The gold standard called for each unit of currency to be tied to a specific amount of gold. In other words, every dollar printed had to be backed up by physical gold. The gold standard was designed to give balance to currency markets and to provide stability to the global financial system.
And it worked…
In the modern era of quantitative easing, low interest rates and other stimulus measures, some have suggested that the eventual return to the gold standard is inevitable. Billionaire Steve Forbes even went as far as recently saying that only a new gold standard could save the US Dollar.
While debate on the feasibility of a return to this form of fiscal and monetary policy is ongoing, a move back to the gold standard or similar form of policy would have a massive impact on the global financial landscape. The backing of currency by a hard asset like gold would have a stabilizing effect on both the currency and the economy.Governments would finally be held accountable. Under the gold standard, a government can only print as much money as it owns in gold. This can help prevent budget deficits and debt. Imagine if the government would have to buy more gold every time it increased spending! No more blank check spending policies to fund a bloated government!
A gold standard may also limit inflation and boost economic activity by forcing businesses to expand and create value as opposed to simply using devalued currencies to buy back their own stock shares.
Bottom line is a gold standard would make it impossible for Governments to simply turn on the printing presses and create more debased paper currency to fund stimulus measures.
Will the U.S. return to the gold standard?
A return to the gold standard in the U.S. is always a possibility. While this may not occur tomorrow, next week, next month or next year, a return to this or a similar system cannot be ruled out.
A return to such a system would likely have to be a large scale, coordinated effort by central banks and others.
Not to mention the fact that the U.S. does not have enough gold in reserves to pay its debts. As a matter of fact, the US is so deep in debt that all of the gold ever mined would not be enough to pay it down half of our national debt!
But should a new gold standard be implemented, it would force the government to begin acquiring massive amounts of gold- potentially driving prices significantly higher in the process.
While a move back to the gold standard could have numerous benefits, it is still unlikely to happen while the central banks are enjoying the benefits of their money printing schemes. If you like the idea, however, of owning hard assets that can protect you from inflation, preserve purchasing power, are traded all over the world and may increase in value, let me suggest this:
Put yourself on the gold standard…
An allocation in precious metals can have many benefits, and just as the gold standard was designed to stabilize currency values, such an allocation may have a stabilizing effect on your portfolio.
Gold has been used by savvy investors for some time as a portfolio diversification tool. This precious metal often exhibits an inverse correlation to stocks, and may increase in value as stocks falter…
Because gold is a dollar denominated commodity, it also exhibits an inverse correlation to the dollar. As the dollar rises, gold may fall in value. On the other hand, as the dollar declines, gold may rise in value.
Because of this relationship, gold is the ideal hedge for dollar depreciation or turmoil…
As the petrodollar system is dying before our very eyes, hedging against a massive decline in the dollar is now more important than ever.
You cannot control the government. You can’t control monetary policy and you can’t control fiscal policy…
You can, however, control your own monetary and fiscal policy…
Adding gold to your portfolio and putting yourself on your own gold standard may provide portfolio stability, wealth preservation and other benefits.
Don’t wait until your wealth has already been eroded…
A precious metals IRA is one of the most convenient ways to add physical, tangible metals like gold to your portfolio.
In today’s uncertain and ever-changing economic times, an allocation in hard assets like gold can not only provide monetary benefits but can provide peace of mind as well.
Please reach out to our experienced precious metals executives with any questions that you might have about investing in gold and the process of setting up a Gold IRA. Call us today at 1-800-341-8584 FREE to get started
Tags: gold, gold standard