Jerome Powell Fails The Gold Standard Test

“You’ve assigned us the job of two direct, real-economy objectives: maximum employment, stable prices. If you assigned us [to] stabilize the dollar price of gold, monetary policy could do that, but the other things would fluctuate and we wouldn’t care,” Powell said from Capitol Hill. “We wouldn’t care if unemployment went up or down. That wouldn’t be our job anymore.” – Jerome Powell in response to a question about returning to the gold standard

Everything about that answer is incorrect. To begin with, the Fed apparently now has three “assigned” jobs: employment maximization, price stability and “moderate long-term interest rates” (  How can we take anything Powell says seriously if he’s not aware of the the duties of his job?

But let’s set that issue aside.  In fact, if the dollar was backed by gold, the Fed would be irrelevant – the gold standard would take away completely any need for a Central Bank. Powell and his cohorts would not have any job at the Fed.

The function of a gold standard is not to “stablize” the price of the currency which is backed by gold.  Interest rates can be used to “stabilize” the value of currency.  Free markets, if ever allowed, would set the price of money.  The function of the gold standard, fist and foremost, is to stabilize the supply of currency in relation to the wealth output of an economic system.

A Central Bank is not necessary to any economic system which has its currency backed by gold.  If the U.S. had its monetary system tied to the value of the gold it holds in reserve,  it would automatically serve the function of price stability. Remove gold from the equation and the macro variables fall apart rather quickly.

But let’s use reality to test this.  Prior to the closure of the “gold window,” the U.S. largely was a creditor nation and never incurred unmanageable Government spending deficits except during wars.  In fact, the amount of Treasury debt issued to fund the Viet Nam war ultimately led to the removal of the last remnants of the gold standard.  This is because the U.S. Treasury did not have enough gold left to redeem debt issued to foreigners with that gold per the Bretton Woods Agreement.  In short, the U.S. ran out gold so Nixon closed the gold window.

Take a look at the economic and fiscal condition of the United States from inception to 1971 and post-1971.  Any “economist” or Central Banker (Powell is not an economist and probably never thought about gold until he was prepped to answer the possibility of a gold standard question) who opposes the gold standard is ignorant of historical facts or has ulterior motives.

Aside from his inability to respond intelligently to the gold standard question (he should have taken notes from Greenspan), Powell knows that  a zero interest rate policy and money printing are the only ways that he and his elitist cronies can keep the system from collapsing until they finish extracting the last remnants of wealth from the public.  A gold standard would stand in the way of this effort.

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. – Alan Greenspan, “Gold And Economic Freedom,” 1966

7 thoughts on “Jerome Powell Fails The Gold Standard Test

  1. There are a few things I would like to add to your excellent article.

    1 The “closing of the gold window” had nothing to do with closing or windows. This is pure propaganda. It was outright bankruptcy.

    2 The reason for this bankruptcy was the extraordinary plunder of the nation’s wealth. The Vietnam War was was not fought to be won. It was fought to loot the nation’s gold by the Merchants of Death called euphemistically “Military Industrial Complex”.

    3 The current COMEX gold futures play the role of the Dollar during the 1960s. They are claims on too little gold and will lead to a major default when present day De Gaulles demand their metal.

    1. Points one and three are especially salient, and with regard to the latter, which I also believe to be inevitable, it will be fascinating to see how the governments related to the major world economies react to the event.

    2. First of all I have heard from several sources COMEX participants understand contracts can be settled in digital currency units rather than physical metal.

      Second, for any exceptions to the above…I wonder what would happen to a large trader with some rights to physical delivery actually insisted on it? No more rights to be a part of the country club [shunned], that’s for sure.

  2. I would say that Powell knows Gold and its relevance. He is a member of the PM price suppression Cabal. However, he knows he has to provide some garbage answer to discredit gold. Which he exactly did. He is like the others, a multi-millionaire that never earned that money, never provided any value but just an exploiter of ill gotten gains by being on the inside.

  3. Totally unrelated but juicy none the least!
    Excerpt from

    “Gold Trading and Money Laundering Investigations Cancelled by Destruction of the WTC

    The 23rd floor of the North Tower of the WTC held FBI records pertinent to investigations of international gold movements and violations of the U.S. Foreign Corrupt Practices Act. The stimulus for the FBI investigation was a lawsuit initiated by GATA against a number a major bullion international banks and the former US Secretary of the Treasury. The lawsuit alleged that these banks conspired to manipulate and artificially depress the price of gold. The evidence presented by GATA was quite compelling, and suggested that 1) these parties had used national gold reserves to illegally regulate the price of gold, 2) these banks had created a significant risk that threatened the liquidity of all of the key players, and 3) that the national gold reserves had been illegally depleted as a result.

    KEY POINT: The basis for this suit was analysis of gold market prices and trades that suggested approximately 14,000 tons of paper gold had been artificially created to keep gold prices depressed. This report speculates that gold prices were not being manipulated, but rather 14,000 tons of stolen gold was being illegally laundered.

    The logic of what GATA called a scam “on the American citizens and individual gold buyers” was this. Bullion banks “loan” gold to each other at 1% or 2% interest. When they borrow gold to cover needs, they buy a gold future and assign it the lender. Thus the lender always has the “same” amount of gold, except some is ‘paper gold.’ According to GATA, these banks would loan gold to each other, and then sell the real gold, using the proceeds to invest in equities, which paid a higher return. This is a good deal when the investment’s return on the equity is greater than the costs of the increased price of gold. The GATA claim is that this process had been going on secretly for a number of years, with U.S. private banks making hefty profits using U.S. treasury gold. This process is not illegal – fixing-prices is.

    At some point in the process, these banks had loaned out more gold than could be produced by all the gold mines in the world in the next two and a half years. Because the world started viewing the dollar as overvalued, there was a move towards gold, which stood to drive the price of gold up – dangerously so. These banks then had to borrow and sell even more U.S. gold, and then (it is contended) brought in the London banks to support them, to keep the price of gold artificially down. The prices had to be kept artificially low because if there was an actual call on the gold loans by one bank, it would bring them all down like a house of cards. There was not enough physical gold available to make good all the futures being held by the banks.

    It has been speculated that it was these banks – with a focus on the American banks -that somehow brought about an attack on the FBI office, using the cover of the airliner assault to destroy the evidence against them. According to this theory, the attack needed to happen before October 9, 2001, when this lawsuit opened in court. It may be fair to speculate that U.S. bank executives were not worried about being convicted for violation of dubious and ambiguous laws. However – win or lose, this report speculates there was at least one group of bank executives that had plenty of reason to worry if this lawsuit saw the open courtroom, and that is the group that set out to destroy the World Trade Center. These are the executives who were worried that an investigation and trial would expose their gold laundering activity.

    KEY POINT: This report speculates that gold being sold on the market was not ‘artificially created,’ but rather illegal, stolen gold that needed to be laundered.”

  4. Looks like dis-officialdom & financial TV presstitutes are intentionally trying to keep everyone in the dark concerning the true state of the global economy contracting.
    The trade dispute and tariffs certainly have piled on but the global economy would still be contracting. How long before the SHTF in all stock markets is the question.

    Gold consolidating above the $1,400/oz is truly a great sign so far. The heavyweights I have alluded to are taking on the Cabal. Two countries like Poland & Hungary buying big tonnage of gold out of London is an eye opener. Christine LaGarde nominated this month in July to be the new ECB President starting November 1 is huge. Remember her talking about the Number 7 in 2014…..well July is the 7th month of the year…hmmm….we are in July. She has not arrived by accident but on time. Let’s see how things play out.

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