The Dollar Dilemma: Where to From Here?

The Dollar Dilemma: Where to From Here? By Ron Paul.

The world now, under very different circumstances, is once again considering official use of gold in the monetary system. A growing consensus agrees that a world-wide monetary crisis is fast approaching and once again the importance of gold as money is being discussed. Those who benefit from the fiat dollar standard are not pleased with this renewed interest in gold, nor with the possibilities that blockchain technology may provide a nongovernment alternative to the current system of money and banking. The principle of gold as money has been acknowledged for thousands of years and is not going to be ignored any time soon.

The current financial chaos brought back the debate over the exact role gold should play in the international monetary system. There are many signs that various governments are considering using gold as an alternative to the fiat dollar. China for the past three years has been a net seller of dollar denominated assets and a major importer of gold. It is making an effort to popularize a gold Yuan to be used in place of the dollar in international oil transactions. China may well have more clout in this endeavor than is generally realized. Other countries like Russia, India and Brazil are cheering the Chinese on and are net purchasers of gold. The US, picking a fight in a senseless trade war with China, only adds to that country’s resolve to stand up to our domineering attitude. …

Even former Chair Alan Greenspan has had an on-again off-again favorable relationship with gold. Basically, when working within the establishment he was anti-gold, but as a private citizen he has been much more sympathetic. This is what he had to say about gold in 1966, in his frequently quoted article, Gold and Economic Freedom: “…gold and economic freedom are inseparable …government deficit spending under a gold standard is severely limited.” And more: “The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit” (by the Federal Reserve). He closed his article with a couple truisms: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no store of value…Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.”

In private, I asked Greenspan about this article and surprisingly he said that he had just recently reread it and still totally agreed with it. …

In a private conversation I had with then president Ronald Reagan, about 10 years after the breakdown of the Bretton Woods Agreement, he stated flatly that: “any time a great nation went off the gold standard it no longer would remain great.” This has turned out to be an appropriate statement, since our “greatness” has been on the wane for quite some time.