WASHINGTON, June 14, 2015 — According to the latest figures published by the world gold council, the United States has 8,134 tons of gold in its reserves. Germany is next with 3,384. With 1,034 tons in its reserves, China is growing fast and is expected to become the largest buyer in the gold market.
Gold is a battered currency, no longer playing its old role of being the favored money of humanity. It is considered a barbarous relic of a dead economic order. Many have proclaimed the end of its role as currency, including the likes of John Keynes and Milton Friedman, and there are no major public figures calling for its return. Many, like Friedman, believe that central banking can solve every monetary problem. Friedman is a hero to the establishment, where there is the political and ideological desire to keep gold a relic of the past.
Yet the U.S. holds gold — not euros, yen or other currencies — as its primary reserves.
If the official view supports central bankers, not gold, then why not dump all the gold and trust the central bankers? Why keep thousands of tons of gold imprisoned in national vaults?
Gold used to be the worldwide standard. In 1933, the US ended that policy. President Franklin Delano Roosevelt closed the banks and declared, “We are now off the gold standard.” Banks ceased to exchange gold for banknotes, and the sale and ownership of gold bullion became illegal in the United States.
With that, Americans focused on paper money instead of gold.
The practice of central banking had triumphed in the political realm. People may have believed that the U.S. would return to the gold standard after the crisis of the Great Depression, but once most gold was confiscated, fiat currency became firmly embedded in practice, then psychologically, as real currency.
That paper money, dollars, is a fiat currency. A fiat currency is a currency that has no backing and no real value except what the government gives it. The currency is exchanged because people are confident that the government will limit its supply and continue to use it as currency.
After the move by the United States, gold standards began to vanish all over the world. London, Paris, Amsterdam and Madrid all passed laws that effectively ended gold’s role as currency.
But now, the cyber-world is again looking at gold as the true currency: Enter BitGold. BitGold, a digital currency, is a new currency backed by gold.
Writing for the Financial Times in an article entitled “Digital currencies: A gold standard for bitcoin,” Henry Sanderson says, “BitGold wants to create a platform similar to PayPal for gold, allowing users to set up an account in minutes and buy gold, which it can transfer to anyone with a mobile phone or email address.”
The BitGold unit of currency, called the “Hayek” in honor of renowned Austrian economist Friedrich Hayek, is backed by one gram of gold, approximately one thirty-first of a troy ounce. This fulfills one requirement of an honest currency; you are dealing with gold, individuals own it and the currency cannot just be reprinted.
The question now is whether BitGold will fulfill the second requirement of an honest currency, which is public trust. A currency cannot work if people don’t trust it.
A return to gold is not a return to barbarism, but a return to sanity. Honest money is a central component of freedom. The end of the gold standard meant that central banks could take control of money supply. Owning the right to make money from nothing gave central banks the power to control prices and inflation, the power to command economies.
The United States is a great experiment in freedom, so why not allow Americans the right to own and trade with gold as an alternative legal tender?
It is time to give the people the option to take back some of their gold, the gold held for them by the U.S. government, if they so desire. It is time to release the golden phoenix from its physical and psychological maximum security prison.