoever can’t save the whole banana and it is fascinating how Americans get stuck on the same old stuff.
    The Kissinger kind of kept it all goldberged when I was born but that is long gone.
    I will have to start reading your blog entries more but like the people around me I am struggling.

  31. Frank Breckenridge | January 10, 2017 at 8:00 pm | Reply

    I have probably missed something in your analysis. That said, this comment is framed as a question: ‘Isn’t your whole analysis based upon the price of gold?’.

    That is: Your averaged values: $176/gold oz. vs. $13/barrel oil. = 14 to 1 ratio. Is it not this ratio that then drives the entire calculation?

    I won’t go into the rest of my question until I make sure that I’ve gotten your method right first! OK?

    • Frank Breckenridge,

      Yes, the gold-oil price ratio was the basis of the 14/1 ratio. What is the rest of your question.

      steve

      • Frank Breckenridge | January 20, 2017 at 11:34 am | Reply

        Well as conditions change in terms of the availability of petroleum, why wouldn’t the value of gold also change? The gold-oil price ratio is not immutable is it? The exchange rate of FRNotes for gold changes over time, as does that of a barrel of oil. So as economic conditions change in relation to energy usage and energy availability, wouldn’t the value of gold (and silver and copper) go up as necessary to purchase supplies?

        This goes back to the notion, if I may call it that, that there isn’t enough gold or silver in the World to adequately represent actual commerce and facilitate monetary needs and transactions. However, if the value of gold, silver and copper was driven by true market forces, there would be plenty of these metals available, but their “price” would change.

        Instead of a shirt costing $20, or an ounce of silver, it might cost 20 copper pennies. (This is not an actual silver/copper ratio, I’m just using the idea here). In former times, like say, 19th and early 20th century America, a penny was actually worth something. Why could it not be worth something again? And, for that matter, also a 90% silver dime? And so on?

  32. Great article Steve. You’re right we won’t go back to the gold standard with the Dollar. However, I believe oil producing nations will At some point stop accepting Dollars and demand gold. As we know Dollars don’t retain their value. At some point oil producers will demand an asset that retains value to secure their future the day oil stops flowing. Iran is a perfect example of the future. You can trade gold and real assets such as finished goods for Iranian oil, and the Dollar won’t buy much from them. If the House of Saud changes their Dollar stance then we will be undone. The question then becomes what will be the unmanipulated oil to gold ratio. Everything is a derivative of energy and if energy is tied to gold then how much gold is in your wallet?

  33. I am 83 years old. I have been observing this financial destruction of the United States since I became aware of it in 1964. I have no substantive disagreement with anything presented in Steve Srocco’s article, however I do have some concerns in the lack of any mention of the enabling cause, identification of the active responsible parties or presentation of any solution.

    As for the United States being on a gold standard, where is that standard set forth in the Constitution? And related thereto, where is the Constitutional authority for the federal government to acquire the gold required for such backing? That is, where would the government properly obtain the gold?

    And finally, the assertion that gold is the only real money. Gold is not properly characterized as being money. Gold is a very valuable commodity, and due to its properties, serves very well as a storehouse of value.

    As an aside here, the gold and silver coins circulating as money during the early years of this Federation, were not entered into circulation by the federal government. They were spent into circulation by the private owners who had their raw ore made into coins by the federal mint.

    I notice in this item the recommendation that concerned readers should invest their paper money in solid commodities, such as land, or gold, or other similar items where the stable value may be relied upon.

    Gold and silver both fit very well into such a protective reserve, however, such application does not make either a desirable or proper medium to be used as money.

    The Constitution does establish that no state shall coin money or make any thing other than gold or silver coin as tender in payment of debt; however there is no such restriction included therein in regard to the federal government.

    Additionally, the Constitution assigns Congress “the POWER to borrow money on the credit of the United States”; and assigns Congress the responsibility to “provide for the general welfare”. Sadly, there are no Constitutional guidelines or limitations in regard to either of these seed bed of corruption enabling provisions.

    If it were not for these two provisions, there would have never ever been any need for any claim of gold backing of the FRNs issued by the Fed.

    No level of government should ever be ALLOWED to spend any more money than is collected through some manner of fee for services rendered. No level of government should ever be ALLOWED to determine how much money it needs or where such money should come from!

    When taxation is instituted, a condition of servitude is established. Are any of the readers hereof familiar with the prohibition of involuntary servitude imbued into the Constitution in the Thirteenth Amendment thereto? And please be assured, when properly invoked, this prohibition does prevent taxation.

    This absence of limitations (in regard to the two provisions mentioned above), enabled the federal government to create its own bank, The Federal Reserve System, wherein Congress can “borrow” however many trillions of FRNs that it needs, in order to “provide for the general welfare” (and individually enrich themselves).

    Of critical significance and concern here is the means by which money created by the Fed enters into circulation. This consideration is critical to understanding the cause of the depreciation of the value of money issued by the Fed.

    As an integral aspect of understanding this monetary failure is an explanation and understanding of the basic purpose of money, which is to facilitate bartering.

    It might be a good idea to re-read that purpose a few times as it is NOT by any means, a minor point!

    Related to this purpose is an understanding as to what it is that actually provides the backing for money; and such backing can never ever properly be gold or any other commodity!

    What ever might be considered or declared to provide such backing, that backing must allow the money medium to be redeemed for some item or service actually needed or wanted by humans. And the available circulating quantity of the money medium must be sufficient to fairly well equal the total value of all of the items and services offered for sale by all of the persons participating in the economy.

    Basically, in every transaction the parties involved expect to receive something of value in the exchange. What is it that humans actually want, bottom line, as a result of their various market transactions?

    Is it not self evident that the primary needs of all humans is food, clothing and shelter? Everything after these three may be considered as desired, but not urgently needed.

    Of what actual value is gold to the majority of humans? Other than jewelers and electronics manufacturers, who has any actual need for gold? If a multi billionaire were to prepare for an African safari, where 100 pack mules would be required, how many of these pack mules would the multi billionaire load with gold?

    As the basic purpose of money is to facilitate bartering, this would require the money medium to be backed with some manner of goods or services needed and desired by humans.

    That is, the value of the money medium is determined by the amount of human effort required to produce the goods or services involved in a given transaction.

    A person agreeing to scrub windows for $5.00 per hour would not expect a medical doctor to examine him for $5.00 just because the examination took only one hour.

    The point here is that it is not possible to arbitrarily determine the hourly value of another person’s output based on the amount of money another person is willing to work for.

    The price of everything is determined by the parties involved in each transaction. This is true every time you walk down an isle in a super store and refuse to purchase items you actually want, because the price on the item is more that you are willing to pay.

    The store determines the asking price of all its offered items, based on the quantity sold and the price the store paid its suppliers. However, it is always the customer who determines the selling price

    All of these prices, whether for physically offered services of variously talented humans, or for the many different items offered for sale, have all been and are continually being reevaluated and redetermined by market conditions on a day by day basis.

    As an example, lets examine the purchase of a house on a mortgage, as this will serve to establish why gold will not work well as a money medium in an electrified society.

    Please keep in mind here, that the fundamental purpose of money is to facilitate bartering. That is, in order for the money medium to have value, it must represent some manner of human productivity.

    When a family wants to purchase a house to live in but does not have the ability to pay the full price of the house up front, the family can take out a mortgage.

    If the price of the house was one hundred thousand FRNs, the family could borrow that money from a local bank. The bank would not lend its own money, no, the bank would create the $100K “out of thin air”, under license from the Fed, by either writing a check or simply entering the $100K into the bank account of the builder/seller of the house.

    (As an aside; such a deposit would activate the Fractional Reserve Lending system, authorized by the Fed, enabling that local bank to create an additional $90K out of thin air, which that bank could lend out on unsecured loans, also known as “signature loans”. This is NOT a negative! In fact, it actually stimulates the economy.)

    Although that $100K was created as indicated, “out of thin air”, it actually has real value because it is backed up by the value of the physical house (a product of expended human effort), through a mortgage, and by the promise of the borrower to make payments for the agreed upon period of years. Most probably thirty years. What this actually constitutes is the monetisation of the future income of the borrower.

    The salient question here (based on the fact that the bank loaned none of its own money but created the loaned funds “out of thin air”); “Is who is it that is actually funding or carrying all such mortgage loans?”

    Who is it that enables this purportedly worthless paper money, created out of thin air, to be accepted by everyone in the community, as though this paper money actually had some manner of backing?

    It is true that the bank did fund the loan but not with the bank’s own money, so how can the bank be carrying the loan when the bank has no manner of investment in that $100K once the paper work is signed and filed? Other than keeping the books and recording the monthly payments?

    Who is it that is accepting that $100K every day, in monetary transactions in the community, for the next thirty years?

    “Follow the money.” Once the builder is paid, the house no longer belongs to the builder. As the builder did not fund the loan, the builder has no claim on the monthly payments, either principle or interest.

    Once the builder receives the $100K, he then disburses appropriate portions to all those artificers and materials suppliers who contributed to the construction of the house. (As an aside. These disbursements have no diminishing effect on the $90K the bank could lend through the Fed’s Fractional Reserve Lending scheme based on the original deposit of the $100K to the builder’s bank account).

    Those persons who received a portion will use their share to pay their various business or living expenses, food, clothing, utilities, vehicle expenses, hair cuts, shoe shines, and whatever else they might pay for with their share.

    The point here is that in a fairly short time, everyone in the community will have some of that $100K in their pocket or purse. That is, that $100K of paper money “created out of thin air”, is being respected as having monetary value by every person in the community; that is, this paper money is not considered to be worthless FIAT un-backed paper money.

    This is true because that $100K is backed up by the mortgage on the house, and more significantly, by the promise of the borrower to create the value in the future, and make his agreed upon monthly payments.

    That is, each month the borrower will make a payment to the loan funding bank, wherein said bank will zero out the principle portion (using the same “Magic” it used to create those FRNs at the time the bank funded that loan “out of thin air”), and the bank will then take the interest portion as bank profit.

    The salient question here is, “How can the bank properly take that interest as its properly earned profit when the bank did not contribute any of its own money as any portion of the $100K lent to the borrower, because the funding bank created the entire $100K “out of thin air”, in order to fund the loan?”

    The only reasonable answer to that question is that the bank has no legitimate claim on any of that interest money; that is, the bank’s taking of that interest money is properly characterized as nothing other than legalized theft.

    Now, as the bank has no proper claim on that interest profit, who does?

    That is, although it is factually indisputable that the bank did not lend anything, at the same time it is just as indisputable that the borrower did borrower from someone or some entity.

    Who or what is that entity that is being legally cheated out of its justly earned profit? Who or what entity is actually taking the risk: who or what entity will suffer a monetary loss if the borrower reneges on his payment obligations?

    The reasonable and logical answer is that such loans are carried by the people of the community. This is self evident by the fact that if the people of the community refused to honor and respect such FRNs as being valuable, the builder would not only not have accepted the $100K as payment for the house, the builder would not have even bothered to build the house and all of those persons who participated in the construction would have been out of work!

    These unfavorable facts ought to give some pause to those persons who so emphatically characterize our economy as “debt based” or “credit based”.

    That is, when the funding banks wrongly take the interest paid by the borrowers as earned profits, such banks are participating in legalized theft of money properly belonging to the communities where such transactions are engaged in.

    When the profit proceeds from such loans are properly recognized as belonging to the communities wherein such transactions take place, such profits can be applied to the treasuries of the four levels of government, municipal, county, state and federal, thereby eliminating any need for any manner of taxation.

    Please understand here, that it is common here in the United States, for there to be between 70 and 80 million mortgage contracts ongoing at any given moment; not to ignore the thousands of business loans, vehicle loans and multiplied millions of daily credit card transactions.

    All of the interest on all of these loan transactions should be credited to the four levels of government, thereby eliminating any need for fraudulently induced servitude invoked in flagrant violation of the Thirteenth Amendment.

    So how does all this cause gold to not work well as money? Here below, is part of the answer, there will be more further below:

    The single most detrimental factor in the operation of the Federal Reserve System in the United States is the fact that The Fed is under the control of Congress, as mentioned in the beginning of this writing.

    That is, the Fed is 100% owned and controlled by Congress. Congress instituted the Fed by the Federal Reserve Act in 1913, and Congress could eliminate or alter the Fed any time it desired. The Fed has been audited every year and has paid over its receipts, in excess of its operating expenses, to the United States Treasury every year since 1913.

    There are no private investors or foreign banker owners of the FED. (Local community banks are owned by private investors. That issue is referred to throughout this writing, although not specifically referenced.)

    The economic history of human civilization reveals that every single society that instituted gold coin as money, where the monetary system was under control of the central government, such government concocted some manner of emergency as its excuse to shift to 100% gold backed paper; and then, when the emergency was becoming more severe, such government reduced the gold backing to 90%, assuring the population that such reduction was “temporary”, but before that emergency was resolved, another emergency arose, “requiring” the gold backing to be reduced to 80%, with the same promise of restoration when these emergencies were resolved.

    By the time there were several of these reductions of the gold backing, the population became accustomed to the unbacked paper and all mention of restoring the medium to gold or 100% backed by gold was forgotten. This enabled the central government to borrow what ever amount of money it could from what ever source would agree to lend.

    This political manipulation was perfected here in the United States when the Founding Fathers included the two Constitutional provisions mentioned herein above on page one, such being the POWER to borrow and the responsibility to provide.

    There could not possibly be a more fertile seed-bed for corruption than that enabled by the Founders when they created their Constitution. Gee, I wonder why?

    As an additional significant point it is important to understand that the Fed’s only means of “issuing” its paper money into circulation is by lending it to some manner of borrower.

    The Federal Reserve System actually has two separate sectors that it creates money to lend to.

    The first is the private sector. This sector covers everything written herein above explaining how paper money works in the private sector to fund mortgages and all other manner of loans, where most of those loans are secured and backed by pledged physical collateral, and where all loans are secured and backed by the signed promise of the private sector borrowers.

    Although it is true that all FRNs created by the Fed to fund loans to private sector borrowers are created under the authority of the Federal Reserve Act, enacted by Congress in 1913; none of these loans are funded unless and until they are personally authorized and applied for and secured by the signed obligation of their private sector borrowers. All of these loans are extended for the purpose of facilitating bartering!

    Therefore, it is improper, unfair and misleading to characterize the FRNs created to fund these private sector loans as being worthless FIAT money.

    The simple truth is that it is these private sector FRNs that enable all of the FRNs created by the Fed to fund the unsecured loans extended to the federal government, to be accepted as having value.

    It is these private sector FRNs that enabled the FRNs created in 1913 to have the tremendous purchasing power they had at that time.

    The second sector the Fed creates money out of thin air to fund loans to is the federal government. None of the FRNs the FED creates to fund loans extended to the government are backed by any manner of promise to repay. None of the FRNs created to fund these loans to the government are for the purpose of facilitating bartering. None of these loans are secured by any manner of physical collateral, therefore, all of the FRNs the FED creates to fund loans to the federal government are created under government FIAT, and are indeed, properly designated as being worthless unbacked paper FIAT money.

    The devious enabling factor here is that all of the FRNs created by the FED to fund all loans to both of these sectors are identical in appearance. This identity factor enables the worthless FIAT money created to fund loans to the government to intermingle with the truly valuable FRNs created to fund loans to private sector borrowers, thereby debasing the value of the FRNs created to fund private sector loans.

    If the FRNs created to fund private sector loans were printed in green ink and the FRNs created to fund loans to the government were printed in red ink, who in their right mind would accept any of the red FRNs?

    The Constitutionally enabled unbridled spending by Congress is the one and only reason the purchasing power of our paper FRNs has diminished 97% since 1913! The reason and cause has nothing to do with the fact that our money is made of paper, NO! The cause is the dishonesty of scheming politicians, using two truly stupid Constitutional provisions to enable them to create money out of thin air, unbacked by any manner of human productivity, to purchase votes by providing all manner of government paid benefits to greedy lazy private sector pawns.

    As guilty as those private sector persons I characterize here as being greedy lazy pawns may be, the responsibility for the debasement of our paper money still falls in and on the politicians elected to properly operate our government. They all need to take a lesson from Congressman David Crockett of Tennessee.

    The manipulation of the money medium from gold to paper as you just read above, has occurred every single time the central bank of any country has been under the control of the central government. This is exactly why paper money has always failed. It is most certainly NOT because the medium was paper.

    All we need to do to stop this ongoing corruption is to transfer the ownership and control of our central bank away from CONgress, to the People of the United States.

    We should assign direct oversight to the Legislatures of the Fifty Sovereign States, assembled, not by any appointed representatives.

    The reasons gold will not work as money are simple. The first point is in understanding that to solve this problem we must start from where we actually are, NOT from where we might have been if our monetary system had been operated honestly.

    The most important point here to understand is that we presently have over three hundred million people in the United States that are using Federal Reserve Notes every day to purchase their food and other necessities of life.

    A critical factor here is in recognizing that all food and other items are currently priced out in FRNs, as is the hourly or monthly pay of all workers. That is, everyone is familiar with the present monetary system and it is working fairly well. What we need to do to fix it is to remove the actual cause of the problem, which is access and control of CONgress and the President.

    If our present money medium becomes recognized as worthless, we will have massive deadly riots and total chaos throughout this country, especially in the cities and highly populated areas.

    Now, aside from the problems above, if none of those issues were confronting us, gold would still not work well as our money medium.

    The reason paper works so well is because paper is cheap and paper money can be created on the basis of the production of goods and offering of services, just as is presently done under the Fed.

    If every paper dollar now in circulation had entered circulation representing actual goods and services offered and available, where none of the paper dollars had been printed based on worthless government bonds or Treasury Certificates, then the purchasing power of our present paper dollars would still be 100% of what it was in 1913.

    As a final point on paper money, the government does not have the means by which it could acquire sufficient gold to provide 300 million people with what those people would need to engage in the economic transactions needed in their day to day lives.

    Please note here that I am not asserting that sufficient gold does not exist on this planet; NO, I am acknowledging that this government does not possess the monetary ability or Constitutional authority to undertake such an endeavor.

    The next point here in regard to the evil of using gold as money is the fact that gold is provided by Nature. That is, there is no means whereby government can ever obtain total control of all gold (or of any significant quantity thereof).

    That is, when gold is used as money, the monetary system will always be under the control of private bankers, the elite.

    All of our societal problems stem from the control of money by the elite. In order to dethrone these wannabe one world slave masters, we must devise a monetary system that we common people can be masters of. This is precisely what I am presenting here!

    With a properly designed paper money system, as mentioned herein above, the interest paid on every manner of loan, will be credited to the treasuries of the four levels of government.

    This fact is critical to the proper and efficient operation of any monetary system where money is lent on the basis of an interest surcharge, appropriate when a person is using money provided by some other entity than himself.

    This is important because the several governments will fairly quickly spend that money that was received as interest on loans, right back into circulation, thereby continuously replenishing the circulating money supply, thereby enabling the borrowers to reuse that very same money to pay the interest on their next monthly mortgage payment.

    These borrowers would, of course, receive these re-circulated paper dollars as a portion of their monthly income as their payment for whatever manner of goods or services they were offering to the community.

    This re-circulation of the interest money would prevent a reduction of the circulating supply inherent in a gold coin money system, where the gold would be owned by private bankers.

    This factor is the most critically evil aspect of a gold money monetary system.

    This is true because under a gold coin system all loans would be funded by actual gold coins. These coins would be the owned property of the elite bankers. As the money lent by the bankers was indeed, their privately owned money, these bankers would be funding all loans with their own gold money.

    I belabor this somewhat, to emphasize that the interest collected by these gold lending bankers would be their properly owned earned profit, and would not be established as community owned due to the acceptance of the borrowed gold by everyone in the community, as would be the case in the example I presented earlier in this writing in regard to paper money.

    The evil here is that when the borrowers make their monthly interest payments the interest would not be distributed to the four levels of government and spent back into circulation thereby enabling the borrowers to reuse those same gold coins to make the interest portion of their next monthly gold coin payment.

    That is, every month the gold coins used to make the interest portion of their payments will be taken out of circulation, thereby reducing the quantity of gold coins in circulation used by every person in the community in their daily transactions.

    Remember, when a loan is funded the lender provides only the principle, NOT the interest. So then where would the gold coins come from to be used by the gold coin borrowers to make the interest portion of their gold coin monthly payments?

    Just using convenient numbers, if a mortgage loan of $100K gold coins was approved, the borrower would be obligated to pay, on a thirty year mortgage contract, approximately $300K in gold coins.

    Where would the additional $200K in gold coins come from for the borrower to use to pay the interest on the gold he had borrowed?

    Yes, there certainly would be many millions of additional gold coin dollars in circulation that did not enter circulation as the principle of loans extended by the private lenders of gold. (I refer to these dollars as “extra dollars”).

    Those borrowers of gold dollars could and would use these “extra gold dollars” to make up the additional gold coins these borrowers would need to enable them to pay the additional $200K gold dollars required under their mortgage contracts as interest on the $100K borrowed.

    The most salient question of all, and the most evil aspect of the use of gold as money, is “How long would it be before all these “extra gold dollars” were paid to and became the owned property of the gold lenders?”

    What gold coins then would all these 70 to 80 million home mortgage obligors use to make their monthly mortgage payments? That is, “How long would it be before the gold lenders became the owners of everything and everyone?”

    There are, of course, more details in the tax eliminating monetary system I have presented here, but there is enough here for readers to understand the benefits of a properly designed paper money system.

    This writing is protected under common law copyright by the writer, Eric Williams (ewhoru@hughes.net). Copies may be distributed as long as no editing is employed and full credit is accorded the author.

    • Frank Breckenridge | January 20, 2017 at 11:40 am | Reply

      To questions occurred to me while reading your excellent essay.
      1) You do not mention the operating costs (i.e. overhead) of the local community banks. Would not some of that “ill-got” interest that they receive be used for overhead? You simply said that the principle of the loan would be paid off (zeroed out on the balance sheet of the loan) and the interest accrued would go into the pockets of the bank as “plunder”.
      2) How is it that all of the gold would be the bankers? Some of the gold in the nation would be, as it is now, in the hands of the People.
      I agree with you that the right thing to do would be for the interest on loans (minus banks’ legitimate operating expenses) be given over to the 4 levels of government you mentioned. But would this preclude the use of gold and silver as money?

  34. Your comment is well written, although, there seems to be many mistakes in your recall of history.
    “The Constitution does establish that no state shall coin money or make any thing other than gold or silver coin as tender in payment of debt; however there is no such restriction included therein in regard to the federal government.”
    The Constitution states: “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”
    `To coin money’ means just that, to make coins of Gold and Silver and nothing else! We know this because of `fix the Standard of Weights and Measures;’ refers to the weight of Gold and Silver coins.
    Again, we know this because of the Coinage Act of 1792 wherein it states: ‘That a mint for the purpose of a national coinage be, and the same is established,’. Again, we find the term ‘coinage’, it does not say print currency, it always refers back to ‘Coin’ or ‘Coinage’!
    In fact, the Coinage Act also mentions ‘officers and persons,:’ It lists ‘Assayer, a Chief Coiner, an Engraver’, only a engraver would be need to print money, the others are strictly needed for coining Gold and Silver Coins!
    The Coinage Act of 1792 goes on to specify that ‘DOLLARS or UNITS – each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.’
    The U.S. Dollar is NOT a piece of paper (or cotton), the Dollar is a measurement of weight! The U.S. Dollar is 371.25 grains of PURE SILVER!!!
    You state: “As an integral aspect of understanding this monetary failure is an explanation and understanding of the basic purpose of money, which is to facilitate bartering.”
    This is a nice idea, but is totally wrong because when two people barter they are trading one item of value for another item of value and there is no value in paper currency.
    This is why Gold and Silver were established as monetary base of the United States. If I trade a car for an ounce of Gold the deal is done, but if trade the car for Federal Reserve Notes, I must SPEND the Federal Reserve Notes for something of value before the deal is complete, otherwise the buyer gets a car and I get nothing but paper. I also need to use those slips of paper before their `buying power’ diminishes!
    Now, we need to look at the Federal Reserve:
    `Rothschild, a London Banker, wrote a letter saying’ “It (Central Bank ) gives the National Bank almost complete control of national finance. The few who understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class… The great body of the people, mentally incapable of comprehending, will bear its burden without complaint, and perhaps without even suspecting that the system is inimical (contrary) to their interests.” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “The FED began with approximately 300 people or banks that became owners (stockholders purchasing stock at $100 per share – the stock is not publicly traded) in the Federal Reserve Banking System. They make up an international banking cartel of wealth beyond comparison (Reference 1, 14). The FED banking system collects billions of dollars (Reference 8, 17) in interest annually and distributes the profits to its shareholders. The Congress illegally gave the FED the right to print money (through the Treasury) at no interest to the FED. The FED creates money from nothing, and loans it back to us through banks, and charges interest on our currency. The FED also buys Government debt with money printed on a printing press and charges U.S. taxpayers interest. Many Congressmen and Presidents say this is fraud.” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “Who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well kept secret, has been revealed:
    “Rothschild Bank of London, Warburg Bank of Hamburg, Rothschild Bank of Berlin, Lehman Brothers of New York, Lazard Brothers of Paris, Kuhn Loeb Bank of New York, Israel Moses Seif Banks of Italy, Goldman Sachs of New York, Warburg Bank of Amsterdam, Chase Manhattan Bank of New York. (Reference 14, P. 13, Reference 12, P. 152)” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “These bankers are connected to London Banking Houses which ultimately control the FED. When England lost the Revolutionary War with America (our forefathers were fighting their own government), they planned to control us by controlling our banking system, the printing of our money, and our debt (Reference 4, 22).” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “The individuals listed below owned banks which in turn owned shares in the FED. The banks listed below have significant control over the New York FED District, which controls the other 11 FED Districts. These banks also are partly foreign owned and control the New York FED District Bank. (Reference 22)
    First National Bank of New York James Stillman
    National City Bank, New York Mary W. Harnman
    National Bank of Commerce, New York A.D. Jiullard
    Hanover National Bank, New York Jacob Schiff
    Chase National Bank, New York, Thomas F. Ryan, Paul Warburg, William Rockefeller, Levi P. Morton, M.T., George F. Baker, Percy Pyne, Mrs. G.F. St. George, J.W. Sterling, Katherine St. George, H.P. Davidson, J.P. Morgan, (Equitable Life/Mutual Life) Edith Brevour, T. Baker. (Reference 4 for above, Reference 22 has details, P. 92, 93, 96, 179)” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “How did it happen? After previous attempts to push the Federal Reserve Act through Congress, a group of bankers funded and staffed Woodrow Wilson’s campaign for President. He had committed to sign this act. In 1913, a Senator, Nelson Aldrich, maternal grandfather to the Rockefellers, pushed the Federal Reserve Act through Congress just before Christmas when much of Congress was on vacation (Reference 3, 4, 5). When elected, Wilson passed the FED. Later, Wilson remorsefully replied (referring to the FED), “I have unwittingly ruined my country” (Reference 17, P. 31).” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    “Rep. Louis T. McFadden (R. Pa.) rose from office boy to become cashier and then President of the First National Bank in Canton Ohio. For 12 years he served as Chairman of the Committee on Banking and Currency, making him one of the foremost financial authorities in America. He fought continuously for fiscal integrity and a return to constitutional government (Reference 1).
    About the Federal Reserve banks, Rep. McFadden said, “They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; the rich and predatory money lenders. This is an era of economic misery and for the reasons that caused that misery, the Federal Reserve Board and the Federal Reserve banks are fully liable.” The Federal Reserve Is A PRIVATELY OWNED Corporation By Thomas D. Schauf © 1992
    The Federal Reserve was created by an Act of Congress which was TREASON because Congress did not have the Constitutional Authority to hand their Coinage Authority to a PRIVATE CORPORATION, like the Federal Reserve!
    “IN 1935 THE SUPREME COURT RULED THAT CONGRESS CANNOT CONSTITUTIONALLY DELEGATE ITS POWER TO ANOTHER GROUP.
    Case Information, A. L. A. Schechter Poultry Corp. v. United States, No. 854,
    “Congress is not permitted by the Constitution to abdicate, or to transfer to others, the essential legislative functions with which it is vested. Art. I, 1; Art. I, 8, par. 18. Panama Refining Co. v. Ryan, 293 U.S. 388. P. 529 .”” Jeffrey Thomas Maehr, Copyright © 2006-2008 All rights reserved.
    Remember the Constitution;
    “To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;” The Federal Reserve is counterfeiting because it is issuing Unconstitutional script, which is not Money, but is actually an instrument of debt, a `Note’.
    The problem and purpose of fiat paper currency is to rob the saver without the saver knowing he or she is being robbed! Someone with a house worth $1.5 Million thinks they are rich, but it is just worthless paper that is worth less and less as time goes by.
    Since 1913 the Dollar has lost 97% of its original purchasing power!
    In 1969, a friend purchased land and build a home on that land for the cost of $50,000, today his home is valued at $1,500,000! Unfortunately, the gain is just an illusion! Subtract 97% of $1,500,000 and you get $45,000, which is less than he paid for his house! However, if you priced it in Silver at $30 per ounce, which would be cheap in the world of today, his house is still worth $50,000!
    One last point: The Federal Reserve was created in 1913 and so was the IRS! This is not a coincidence, the IRS is the collection agency for the Federal Reserve, it is also, like the Federal Reserve, a PRIVATE CORPORATION!

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