Here are five reasons why Federal Reserve Chairman Ben Bernanke hates the idea of moving the U.S. off its fiat currency:
1) The gold standard helped create the Great Depression. Pegging the dollar to gold led to financial panics during the Great Depression Bernanke argued during a recent speech at George Washington University (per Politico).
“The gold standard would not be feasible for both practical reasons and policy reasons,” he said. “I understand the impulse, but I think if you look at actual history the gold standard didn’t work well.”
I disagree as much of the world operated on some form of precious metals-based monetary standards between the late 1700s and the 1970s. Financial panics occur when the public loses faith in a government’s ability to meet it debt obligations (and it doesn’t matter if that country’s operating with a gold standard or a fiat currency). Rather than a history of failed gold standards, I think it’s more likely that the world will look back on fiat currencies as something that “didn’t work well.”
2) There’s not enough gold to go around. Bernanke claims this is one of the biggest problems with a return to the gold standard. In fact, the move would just require valuing gold at a much higher level. The often-quoted figure is $10,000 per ounce.
3) Less control over the economy. It’s no secret that the Fed uses the dollar as way to manipulate the economy. It gooses a tough economy with easy cash or it caps off a good economy with higher interest rates when it shows signs of overheating. If the U.S. returned to a gold standard, the Fed would no longer have that control.
4) Fiscal discipline would be imposed. Washington’s putting lots of pressure on the Fed to ensure the country can continue offering touch-point social programs: things like Medicare and Social Security. So long as Washington is unwilling to make cuts to those programs, the Fed will have little choice but to keep printing money to pay for them.
5) Gold standards benefit creditors. Gold standards inject price stability into an economy. That means governments can’t “inflate” their way out of debt by printing more “cheap” cash to pay off long-standing bills. Putting the U.S. on a gold standard with a national debt north of $15 trillion would be a form of financial suicide. Bernanke knows that, and the rest of Washington does, too. That’s why they’re publicly lobbying against a gold standard. If another country moves to it first, though, we may not have any choice but to follow.
Related
|
UNCOVER THE NEXT MINING GIANT
|
ARE THEIR HEADS IN THE CLOUDS?
|
|
INTO THE CRYSTAL BALL
What will silver prices be like in 2016? Haywood makes silver price forecasts |
A JOLT TO THE SYSTEM
|
|
THE CALM BEFORE THE STORM
|
A NEW WAY TO SEE THE DOCTOR
|
1) The ECRI. There’s just one institution that can legitimately claim to have “never been wrong” at predicting a recession. That’s the Economic Cycle Research Institute (ECRI), and last Friday they sounded the warning bell. “Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession,” the company wrote on its Web site, “and there’s nothing that policy makers can do to head it off.” 
The most important question then is, “How far will silver prices go before they peak?” Global Investing Strategist at Money Morning, Martin Hutchinson, was brave enough to make a prediction over at 
And the speculation is that an announcement of some sort will come as soon as Sept. 21 at the conclusion of the Federal Open Market Committee (FOMC) meeting. Rather than buying up even more short-term treasuries, though, analysts believe the Fed could announce plans to sell off short-term notes to buy longer-term bonds. The move’s been dubbed “Operation Twist” (per 
Regardless of the reason, precious metals investors are jittery. But I’m far from convinced the decade-long bull market in gold and silver is drawing to a close. Here are three reasons why investors should consider staying the course:
Is it time to re-allocate some of your silver holdings into gold? Could we be witnessed a shift in investor sentiment? No one knows for sure, but the powerful upswing in gold prices while silver sat by languishing was enough to give me pause. Here are some possible explanations for the shift:
Instead, Mr. Bernanke reiterated his insistence that inflation is tame and interest rates will remain near zero for an “extended period.” With that, the cloud of uncertainty hovering over the precious metals market was parted, and investors re-upped their holdings in gold and silver. Silver spiked $3 an ounce from an intraday low near $45 to more than $48.50 – a gain of nearly 8 percent. I expect more of the same in May, and here are five reasons why:
Mr. Bernanke’s also expected to reiterate that QE2 will end as scheduled in June. The gigantic cash spigot will be shut off. That doesn’t mean, of course, that the Fed will immediately stop injecting the economy with cash. They’re fully expected to keep re-investing the interest off the bonds they’ve already purchased. Without Japan and China, someone’s going to need to prop up bond prices, after all.
“This is an indication that gold and silver remain far from the ‘bubbles’ that some have suggested,” writes 
