Much Ado About Gold

The Times’s front-page dispatch on the status of America’s gold reserve at Fort Knox is the latest instance of a discrepancy within the liberal press in respect of money. They view gold as an outmoded curiosity, disputing its inherent role as the basis of monetary value. Hence the poser by the ex-chief of the Fed, Alan Greenspan: “If gold is such a worthless metal, then why does the U.S. Government, and all other major governments, hold so much of it in storage?” *Why, too, if today’s Times report is any guide, is the press so worked up over how much gold America has in reserve? The Gray Lady touts what it calls the “Convenient Return” of an intrigue that it labels the “Fort Knox Gold Conspiracy.” That, the Times suggests, could signal an effort by “Trump-Allied Investors” to “Cash In” on the plummeting value of the dollar, which is how sound-money advocates describe the surging market price of gold.These advocates of an honest dollar hew to the wisdom of, say, J.P. Morgan, who held that “money is gold, and nothing else.” When Morgan marked the point, the dollar was convertible at the legally fixed rate of a 20.67th of a gold ounce. Today its value in gold has collapsed to less than a 3,300th of an ounce. The shrinking value of America’s fiat dollars is the backdrop to the apparent anxiety being fanned by the Times over the security of America’s gold reserve.In a report filled with insinuations, the Times calls President Trump’s comments about visiting Fort Knox to inspect the gold reserve “one of the more baffling story lines” of his second term. It finds it “difficult to say what exactly is behind” the president’s interest in the gold hoard. Secretary Bessent assures that “all the gold is there,” the Times reports, yet Mr. Trump “has a long history of embracing conspiracy theories.”What is so all-fired baffling to the Times about the idea that the collapse in the value of the dollar — meaning the value of the dollar expressed in gold — might turn attention to Fort Knox? What is the Gray Lady’s own reckoning in respect of the long slide in the value of the dollar against the classical monetary metal? “Global economic uncertainty that the president’s shifting tariff policies caused,” is how the Times explains the dollar’s latest slide. Yet the fiat dollar’s plunge in value dates back to 1971, when Nixon abandoned the gold exchange standard under which America redeemed dollars presented to it by foreign governments at the rate of a 35th of an ounce. Severing the dollar’s historic tie to gold sparked stagflation and started the runup in federal deficits and debt that have culminated in a vast asset bubble and a corresponding mountain of federal red ink — more than $36 trillion.The dollar’s debasement was aided and abetted by a Federal Reserve that was formed to be a steward of the dollar under the Gold Standard Act of 1900. Yet the central bank has presided over the dollar’s fall, helped along by monetary experiments like Quantitative Easing, which added trillions of dollars to the Fed’s balance sheet, and a policy of artificially low interest rates that set expectations in the markets for easy money.These developments, and the price inflation during Joe Biden’s presidency, explain why the soaring market price of gold has been signaling doubts about the greenback’s actual value. Mr. Trump and his camarilla have done little to reassure markets about the value of the dollar. They have called for weakening the currency to make exports more affordable. So it’s hardly a mystery why, as the Times frets, “gold is on many investors’ minds these days.”________* The former Fed chairman, Alan Greenspan, posed the question about gold in a personal exchange on July 12, 2019, by email with the monetary economist Judy Shelton.

Much Ado About Gold

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