After the election chaos of last week, is President Trump really going to revalue gold to this jaw-dropping price?
Part II of James Turk’s KWN interview: “When I say that the dollar is toast, Eric, I am of course referring to the Federal Reserve dollar (F$), which circulates as a money substitute in place of the Constitutional dollar (C$). The C$ is 11.369 grains of gold ($42.22 per ounce)…
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President Nixon “temporarily” – to use his word – suspended the conversion of F$s into C$s back in 1971.
Trump’s only option to end the clear divisions in the country is to increase prosperity with a level playing field for everyone. And the way to do that is to take away the advantages the 1%ers enjoy as a result of an unconstitutional monetary system.
The Need To Build A Sound Monetary System
So President Trump has to build a sound monetary system. To do this he must end Nixon’s temporary suspension of dollar redeemability into gold. Restoring a Constitutional dollar will provide a solid the foundation for building a new monetary system. The best way to do that is to follow the precepts of the Coinage Act of 1792, which is America’s first and best time-tested law concerning money.
Back in June, when asked about the gold standard Trump replied:
“Bringing back the gold standard would be very hard to do, but boy, would it be wonderful.”
The “hard” task he is of course referring to is making the gold standard credible after decades of monetary debasement. Rebuilding credibility will indeed be a difficult task, but can be accomplished over time. Initially all that is needed is to make sure that gold flows into the Treasury – and not out from it – when redemption of the dollar into gold is restored.
Will Trump Revalue Gold To $10,000?
To do that Trump will need to make the new monetary system credible by accounting for all the monetary debasement of the F$ since 1971. That means the Treasury will need to be ready to act as required under a gold standard to buy gold and redeem dollars for gold at a credible price, which I calculate to be $10,000 per ounce.
Some may find $10,000 to be eye-watering, but this amount is based on historical experience. It would simply be repeating what happened in 1934. When President Roosevelt devalued the dollar by 41% from 23.222 grains of gold ($20.67) to 13.714 grains ($35), gold flowed into the Treasury in exchange for dollars. The resulting increase of sound money flowing into the economy enabled it to begin the process of recovering from the depths of the Great Depression.
So to make a new gold standard credible by getting gold to flow into the Treasury, we need to repeat what FDR did. It is easy to calculate.
After the 1934 devaluation, the weight of gold in the Treasury was 15% of the total quantity of dollars in M3. Today M3 is $17.6 trillion, and supposedly there are 261.5 million ounces of gold in Treasury vaults. Which equates to $67,304 per ounce. So 15% of that is $10,095. For simplicity, let’s round it to $10,000, meaning that one C$ would be defined as 0.048 of one grain of gold. At that $10,000 rate of exchange, gold will flow into the Treasury from the far reaches of the planet, benefitting global economies as well as the US economy.
We need to ask ourselves, won’t this resulting increase in the money supply be inflationary? Answer: No more than it was during the Great Depression. In one year after FDR’s devaluation, M3 increased by 10.2%, but there was little inflation. The bulk of the new money was not put into speculation, but rather, used in productive purposes that began rebuilding the US economy.
What’s more, commodities and other goods that were being hoarded as an alternative to bank deposits flowed into circulation, helping keep inflation under control. The same thing will happen today. But let’s not forget, what happens to the federal government’s debt mountain? I suspect some government promises will be broken – like changing Social Security to reduce payouts – to enable the debt to be brought back under control, which brings up one last point.
A credible national currency and creditworthy government are different things. They do go hand-in-hand, but you need the former to achieve the latter. The reason of course is that governments cannot create gold out of thin air, like they do paper dollars. That is the wisdom the framers enshrined in the Constitution. Let’s hope Mr Trump values their wisdom and re-establishes the monetary legacy they left for us. A sound dollar helped build a great country where everybody was given the opportunity for life, liberty and the pursuit of happiness.
As president with a Republican controlled Congress, Trump can change everything. America’s best hope is he rescinds Nixon’s “temporary” suspension of the dollar’s redeemability into gold and puts the dollar back on a credible gold standard at $10,000 per ounce.” For those who are interested in hearing more about the gold market and the Trump shocker, KWN has just released one of legendary Art Cashin’s greatest audio interviews ever discussing the gold market at length, including the recent takedown in gold, what to surprises to expect in key markets as Trump becomes president, and what impact massive public works projects will have on the United States, inflation, gold, bonds, and much more. and you can listen to this extraordinary interview by CLICKING HERE OR ON THE IMAGE BELOW.
***KWN has now released the extraordinary KWN audio interview with whistleblower Andrew Maguire, where he discusses the gold and silver smash, at what price the large sovereign wholesale bids are located, and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Legend Art Cashin On A Trump Presidency, The New World Order, Gold, Brexit, The Great Depression And Why We Will See Panic CLICK HERE.
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