...even at $20,000/ounce, 8,200 tons of gold is only worth $5.7 trillion-about one-third of the $17 trillion in cash allegedly being held offshore. Anyone holding that $17 trillion would know he had only a 30% chance of redeeming his fiat dollars for gold and so would try to instantly send his fiat dollars into the US trying to beat all other competitors.
Steve Forbes (Forbes Magazine) recently warned that government must link the fiat dollar to gold or face another Great Depression.
If that's true, we're going to have another Great Depression because government can't link the current fiat dollar to gold.
Why? Two reasons:
1) There are reportedly up to $17 trillion of our current fiat dollars being held offshore. What do you suppose would happen to those $17 trillion if Obama announced that they were all backed by gold at, say, $5,000/ounce or even $20,000/ounce?
Those intrinsically worthless $17 trillion would come flying, pouring and stampeding back into the US to be redeemed for physical gold. The influx of $17 trillion might cause US inflation to go hyper.
Our 8,200 metric tons of gold (less than 300 million ounces) would be "disappeared".
Why?
Because, even at $20,000/ounce, 8,200 tons of gold is only worth $5.7 trillion-about one-third of the $17 trillion in cash allegedly being held offshore. Anyone holding that $17 trillion would know he had only a 30% chance of redeeming his fiat dollars for gold and so would try to instantly send his fiat dollars into the US trying to beat all other competitors. The instant influx of most of $17 trillion into the US economy might precipitate instant hyper-inflation.
But if the gov-co tried to back current fiat dollars with gold, the influx of $17 trillion foreign-held dollars would be so enormous that our entire gold treasury would be exhausted. We might be able to back the current fiat dollars with gold for a few days, perhaps even a month, but after that, the entire US Treasury of gold would be depleted and our dollars would once again be pure fiat and backed by nothing tangible.
2) It's conceivable that the US might try to keep the existing fiat dollar (perhaps for domestic transactions) and also create a second "dollar" that's backed by gold for, say, international transactions. Government might try to run both fiat dollars and gold-backed dollars are the same time. It seems unlikely that two different "national" currencies could be sustained, but it's not impossible.
Nevertheless, there's still a problem with starting a new, gold-backed dollar: the last time the US Treasury's gold was audited was A.D. 1953. It's unlikely that the US Treasury and/or Federal Reserve still have the 8,200 tons that they claimed to have had about 60 years ago. Odds are, the US Treasury and/or Federal Reserve have secretly sold much of those 8,200 tons into the commodities markets in order to suppress the price of physical gold and maintain the illusory value of the fiat dollar.
Evidence of these secret sales can be inferred from the fact that, in January, A.D. 2013, Germany asked that the 300 tons of German gold held by the US and/or Fed be returned. By January of A.D. 2014, the US had reportedly returned only 5 tons of gold to Germany. The clear implication is that the US gold treasury may have already been massively depleted-perhaps by 80%, 90% or more.
**due to volatility of markets prices are subject to change however we always try to accommodate International Forecaster subscribers.
Point: There's no way to back the current dollar with gold, or even a new, alternative gold-backed dollar, if there's little or no gold in the US Treasury.
So, if Forbes' dilemma-1) back the dollar with gold or 2) suffer the Great Depression II-is valid, we're going into a depression because we can't back the current fiat dollar with gold because the outstanding debt is too great, and we probably can't back a new "dollar" with gold because our Treasury has been depleted.
* The only way the US might return to a gold standard and once again back US dollars with gold is if:
1) The current fiat dollar is allowed to die in hyper-inflation-complete with an economic collapse, massive poverty and political instability probably lasting for several years.
Why? Because once the current dollar dies, the $17 trillion held overseas becomes worthless and can't be later be redeemed for gold. Then,
2) The US creates a completely new dollar that is backed by gold at some extremely high price-but is not exposed to redemption by the $17 trillion hoard currently held overseas.
Implications:
1) Don't expect to see a new dollar backed by gold in less than 3 years (if then); and,
2) We can't return to a gold-backed paper or digital dollar until after the current fiat dollar dies, collapses our economy and subjects us all to suffering and instability of the Great Depression II.
In other words, we might we see a serious attempt to back a new paper dollar with gold-but not before we first suffer an economic collapse and another Great (or "Greater") Depression.
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