Home › 6a) Gold & Monetary Metals › 6a.) GoldCore › Why Governments Hate Gold
Permanent link to this article: https://snbchf.com/2021/11/flood-why-governments-hate-gold/
Donate to SNBCHF.com
Donate to SNBCHF.com Via Paypal or Bitcoin To Help Keep the Site Running
Please consider making a small donation to Snbchf.com. Thanks
Bitcoin wallet: bc1qa2h6hgd0xkuh7xh02jm5x25k6x8g7548ffaj3j
Receive a Daily Mail from this Blog
Live Currency Cross Rates
On Swiss National Bank
-
SNB Sight Deposits: is stable compared to the previous week
14 hours ago -
Swiss Franc at risk as inflation diverges from SNB forecasts
13 days ago -
The Swiss National Bank vs. the Federal Reserve: The Fed’s Capital Losses in Perspective
17 days ago -
EUR/CHF Price Analysis: Pullback possible amid mixed signals
16 days ago -
Swiss Franc extends losses on Swiss interest rate outlook
22 days ago
Main SNB Background Info
-
SNB Sight Deposits: is stable compared to the previous week
14 hours ago -
The Secret History Of The Banking Crisis
2017-08-14 -
SNB Balance Sheet Now Over 100 percent GDP
2016-08-29 -
The relationship between CHF and gold
2016-07-23 -
CHF Price Movements: Correlations between CHF and the German Economy
2016-07-22
Featured and recent
-
No, the Brazilian Government Should Not Subsidize Carnival Festivities
-
Eilmeldung: STIHL flieht aus Deutschland!
-
When Financial Conditions Butt Heads With Borrowing Conditions
-
Foreign Aid and the Politicization of Economic Life
-
Waller Pushes on Open Door: Push for Patience Lifts the Dollar, Complicating Japanese Efforts
-
Lauterbachs Lügen fallen ihm krachend vor die Füße!
-
SNB Sight Deposits: is stable compared to the previous week
-
Wichtige Morning News mit Oliver Klemm #274
-
Innovation and Capitalism
-
Ray Dalio on the Keys to Success
More from this category
- No, the Brazilian Government Should Not Subsidize Carnival Festivities
28 Mar 2024
- Foreign Aid and the Politicization of Economic Life
28 Mar 2024
- Waller Pushes on Open Door: Push for Patience Lifts the Dollar, Complicating Japanese Efforts
28 Mar 2024
- Big Agriculture Protectionism led to the Amos Miller Raids
27 Mar 2024
- Big Agriculture’s Protectionism Targets the Amish
27 Mar 2024
- Who Will Take Care of the Roads? Why, The Coercive, Substandard, and Monopolistic Government Department, That’s Who
27 Mar 2024
- The Tyranny of the 1964 Civil Rights Act
27 Mar 2024
- Boeing’s Problems Are Not Due to Free Markets
27 Mar 2024
- Heightened Threat of Japanese Intervention Pushes Greenback Away from JPY152
27 Mar 2024
- The West Is Losing Interest in Ukrainian Victory
27 Mar 2024
- Knowing Murray in the Early Years (1971–1972) and Why Rothbard and Rand Would Relish 2024: Beginning Collapse of Statism and Its Realities!
26 Mar 2024
- Who Really Works Against the Public?
26 Mar 2024
- Congressional Omnibus is Like a Bad Hollywood Movie Sequel
26 Mar 2024
- Navigating the Slippery Slope: How Hoover’s Interventions Paved the Way for the Great Depression
26 Mar 2024
- The Bolivian National Census: A Stark Reminder of the Perils of Unchecked Government Power
26 Mar 2024
- Dollar’s Recent Gains Pared but Firm Undertone Remains Intact
26 Mar 2024
- The Hoax of “Multiculturalism”
26 Mar 2024
- The Forgotten Austrian: Peter F. Drucker and the Welfare State
26 Mar 2024
- Federal Judges Co-Opted America’s State Constitutions
26 Mar 2024
- Libertarian Scholars Conference 2025
25 Mar 2024
Why Governments Hate Gold
Published on November 27, 2021
Stephen Flood
My articles My videosMy books
Follow on:
Do governments hate gold?
The answer: Yes — Governments hate gold because they cannot print it, and it is difficult for them to control.
Because they cannot print it or easily control it, gold has little use to them during the never-ending schemes to tax and then redistribute wealth.
India is a recent example of a government trying to control gold imports through increased taxation on imports and imposing rules, such as that importers had to re-export 20% of imports as gold jewelry.
These types of rules are difficult to enforce and smuggling of gold into India skyrocketed. Once gold is in the form of jewelry or physical metals it is very difficult to tax. Below we explore some other granular points about why governments disown gold.
Yes, some central banks do own gold … which seems counter to our thesis but in actuality, central banks own gold for the same reasons that you and I own gold – because it is not the liability of another government.
Why Governments Hate Gold?
A) Legal tender laws mean that all taxes must be paid in fiat currency (such as the dollar in the U.S., Euros in W. Europe, …) not gold or silver (held in physical form). Nothing but sponsored fiat currencies issued by the government is acceptable to pay debts and taxes.
Why do governments pass these legal tender laws? Because in a long running series of decisions from 1921 until 1971 western governments, in response to politicians creating ever larger government spending, countries decided they prefer interference and redistribution over letting capitalism and ingenuity grow the pie for everyone (However, the pie has grown tremendously…looking at GDPs over the last 50 years).
Pursuing perfectly equal pizza slices became the ideal goal rather than a rapidly growing pizza diameter.
But you cannot control pizza slice sizes if you don’t control the pizza cutter. Since wealth is the pizza slice, and taxation is the pizza cutter, the government must ensure that only fiat money gets recognized as wealth since fiat is easier to find and tax than physical metals.
B) Heavily government-regulated industries cannot be bailed out if the currency is not fiat – and if it is tied to a gold standard or some other limiting factor.
Once we see that the government is helping to set the rules for industries, and influences industry via regulation, it becomes clear that government is then liable for when a regulated industry fails.
During the 1930s banks, the world over failed because the government applied the wrong policy response to illiquidity problems. To be sure speculation and double counting of cheques all played a part in the 1930s banking crisis.
But since the US government, along with many others were on a gold standard they could not print more US currency without more gold. In order to increase its gold reserves, the US government seized all gold held by citizens and banned citizens from owning gold.
The UK put into place restrictions which limited citizens to owning no more than four gold or silver coins and restricted any imports of gold for private citizens. The US government paid well below market prices for the seized gold and then raised the price to a higher official rate.
This allowed the government to then print more dollars to bail out the banks. Gold was ‘officially’ banned for individual ownership in the US until the 1970s – but the underground market prevailed and because gold is a physical asset it was easily hidden from government raids.
C) Gold has gained value against all currencies since governments abandoned the gold standard.
D) The existence of gold in the economy is a constant reminder of the poor quality of the government paper, and it always poses a threat to replace the paper as the country’s money.
Even with the government giving all the backing of its prestige and its legal tender laws to its fiat paper, gold coins in the hands of the public will always be a permanent reproach and menace to the government’s power over the country’s money.
E) Central Banks (e.g., the Federal Reserve) are for the most part privately held but controlled by the country’s government. A central bank derives its power to create and control fiat currency from the government.
So long as people use their money the central bank is happy. The problem becomes when people find an alternative to fiat currency. The biggest alternative is gold. That is why central banks hate gold. If people use gold instead of their fiat currency, the central bank loses power.
F) The Federal Reserve operates under a dual mandate. It must maintain price stability while also simultaneously promoting maximum employment.
The Fed hates it when the price of gold rises because it correlates with a rising unemployment rate.
G) The hatred of gold is nothing new. When it operated on a gold standard, the US government was limited in terms of its ability to pursue deficit spending. It could only accrue so much debt.
The gold standard forced the practice of austerity. When the government abandoned the gold standard, it gained the power to finance any national expense by simply borrowing from the Federal Reserve.
Today, no amount of gold is necessary for the Fed to purchase treasury bonds. It is blessed with the ability to expand their balance sheet with zero limitations.
Simply put, gold limits the power and influence of central bankers. No wonder they hate it.
Full story here Are you the author?Follow on:
No related photos.
Tags: central-banks,Commentary,crypto,Featured,Gold,gold news,gold price,gold price forecast,gold price news,gold price prediction,gold price today,inflation,News,newsletter,Precious Metals,silver