DRAFT: The Biggest Monetary Change In 80 Years

The Swiss people put an initiative on their ballot to reverse decades of regression. They’re trying to get gold back into the monetary system, in the hope of halting the destructive process of currency debasement. I am sad to see the measure defeated on Sunday, even though I had concerns about it.

The simple fact that gold backing for a currency is up for vote in Switzerland shows how much the world is changing. A gold initiative wasn’t possible before 2008, and even today, no other country is ready for it yet.

Most people care little about monetary policy. Even the critics of central banks mostly quibble over minor rule changes or who to put in charge. Few have any serious interest in the gold standard. This, unfortunately, includes the gold bugs.

big-changes

Gold bugs say they love gold, but they don’t necessarily advocate gold as money. They want something else, and the Swiss referendum shines a spotlight on it. The gold bugs focused on the requirement of the Swiss National Bank to buy gold. Jim Rickards, bestselling author of Currency Wars: The Making of the Next Global Crisis, said:

he Swiss gold referendum could have a massive impact on the gold market. It would be extremely bullish, not only putting a floor under gold but also sending the price of gold up significantly.”

Got that? The Swiss referendum will drive up the gold price. The gold bugs don’t care about the monetary implications. They just want to make a few bucks on their gold trades. Let me present one more bit of evidence.

A common gold bug refrain is that the Federal Reserve and its cronies are suppressing the gold price. Addressing and debunking this allegation is beyond the scope of this article, though I have spent many gallons of electrons on this topic elsewhere. There is no monster under the bed, and no dark banking cabal that suppresses gold.

Conspiracy theories about gold price suppression are just the frustrations of people who want to sell their gold. They’re frustrated because they bought with the intention of selling at a profit, but then the price dropped.

In one area, gold bugs agree with gold standard advocates—the slow collapse of the dollar. Gold bugs often say, “All fiat currencies eventually reach their intrinsic value—zero.” This is a good reason to own gold. On the other hand, they fail to understand that a rising gold price simply reflects the falling dollar. It doesn’t make anyone richer. Sure, you may have more dollars, but each of them is worth proportionally less. If you really believe that the dollar will fail, then you should buy more gold while you can. A lower gold price is good, because it lets you accumulate more.

Keith Weiner
Keith Weiner is president of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of the precious metals fund manager Monetary Metals.
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