New Gold Standard: Orderly or Chaotic?
- New Gold Standard: Orderly or Chaotic?
by JAMES RICKARDS, https://dailyreckoning.com/
Before 1914, the global monetary system was based on the classical gold standard. But over the past century, monetary systems change about every 30 to 40 years on average.
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Sure enough, 31 years after the end of the classical gold standard, in 1945, a new monetary system emerged at Bretton Woods. The dollar was officially designated the world’s leading reserve currency — a position that it still holds today.
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Under that system, the dollar was linked to gold at $35 per ounce. But 25 years later, in 1971, Nixon ended the direct convertibility of the dollar to gold. For the first time, the monetary system had no gold backing.
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Today, the existing monetary system is nearly 50 years old, so the world is long overdue for a new monetary system. Gold should once again play a leading role. It may be the only asset that can anchor the international monetary system in these troubled times. But the gold price will be much, much higher.
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I’ve written and spoken publicly for years about the prospects for a new gold standard. My convictions have only gotten stronger since the coronavirus and the monetary chaos it generated. My analysis is straightforward…
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International monetary figures have a choice. They can reintroduce gold into the monetary system either on a strict or loose basis (such as a “reference price” in monetary policy decision making). This can be done as the result of a new monetary conference, a la Bretton Woods. It could be organized by some convening power, probably the U.S. working with China (which might seem unlikely these days, but not as unlikely as you think).
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Or they can ignore the problem, let an even bigger debt crisis materialize (that will play out in interest rates and foreign-exchange markets) and watch gold soar to $14,000 per ounce or higher — that’s not a typo — not because they wanted it to but because the system is out of control.
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read more.
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