Cleburne writes:
Are you a Bix Weir guy, Doc? That [gold] revaluation statement makes me wonder.
Do you believe that they’re secretly preparing us for a return to the gold standard?

Cleburne,
I read Bix Weir and believe that he has compelling arguments. We are in complete agreement with regards to the future prospects of silver, focusing on physical silver rather than paper, etc. 
I’m not convinced that Greenspan, Buffet, The Bernank, etc are “good guys” actively working to take down the banksters.  For example, if Buffet is a good guy, why did he dump his silver position, and why is his fund being investigated for fraud?  I understand Buffet’s father was a hard money advocate, and I understand Greenspan’s early writings on gold.  I also believe greed and power have the ability to corrupt decent morals.
Call me skeptical if you like, I’ll believe that these guys are on our side when I see it. 
As to the question of whether they are preparing a secret gold revaluation- gold revaluation is much different than a gold standard.
In November of 2002, The Bernank outlined in his famous speech to the National Economists Club Deflation, Making Sure It Doesn’t Happen Here, the steps that a central banker can take to fight deflation. (You can read The Bernank’s entire speech here.)

QE is just one of those steps. In his speech, The Bernank states that the next step after quantitative easing is gold revaluation.  This is a one-off event, and is a nice way of saying dollar devaluation. The central bank upwardly revalues gold vs the currency (dollar).  This was done by Roosevelt, and is The Bernank’s next outlined step to prevent the dreaded deflation.

Maybe it will help if I list the steps to fight deflation given by The Bernank:

1. Drop interest rates to zero.  Check.
2. Inject money into the economy by giving major banks zero-interest rate loans.  Check.
3. Stimulate spending by lowering rates further out on the treasury structure (translation, lower mortgage costs to inflate housing prices)   Check.
4. The Fed could make unlimited purchases of treasury securities to control the rates (this is quantitative easing)  Check.

There’s only one step left in The Bernank’s playbook given in that 2002 speech.  I’ll give his entire quote on this final policy action.

5. “It’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation. ”  This is the final option after QE is proven ineffective. We’ll see whether The Bernank gives QE one last go or if he proceeds immediately to the last arrow in his quiver- gold revaluation.

Whether there are “good guys” secretly preparing us for a return to the gold standard or not, we are headed for a de facto re-linking of the currency to gold.  There will be no other way to restore confidence in paper fiat currencies when the current crisis plays out to completion.

-Doc

  1. Wow. Didn't expect a post to respond to my question. Well-reasoned response, and it makes sense.

    I, like you, read Bix Weir and see alot of value there, but I just won't be able to consider his theory as valid until I see regulators go for the kill, and the bankers all handed subpoenas.

    Til then, I agree with you: power corrupts. These men are guilty until proven innocent. Thank you again for your thoughtful response.

    -Cleburne61

  2. crazy to read that speech, and realize he is going EXACTLY by his own playbook. how can he not proceed to gold revaluation next…hes done everything else already!

  3. I have not yet seen anyone adequately explain how the FED/govt would devalue by decree or mandate the dollar against gold – or any other currency for that matter.

    FDR could do it because the dollar was officially linked to gold or vice versa. Now it is (more or less) a market driven relationship.
    So the gov't can affect the exchange rates (by printing/tightening efforts, policy changes, etc) but they can't mandate them.

    The only way to mandate a devaluation of the dollar is to issue a 'new dollar' where old dollars are exchanged for them at a specified rate. If the new dollar (Amero?) happens to be linked to the price of gold, that is a different matter.

  4. swattsup, thats an easy one. the fed says we are fixing this crisis by rebacking the dollar with gold at $10,000 an ounce. The dollar is suddenly the only fiat currency backed by gold, and the debts are devalued away.

  5. Remember that on the books, the treasury's gold is valued at approx. $42. (Remember that Bernanke just told Ron Paul, and us all, that it is the treasury's gold, not the Fed's) All it takes is an act of congress to revalue it as "mark-to-market." The ECB's gold is MTM quarterly, I believe. If congress did this, that would be a major step in birthing a new paradigm some call "freegold," (free floating gold). It would be a very different and much more honest monetary world. I will let you do your own due diligence on "freegold." Google it. It has also been called "Reference Point Gold," (RPG) by others.

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