Column #311      August 20, 2021Executive Order Gold Outlawed

This column explains why we do not want professional politicians and bureaucrats running the show. Their unconstitutional rulings in the past have caused long-term negative consequences that have haunted Americans for decades.

It was 50 years ago this month when, for the second time within a span of only 38 years, the United States of America reneged on its promise of monetary integrity. First it was Franklin D. Roosevelt. On April 5, 1933, soon after assuming the presidency, he confiscated all of the gold held by private citizens at $20.67 and declared that holding gold was illegal. Essentially, he reneged on the nation’s promise to redeem the dollar for gold domestically. Later in the year he devalued the dollar so that it took $35 to buy an ounce of gold. American citizens got taken to the cleaners twice in his first year in office.1 2

Next, it was Richard Nixon who reneged on our country’s promise to redeem dollars in gold on an international basis when he closed the gold window on August 15, 1971. He was responding to numerous calls by foreign countries to exchange their dollars for gold. Since the United States was down to its last $10 billion in gold, the worry was we’d run out. So when it was rumored the Bank of England was about to demand $3 billion in gold, Nixon slammed the window shut which is where it’s been ever since. At that time our nation held about 285.7 million ounces of gold. A couple of years ago it was down to 261.5 million ounces. Closing the gold window made the dollar a fiat currency—domestically and internationally.3 4 5

The upshot of these devaluations, along with making gold illegal for U.S. citizens to own, was that politicians wrested away from the citizens the control of the country’s purse strings and took charge of it themselves. The consequences of their unconstitutional act were very dramatic and costly. Yet Americans bowed to their betters both times as the politicians assumed powers the Founding Fathers would never have tolerated.

From 1820 through 1933, dollar-denominated prices of all goods and services stayed about the same. Prices would fluctuate up and down, but they always returned to the baseline. By 1933 the Consumer Price Index (CPI) had only increased 11.1% in 113 years. That’s amazingly stable.  In fact, if Roosevelt had not devalued the dollar to spark inflation the CPI and credit contraction would have bottomed out in 1934. If that had happened the dollar would still be backed at $20.67, gold ownership would not have been outlawed, politicians would not have been able to borrow and spend wildly while pocketing vast fortunes for themselves and their family members, and the purchasing power of the dollar would be the same today as it was in 1820 and even as far back as 1780.

Since 1933, during the 90 years professional politicians controlled our nation’s purse strings and “managed” the value of the dollar, the fiat dollar lost 95.2% of its purchasing power. From 1933 to 1971 (the first 38 years) the dollar lost 67.9% of its purchasing power. After Nixon closed the gold window 50 years ago, the dollar lost 85.16% of its 1971 purchasing power. After 150 years of financial stability that was structured by the Founding Fathers, in way less time our nation’s so-called leaders almost totally destroyed the value of the dollar with no intention of fixing the problem they caused.6

Obviously conditions keep deteriorating. The average debasement rate since 1933 is 3.15%. The past 12-month’s inflation (debasement) rate is 5.37%. What’s really amazing is that debt has also grown exponentially to the point where the Federal debt ($28T) is greater than the nation’s Gross Domestic Product ($23T). Couple that debt with all of the debt on the private side of the ledger and Americans are so deep in debt that they can’t possibly pay it off. Yet the political hacks want to add trillions more to the debt ASAP! Go figure.

The reason the gold standard was so despised by bankers and politicians was that it tied their hands. When the dollar, which is a note (a credit instrument), was redeemable for something physical such as gold, dollar holders both foreign and domestic could restrict credit growth if they grew concerned. In other words, gold backing restricted credit growth because when debt levels were excessive or a country’s trade balance was negative, dollar holders would turn in their dollars for gold. Credit would then contract. But the good thing was that physical gold didn’t blow away in the wind like credit. Gold remains in place to support another credit rebound. That’s why under the gold standard all fiscally sound banks held gold as reserves rather than currencies that could be inflated willy nilly with a printing press. That’s when bankers had to have discipline and integrity.

Today’s dollar is backed, but it’s a real scam. It’s a Federal Reserve Note which the Fed backs with US Treasury Bills which are payable in Federal Reserve Notes which . . . and around and around we go. If that sounds like a ponzi scheme, that’s because it is a ponzi scheme. That’s why when a modern-day credit collapse comes along, the entire credit structure can implode down to zero wiping out all confidence in the paper money and the banking system at the same time. Some day there will be huge strains on the credit system and our “leaders” will probably respond to it by printing dollars and giving them out by the thousands of trillions. That would mean more debt and the currency would lose 100% of its remaining purchasing power! That’s called hyperinflation.

What’s tricky is that right now all debts are denominated in dollars. Therefore, during the initial stages of a credit squeeze there’s a scramble for dollars as people sell assets (stocks, bonds, gold, crypto, real estate, commodities, collectibles, etc.) for dollars to service debts. But a squeeze like that can only progress so far before the entire credit system implodes dramatically in a flash taking out all the banks.

That’s why, after a contraction starts, there’s a short window in time where one must switch out of dollars (a credit instrument) into money (gold) during the asset shakeout. That magical moment may be when gold is between $600 and $800 an ounce. Gold has been a store of value for thousands of years. It will still be around after a new monetary system is created as a store of value. That’s why people can use gold to preserve the purchasing power of their savings versus goods and services. This is not a money making event. This is a purchasing power preservation event. Gold is money.

This gold/credit cycle isn’t new. It’s been around since the beginning of recorded history. Our nation’s Founding Fathers had it figured out. Today’s politicians are clueless, at least most of them anyway, and they have no intention to do the right thing. They just seem hell-bent on going along and exploiting the easy money for their own benefit.

Inflation is a form of taxation. It’s a backdoor tax that robs the purchasing power of the citizen’s savings. This is why it’s important our elected representatives are not professional politicians. They need to be actual leaders who are wise, honest, worldly, and religious with business backgrounds like the Founding Fathers. These representatives should only want to be in office for a short period of time before returning to the private sector to live under the laws they pass. Professional politicians seeking wealth and fame tend to be corrupted by all the money that flows past them and they have no qualm passing laws they’ll never have to abide by.

Total government spending for 2021 is estimated to be $10.43 trillion, including a budgeted $7.25 trillion federal, a “guesstimated” $2.05 trillion state, and a “guesstimated” $2.17 trillion local. There are only 545 representatives running DC “for” the American people. They have “control” over spending $7.25 trillion this fiscal year. That’s $13.3 billion per representative. Most of the rascals representing us want a part of that action. So they cheat, lie, steal, and scam to get even a small piece of the action. There are damn few representatives that can be trusted because of the incredible greed that grips them.

Back in the day, Nixon was not known as a greedy politician seeking riches. But he was a typical incompetent, puffed-up, selfish, corrupt, power-hungry politician who thought he was really smart. He was not a problem solver nor an effective leader. And because of that he didn’t rule for the nation.

In less than 12 months Nixon cut the dollar’s tie to gold unleashing inflation’s full fury, set the stage for unlimited debt-based consumption, mandated repressive wage and price controls to mask the symptoms of his deeds, and then opened up trade with China which gutted many of our country’s factories in the years that followed. He also didn’t end the war in Vietnam. Compared to those events his Watergate crime was minor stuff. What a guy!7

Looking back on it, Roosevelt’s actions resulted in long-term negative outcomes for America. Nixon’s actions also resulted in long-term negative outcomes for America. How is it that Americans tend to trust professional politicians and bureaucrats who do not have real life experience in management, finance, problem solving, wisdom, independence, honesty, and other positive attributes? Americans tend to elect slick talkers, liars, incompetent folks with good bedside manners, corrupt, mean-spirted types, and those who don’t demand that citizens be responsible, self sufficient, independent, and disciplined. And just look at the decades of perpetual wars that Americans have been saddled with by the military-industrial complex.

Someday, historians will look back at the bureaucratic mandates of 2020 and 2021 and the actions of the Biden administration and shake their heads in disbelief. The “official” responses to the pandemic with closures and confusion, the welfare measures, the trillions of dollars of new borrowing, the open border, threats to pack the Supreme Court, the unscientific mandates for masking and vaccinations, the falsified efficacy of the vaccines, the tyranny of divisiveness, and the botched pullout from Afghanistan will be interpreted as the actions of a mob gone mad.

Once again, it’s up to the good citizens to insist that our nation’s problems are solved rather than ignored. If good citizens want the country our Founding Fathers dreamed of they must be vocal, in constant contact with their representatives, active in the community, insistent on Christian values, and aggressive at getting out the vote. Change for the better won’t happen by giving up and accepting what we’re up against today.

To your health.

Ted Slanker

Ted Slanker has been reporting on the fundamentals of nutritional research in publications, television and radio appearances, and at conferences since 1999. He condenses complex studies into the basics required for health and well-being. His eBook, The Real Diet of Man, is available online.

Don't miss these links for additional reading:

1. Executive Order 6102 from Wikipedia

2. FDR takes United States off Gold Standard from History

3. A Look Back at Nixon’s Infamous Monetary Decision

4. British Requests for $3 billion in US Treasury Gold – The Trigger that Closed the Gold Window by Ronan Manly from Bullion Star

5. Fiat Money from Investopedia

6. Inflation from 1820 to the Present

7. Nixon's Wage and Price Controls by Emily Skarbek from The Library of Economics and Liberty