By Robert Ringer

(The content of this series of articles has been taken from my 1982 book “Civilization.” Today, we continue with our examination of real money. Following is what I had to say about that subject in 1982.)

It is interesting to note that the government, in an attempt to demonstrate that it no longer considered gold to be money, finally allowed U.S. citizens to own the metal beginning on December 31, 1974. The ensuing meteoric rise in the price of gold was, of course, a source of great embarrassment to the fiat money printers in Washington.

Refusing to be upstaged, the government then proceeded to contemptuously dump gold in the open market in an effort to depress the price and to demonstrate to gold speculators, once and for all, that the paper dollar was king. But, alas, the king had no clothes. The dollar all but turned pink from embarrassment. The more gold the bureaucrats auctioned, the more the price of gold rose.

What these tactics have amounted to is an ongoing attempt on the part of Uncle Sam to demonetize gold. To his dismay, however, these clumsy attacks have instead hastened the day of gold’s demonetization of paper money. What the marketplace has been telling the government is: “We like you and all that, but, if it’s all the same to you, we’d just as soon keep the gold and let you keep the paper. No hard feelings, of course.”

The Galbraithian blushes are still to be found all over Washington, yet Washington’s contempt for gold grows greater each day. (While temporary downturns in the paper money price of gold never fail to prompt a chorus of “I told you so’s” from pa per money advocates, their joy is always short lived ─ and their long term dismay is a certainty.)

Confiscation of gold is the only weapon left for the government, and you can count on just that at some future date. Which is all the more reason for you to own gold. If the government is so intent on taking it away from you, you had better make certain that you have it ─ and that you keep it away from them. You’re going to need it to survive. Above all else in your long term planning, don’t blow this one.

Obviously, if gold were as worthless as government and establishment economists would like you to believe it is, South Africa wouldn’t be producing 700 tons of it each year. And the Soviet Union 200 to 500 tons.

Even the United States produces about thirty tons annually. Someone-lots of someones ─ must be awfully interested in owning gold. And those someones go far beyond dentists, jewelry makers, and industrial users. Yet you are constantly discouraged, usually by subtle putdowns, from buying gold.

What is it about gold that makes it so special? You’ve undoubtedly read about its unique characteristics many times. It is portable, easily and precisely divisible by weight, durable, consistent in quality (while not technically inert, it is extremely stable), easily identifiable, and, perhaps most important of all, scarce enough so that it cannot be obtained in great quantities without considerable effort.

As a result of these characteristics, governments throughout the centuries have never found it necessary to force people to use gold as money. People know that gold is money. It has evolved as money through the process of supply and demand, notwithstanding paper money’s greater convenience as a medium of exchange. The primary reason for gold’s evolution into the world’s most accepted form of money is that, in addition to being a medium of exchange, it is also a store of value.

There is no question that paper money, as a medium of exchange, has made modern society possible. It is by far the most convenient money ever invented. But as a store of value, it is considerably inferior to baseball trading cards. The latter can only be counterfeited illegally; paper money can be counterfeited legally ─ in unlimited quantities.

Though a paper dollar will buy only about 5 percent of what it could purchase in 1940, an ounce of gold will still buy about the same amount of products and services that it did forty, fifty, or even one hundred years ago. To understand this, you must think of money as an IOU. It’s a way of storing wealth that you do not wish to use right now. Gold accomplishes this objective more effectively than any other commodity; paper accomplishes it the worst.

Because of this, you can no longer use paper currency to store what you’ve earned. The printing presses will destroy it just as surely as if someone had set fire to it, which is precisely why politicians exhort you to “save” it. If they can convince you to keep your savings in the form of paper, they can quietly extract those savings from you through their printing presses (i.e., decrease its value through monetary inflation).

Is it any wonder that politicians hate gold? Gold, in effect, acts as a lie detector. If the United States dollar were 100 percent tied to gold (any other kind of gold standard would be merely cosmetic ─ and meaningless), it would be like asking Tip O’Neill each day, “Tip, you sneaky old buzzard, have you tried to steal anyone’s hard earned money today?”

If Tip replied, “Golly, no. I’d never do a thing like that,” the gold alarm would sound, loud and clear, for everyone to hear. The gold standard would tell the public that sly old Tip had tried to slide one by them once again ─ that he had voted for a bill that called for handing out newly printed paper money to people who are not producing products or services that other people are voluntarily willing to pay for. The gold alarm would have caught him red handed.

You may conclude that Tip O’Neill is not a big advocate of the gold standard. Nor, with a few notable exceptions, is any other individual now in public office. And it is precisely this refusal on the part of the government to acknowledge gold as money that has hastened the destruction of its own fiat currency.

In Part IX of this series, we’ll take a look at whether it is theoretically possible to have an unbacked paper currency that can be trusted by the general populace.

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Today’s Reflections:

It is noteworthy how, for decades, government officials and academics poked fun at the thought of people wanting to own gold, ridiculing the idea of using gold as money as an antiquated concept.

Now, twenty-seven years after I wrote the above (as gold teases the $1,000 mark), interest in gold ownership is increasing daily as it becomes ever more obvious that the Obama depression (dictatorship?) will last many years into the future.

This entry was posted on Friday, March 13th, 2009 at 8:12 am and is filed under Ideology of Freedom. You can follow any responses to this entry through the RSS 2.0 feed. You can comment below, or trackback from your own site.