Was Ron Paul right about the gold standard?

As an economic ignoramus, I have to ask: Does this mean it's wise to buy gold right now? And if so, what is the best way to go about doing that?

I would like someone to explain where we're going to find three quarters of a trillion dollars in gold, which would be required to back all the currently printed money.

The gold standard had been abandoned de facto long before 1971. The causes of our current crisis lie elsewhere.

I'd like goldbugs to answer a number of questions I have about the gold standard, both past and future.

We have struggled to come up with a financial system that can handle the explosive growth of the modern age ever since the dawn of the Industrial Revolution. Numerous attemps at maintaining a gold standard, both domestic and international, have failed spectacularly since then.

How do you make it work in a modern economy?

How do you implement it without causing massive deflation and impoverishing everybody?

Wouldn't modest changes to the current system have prevented the crisis? These include strict rules against currency manipulation (the biggest cause of them all), higher reserve requirements for fractional reserve lending, elimination of the Fed's contradictory dual mandate of monetary stability and full employment, and stringent rules on or even elimination of the Fed's ability to set short term interest rates. There are others but I won't bore you further.

(Full disclosure: I had drinks several times with Christopher Wood back in his days as Tokyo Bureau Chief for the Far Eastern Economic Review or the Economist, I can't remember which as he has been both. He's one of the smartest men in the trade.)

1. I'd critique the gold standard, but Jane Galt has already done so:

meganmcardle.theatlantic.com/archives/2007/09/theres_gold_in_them_thar_stand.php

For me, one of the strongest arguments against the gold standard is political, not economic: A gold standard, like a strong dollar policy with a fiat currency, is only as credible as the men who administer it. Those who believe that pegging the dollar to gold will prevent debasement of the former would be well advised to study FDR's devaluation of the dollar (which occurred in the context of a gold standard).

2. Contra Wood, a fiat currency is hardly incapable of offsetting the deflationary consequences deleveraging-induced declines in monetary velocity. See here:

econbrowser.com/archives/2008/10/deflation_risk.html

3. Even if the Fed is "out of ammunition", that doesn't demand a gold standard. It simply means we need to utilize other means to deal with the financial crisis, beyond what the Fed has done or is capable of doing. E.g., examination & recapitalization/liquidation of troubled banks under FDIC auspices.

I’m not going to try to elaborate on anything that Pyrrho or MI wrote: they addressed the specific issue of the gold standard far better than I ever could. A return to a hard gold standard would be like trying to fix a flat tire with a hammer. You’re using the wrong tool.

I’ve probably gone on a dozen times about this. The Great Slowdown of 2008 is our economic system trying to tell us that we’re doing something wrong. The Keynesian model of central-government spending and constant economic tinkering has gone from simply being parasitic on the economy to approaching the point of actual breakdown. Excessive debt and securitization of debt got us here, and working through those debts is the only way we’re going to get out of here.

On the individual level, this means actually SAVING UP for what we’re looking to buy, instead of putting it on Ye Olde Credit Card. The concept is called “delayed gratification”—a concept that is positively anathema to the modern American. Lord have mercy, it might even mean having to avoid all those advertisements, and maybe even having to turn off the TV. (Yes, I know: a sure sign that the Apocalypse is upon us.) Parents of teenagers (especially), you are officially on notice.

On the state level, this means realizing that we (collectively) cannot have every program we want. (Sorry, progressives. Pepperland just isn’t on the itinerary.) It’s going to mean re-regulation of the “quants” and their attempts to make one dollar do the work of sixteen. Our fiscal policy is going to have to emphasize locating and neutralizing the financial institutions’ toxic debts. It’s going to mean that wild expansions of existing programs simply aren’t going to happen. (I can hear the mild sighs of relief going up from conservatives already.)

HOWEVER. It’s going to take a long time to wipe out all these debts. Three to five years at a minimum—that “L-shaped recession” our Pyrrho-friend spoke of on another thread. There simply aren’t that many forensic accountants around to locate and identify all the securitized mortgage debts out there. That bailout fund is going to have to last a long, long time, and probably without augmentation from Congress. There isn’t that much available money left out there to borrow.

The final step, the one that I am not sure that we have the moxie to take, is the retooling and reduction of our collective long-term commitments. In other words, we’re going to have to re-examine the whole issue of entitlements and just what exactly we can afford to spend on our elderly and poor population. Our Medicare/Medicaid/Social Security commitments are far in excess of what we can afford, and they will drag us down, without and despite anything we might do to solve our immediate problems, unless they are drastically re-tooled. Generation Xers and older Millennials, take note

We. Have. Been. Warned..

Your servant,

Lord Karth

When will the misinformation about Ron Paul end? Ron Paul does not advocate a return to a gold standard, he advocates a system of competing currencies.

Do some research, then opine.

Gold doesn't stop bubbles. The tulip craze and the bubbles of the 1880's through the 1920's happened under a gold standard.
The cure for bubbles is, as MI said, stronger regulation.

After Shotgun Paulson and Bugsy Bernanke have wasted a few trillion on nonsensical schemes, we may get around to doing what FDR did. Which we could have done in the first place if anyone in DC had as much intelligence as a bacterium.

Ok, let's leave the gold-as-collateral argument aside. shall we, and entertain just what exactly is the valuable asset behind the credit being extended by the Fed (this association of private banks -- their union if you will -- handed over benefits to their members 1,900 times greater than the weekly average of the last three years)? Mr Bernanke finds it a bit uppity of me to even ask such an audaciously invasive question of these publically-traded corporations, “Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,” Bernanke said Nov. 18 to the House Financial Services Committee. “We think that’s counterproductive.”
____ http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home
but let's not forget they're playing with OUR money deposits. Its not their private property whose "transparency" is being compromised, its yours and mine:
Note Bloomberg calculates that sum of "money" (is it gold, is it land with a pile of bricks and mortar on it, or is it mere paper(*)?) "The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages."

___
* those who argue that the gold standard is as fallible as FIAT reserves aren't good scholars of history - it is incorrect to assume that a secure backing of currency can be achieved merely by stockpiling amounts of a valuable asset such as gold (could be silver, in Song China of 1000 AD it was copper) equivalent to the circulating paper. The amount required for parity of the "value" is many times more: to cover the "money" implicit in all checks written, and the current account balances those checks were written on. The modern commercial banking system has never been run this way. Some national postal banks and cooperative societies (e.g. the UK's CO-OP) did operate without fractional reserves as prudent GIRO banks but they're few are far between nowadays when money multipliers promise Nirvana via leveraging those deposits 12-1 or more. That's where the paper money of the Song mandarins failed - they succumbed to inflating the money supply when their balance of trade deficits left their vassal states holding all the copper coins - leading to their dynastic collapse...
____ http://en.wikipedia.org/wiki/Economy_of_the_Song_Dynasty

Study history - permitting private issuers to continue competing (as Ron Paul advocates) for business might avoid the money velocity problem arising...?

Read more in "Money, Bank Credit and Business Cycles" [ see mises.org/books/desoto.pdf, reviewed here pcpe.libinst.cz/nppe/2_2/nppe2_2_5.pdf ]

"As Hayek explained, man is as much a rule-following animal as a purpose-seeking one. Where economic agents’ behaviour is governed by particular abstract rules of conduct, spontaneous order will emerge and social life will run its course in a well-ordered and coordinated fashion. To the contrary, whenever those rules are violated on a more or less significant scale, life in society will become dis-coordinated and a process of decivilization will set in"

MI: why assume government has any virtue? The founders didn't, they knew we're all fallible, and thus restrained its powers by separating them. To avoid the inherent temptation to embezzle (debase) Hayek argued for PRIVATE currencies under free enterprise here:
http://www.mises.org/story/3204

Polistra- It is true that even a gold standard can cause bubbles, but that is only true if it isn't a 100% gold standard, such as it was during the time periods you are refering to. A 100% gold standard would not allow for the creation of bubble since the banks would not have the ability to inflate the currency by lending more money than they have in reserves. This sort of lending is the cause of bubbles and is why such lending should be outlawed as theft or fraud, since that is what it is.

Yes Ron Paul is right about the gold standard. Our current crisis started when the NASDAQ bubble burst in 2000. To avoid a much needed deep recession Greenspan flooded the economy with cheap money. Then after 9/11 he flooded the economy with more cheap paper. The construction boom took off partially helped with an endless supply of cheap labor from Mexico. Banks flush with cash went on a lending spree and the rest is history.

Gerald Driscoll former VP of the Dallas Federal Reserve had an excellent op-ed a couple weeks ago in the WSJ on this very subject.

http://online.wsj.com/article/SB122688652214032407.html

To avoid a much needed deep recession Greenspan flooded the economy with cheap money. Then after 9/11 he flooded the economy with more cheap paper.

Greenspan wasn't the only culprit; massive imports of capital from foreign lenders were also a factor. See, e.g.,:

blogs.cfr.org/setser/2008/10/21/the-end-of-bretton-woods-2/

Not sure how a gold standard would've stopped this; seems more a job for capital controls.

Thanks, Adam.
I weep for this country (and for the GOP) that Ron Paul could only garner a few percentage points in the primaries. I have Republican friends who hated the guy (i.e. "he's bad on the war" etc.). To me he was the only sane Republican.

'Your Name' (Presumably MI): [M]assive imports of capital from foreign lenders were also a factor.

It was a huge factor. And don't forget the yen carry trade (not the same thing).

LK,

You're right about the heart of the matter being a moral failing.

MI,

Why did you have to bring up Original Sin? You should look into Modern Therapeutic Deism. You'll feel a whole lot bette ;-)

I think we should make Moon Rocks the latest currency.

That would put us up there for the greatest holding share and it might even prompt another human 'surge' to the moon alice !

MI...I believe that, if any leading Federalists had expressly stated that the Constitution authorized the federal government to "emit bills of credit" or any other form of paper money, it would have certainly and immediately doomed any chance for ratification.

Natelson suggests that at least some of the Framers recognized this when he mentions that several of them voted to delete the language giving the federal government the power to emit bills of credit so as not to offend or alarm those who would vote on ratification.

Its true that we were better off lodging certain powers in a new federal government...that was the purpose of the Constitution. My point is that everyone at that time recognized the economic damage that several of the states had done by printing up too much paper money. Its a real stretch then to believe that they would then have trusted this new federal government with such a power...they were very jealous of the sovereignty of their own states and they barely trusted this new federal government with the power to regulate trade between the states or to maintain a navy.

Your Name @ 4:19 -

1. WRT express statements by Federalists on federal emissions of paper money:

A Native of Virginia: "An exercise of [state emissions of paper money] would materially interfere with the exercise of the like by Congress"

David Ramsay (Civis): "...the states cannot emit money; this is not intended to prevent the emission of paper money, but only of state paper money. Is this not an advantage? To have thirteen paper currencies in thirteen states is embarrassing to commerce, and eminently so to travelers."

Robert Barnwell: "...it was not the state, but the Continental money, that brought about the favorable termination of the war. If to strike off a paper medium becomes necessary, Congress, by the Constitution, still have that right, and may exercise it when they think proper."

Charles Pinckney: "...if paper should become necessary, the general government still possess the power of emitting it, and Continental paper, well funded, must ever answer the purpose better than state paper."

2. As for removal of language authorizing "bills on the credit of the United States" some (e.g., Morris) undoubtedly viewed such language as a provocation to paper-money opponents; but it is unclear whether this view was unanimous. In any event, since the phrase "coin money", in contemporary terminology, was broad enough to encompass paper money, the topic still came up during Ratification.

DavidTC:

Let's just say the gold standard may represent 'sound money' to the faithful, but it is not the 'gold standard' for sound economic thinking.

The gold standard is NOT in the constitution, or any place else. We had a gold standard and it was a disaster; a constant alteration between rapid inflation when a new gold strike was discovered followed by long periods of deflation.

A money supply needs to reflect the amount of goods and services in circulation. Gold cannot expand with the supply of goods. It is inherently deflationary. Deflation represents a transfer of wealth from borrowers to lenders.

Nor was there ever a "gold standard" in the Austrian sense of the term in any period in history. The Austrians treat gold money as a commodity, but the value of gold was always fixed by the gov't, meaning that it wasn't a commodity. The "value" of gold was the number stamped on it, which is the price the gov't would pay for it.

And finally, the gold standard lead to the paper standard, which led to the Fed, since the amount of paper couldn't be verefied to have a real gold backing. A gold standard works only with gold coinage, which is impractical and would be sufficient to choke the economy into primitive barter (which is what the Austrian theory really is.)

In this time of crises, almost anything is possible--anything, that is--except the gold standard. No responsible public official will go there, and if they were to attempt it, the international markets would abandon them. This is just another fantasy of the Austrian ideologues.

Gold Standard? Oh, my word!

Now there's an idea whose time came and went and was never good.

Just because it uses the word "standard" does not mean trying to get ON it would do anything but cause havoc...

It would create an artificial over or underabundance of currency, one that would NOT be "controllable" in any way, and subject us to inflation and deflation cycles, and slowly whipsaw the economy into shreds.

leopardpm
Trying to take the current total amount of fiat dollars and value them with the total amount of known gold is both an excercise in futility, but it is also non-sensical: who exactly would be trading their gold for worthless dollars? no one.

Also a very good argument against the gold standard. Namely, it is inherently nonsensical for the government to purchase gold to back their currency, using the currency backed by gold.

Anyway, the actual point I was trying to make was to point out that the M0 money supply, the actual printed money, outstrips the amount of gold backed currency that could reasonably exist. We'd have to suddenly gain all gold bullion in the world and melt down all the gold jewelry or something.

It's a dumb idea from a math perspective, forget economics. It doesn't even require any knowledge of economics at all to see the stupidity. It's an economic solution akin to proposing that everyone run a lawnmowing business. It's not just economically stupid (Who would supply the gas to run the lawnmowers?), it doesn't even make mathematical sense in that there are a good deal more people than lawns that need mowing.

Economically, too, the gold standard sounds pretty stupid too, but I haven't even bothered to look into that.

The way to achieve the desired end of a commodity backed money is to allow it to come up through the market and compete naturally against the world's fiat currencies... all it takes is to repeal the legal tender laws and a few others which confer monopoly status on government issued money.

Legally, alternate currencies are legal in this country. Legal tender laws control what sort of currency must be accepted to pay off debts without previous agreements, and the government is never going to require that they, or anyone else, accept anything but American money. But places can accept almost any form of payment they wish. For example, 'girt certificates' are not actually any form of money transfer at all. (Although they are denominated in US dollars.)

However, while I said that legally they're okay, in actual practice the US government likes to find imaginary reasons to shut them down. Witness what it did to e-Gold just recent, or the various other schemes throughout history where people printed their own scrip, or invented their own commodity-backed currency.

It's not the laws you need to worry about it. The law has no objection to people operating a barter economy where a business accepts 'three pieces of paper printed by a random guy that promises he'll exchange them for gold' for a hamburger. That is not, in any technical sense, illegal.

The government will, however, invent charges of tax evasion or money laundering or whatever. (The tax evasion stuff actually has somewhat of a point. While sales tax does not technically apply to barter, if businesses are going to standardize acceptance of 'non-currency', at some point the sales tax people will show up and start making rules. Businesses that accept such 'non-currency' need to make it clear that they are perfectly willing to pay sales tax on purchases if someone will tell them how that should work.)

(Incidentally, the captcha-expiring code has a bug. Mine expired, I clicked the button, and my text was back, and I hit 'Post'...and then noticed it was my *previous* comment, which I had made hours ago. Hah. I canceled it, don't know if in time. Luckily, I copied this to the clipboard. If a repeat post from me shows up right above this, that's what happened.)

John Médaille, MI, DavidTC ---

Thanks for taking on the Scientologists Austrians. It's usually a thankless task, but it should be clear to Rod by now who's sane and who's a wackadoo.

Happy Thanksgiving!

OK, neither one of the strikethrough tags works. Good to know.

pyrrho:
I hope you realize that name-calling and throwing out various insults is really not a method of reasoned or rational debate. It does no one any good to hurl schoolyard barbs back and forth. If you don't have anything to contribute which backs your point of view (at least David is providing very valid criticisms which denote thought on the subject and require addressing) then why say anything at all?

I would say the real wackadoos are those that stick their head in the sand and wish reality to go away - in other words, keynesian inflationists who would pretend that merely slapping some special ink upon paper actually creates wealth and prosperity.

I fail to see how it is a "stupid idea" to have one's paper currency backed by hard assets of some sort.

I also fail to see why people continue to mischaracterize Paul's ideas on monetary policy by claiming he calls for an immediate "return to a 100% gold standard." The least some of you can do is state that he wants gold AND silver backing for the currency.

In reality, what Paul argues is for competing currencies to be permitted.

If I want to pay someone coin/s or measures of gold, silver, copper, titanium, aluminum, etc...or just hand them a really shiny rock...for a certain amount of goods, and someone who has the goods I want agrees and wants to accept that- then why should the government come in and seize whatever agreed-upon valuable material we have exchanged, threaten some sort of penalty, and force us to exchange only pieces of paper that have no inherent value? Something about that seems fundamentally flawed, no?

Im truly confused as to why so many people dont see a problem with owning only pieces of paper as "wealth," and see the ability to redeem this piece of paper for hard assets that have value nearly everywhere in the world that you might want to take them (in the odd chance that their country's monetary system goes to hell in a handbasket) as trivial.

There are a lot of misunderstandings here on this board.

First off, the idea that the gold standard did not work is stupid. Of course it worked. For the people. it was and is governments and their apologists who didn't and don't like it because it limits their power.

The most serious economic problems we've had are post fed.

Most of you don't seem to realize the chronology here. We did not "struggle to come up with a financial system that can handle the explosive growth of the modern age ever since the dawn of the Industrial Revolution." Not true at all, we had a system already and it was working perfectly. Prior to WW1, we had a working, stable international system that settled all international currency imbalances in gold. This system supported a huge amount of trade worldwide, and it never required huge amounts of gold to change hands.

Basically, it was self-correcting in that, if a nation were to import too much without producing, it's counterparty nation would simply receive gold FOR THE DIFFERENCE. This need to pay imbalances in gold WAS the discipline that nations needed to prevent them from living beyond their means. It worked just fine, until governments that wanted to war screwed it up.

By that time in history, we weren't on a "pure gold standard" anymore anyway - what we had was a system where Real Bills of exchange were circulating among producers and suppliers of goods. These bills, spontaneously and temporarily ciculating as money, allowed for the expansion and contraction of the money supply as needed, without constantly revaluing gold, and supported all the trade the world needed.

These bills were the precursors to what we now call "commercial paper." Central Banks were not needed to issue, discount, or manage these bills at all. It was largely this aspect of the free market in money and interest rates that Central Banks were instituted to control and then eliminate, and that's exactly what they did do.

Now, fractional reserve banking is theft, but governments allowed it even before we went off the gold standard. This practice, not the gold standard itself, is what led to the runs on banks prior to the fed. Fractional reserve banking is not inherent to the gold standard at all.

As to people losing capital due to a return to the gold standard, this is silly too. If their dollars were to lose value compared to gold or silver, then their dollars were set to lose value against goods and services anyway. Staying with a fiat system IN NO WAY protects anyone's wealth or savings, in fact, it insures that it will be lost.

Everythingwe have done since before WW1, including Bretton Woods, has been done to attempt to replicate the working system we had before with the gold standard and bills of exchange. The only problem is that the system we had EVOLVED and didn't allow for governments to have so much control over money and interest rates. We've been trying to have our cake and eat it too.

The problem is simple - a gold/silver/metallic standard works for the people of the world but is unpalatable for governments that desperately want to grow and control more and more aspects of people's lives. So, they try this and that, hoping to plan a system that is better than the one that evolved - BUT THEY CAN'T.

Now, of course, after so many years have passed, denial is very deep, and many folks do not understand money anymore. First off, what is so bad about a little deflation? We had a mild deflation between 1800 and 1913 - didn't hurt us at all. The dollar actually bought more while the economy steadily grew. That's a good thing. Why people act like it's bad, I don't know. Why people act like such a thing can't happen in our modern economy, I don't know either.

Paper money can't "outstrip" the amount of gold available, because the dollar, or any money for that matter, can simply be revalued relative to gold. Again, this process can't suddenly make the dollar worth less than was going to happen anyway; it simply re establishes the worth of gold to it's proper level.

In any case, as posters have pointed out - there is no need to suddenly institute a forced revaluation by government fiat. All we need to do is legalize competing currencies. Legal tender laws must be abolished.

As to a gold standard being subject to the same human failures as fiat money, such an assertion is ignorant. Pointing out that FDR revalued gold against the dollar, thereby hurting people, proves nothing about the gold standard. Just because a stupid president mucked with the standard and stole the people's gold does not mean that there was something wrong with the standard itself. It merely means that we should never have let him do it.

If FDR had went around killing people, does that mean that laws and morals against murder were useless, just because someone got away with it?

The whole point here is that stealing everyone's gold, and then making sweeping revaluations is much harder than just printing up what you need, and bamboozling a bunch of suckers, which is all they have to do now. Regardless of the fact that there have been revaluations of gold, the fact is that it DOES enforce discipline on government spending and currency issuance. Just go look at a chart of either, and see that there are two big trend changes - a smaller one in 1933, when FDR stole the gold, and a much bigger one, when Nixon reneged on Bretton Woods by refusing foreign dollar holders their promised option to trade their excess dollars in for gold.

The issue is a lot simpler than many of you posters are trying to make it: In order to have a viable and growing economy, the people must be able to save and delay consumption. People must have the proper interest rate information in order to invest in plant and industry that is really needed. As we can plainly see, this current system does not afford these things. In fact, it completely discourages them.

People must have a viable and completely legal means to save, long term. Paper money does not work for this purpose long term, which is why we have no savings as a nation. This alone, is reason enough to re-establish a monetary standard or allow competing currencies.

It is not, and never will be fair, or sustainable, for people to work all week to earn paper money that the government, through central banks, can simply create with no work at all. It is a fundamentally unjust idea, and it has never worked, is not working now, and isn't going to work.

It doesn't matter if you're in the year 1700, 1800, 1900, or 2009, the issues are the same.

Can true capital be created by central banks or governments by a printing press or computer?

NO.

Can a real economy long survive with cheap paper that is created from nothing and backed by nothing, chasing and buying real goods that people sweat and bleed to produce?

No.

In the end, all such systems will collapse, as they must, and people will trade real things, and use real money that has inherent value again, whether statist fools who know nothing about money like it or not.

For those that think the Gold Standard is wrong we suggest you check out the site below. The chart shows hardly any inflation at all from 1940 - 1970. Starting in 1971 inflation rose at a 45% angle on the graphs.

www.cedarcomm.com/~stevelm1/usdebt.htm

For those of you that still insist it will not work we have a surprise for you. E-Currencies such as e-Gold and e-Bullion have been working effectively for many years. That is until the government found a way to shut them down, with no cause we might add. They also shut down the company that was creating the Liberty Dollar.

It is merely supply and demand. Some will purchase why some will sell. You have paper money but it is backed by some type of commodity whether it be precious metals or not. JFK was ending the Fed by introducing competing currencies that were backed by silver. Many believe that is why he was assassinated.

"Helicopter" Ben Bernanke admits that Federal Reserve caused the Great Depression.

www.wnd.com/index.php?fa=PAGE.view&pageId=59405

For any of you that is interested in a bank that only deals with precious metals send an email to us @ Freedom4America@LibertyIsWEalth.com with "Bank" on the subject line.

"Switch to Gold, the Fed WILL Fold"

Tempeltoncapital says that WITH THE BANK OF ENGLAND in panic mode, slashing the returns-paid-to-savers to three-century lows at the start of December, the clear winners from its campaign to reboot the bubble so far have been gold investors stuck with Pounds to earn and Pounds to spend. Since the Old Lady began cutting interest rates exactly 12 months ago, the number of UK investors choosing to own gold through The Tempeltoncapital Guaranteed Bullion & Commodities Fund has risen by more than 130%.
So far, at least, they look to have made a wise choice.
• Since the start of December '07, the average UK house-price has dropped by 16% (Halifax data);
• The FTSE100 index has dropped by one-third;
• Cash ISAs (before inflation) have added just £3.40 to every £100 invested (BoE data);
• Government gilts – which typically benefit from lower Bank interest rates – have returned just under13% (capital + coupon).
• The Gold Price in Sterling, in contrast, has risen by more than one-third, up by 33.4% and hitting a series of all-time record highs throughout November above £550 an ounce.
Manufacturing output, meantime – a key target for the Bank's devaluation policy – has contracted by around 10% (PMI index), even as the Pound in your pocket lost one-fifth of its international value on the currency markets.
Here at home, the Pound has lost 3.7 pence of its purchasing power since Base Rate began its descent from 5.75%...down at a near-record pace to just 2.0% today. Cash savers have been hammered by Bank of England policy, in short. And now, like pretty much all government wonks everywhere, the "businessfriendly" socialist authorities are planning to borrow the nation out of its debt-led deflation.

Tempelton Capital says that will only hurt gilt investors in turn, of course, most especially those hapless fund clients being fed into 5- and 20-year gilts at near-record low yields. Little wonder so many private individuals are opting out of official paper entirely, choosing un-inflatable, un-indebted gold as a bolt-hole for a portion of their wealth.

Bank Rate now stands at its very lowest level since the Bank of England was founded in 1694. Measured
against the Retail Price Index (Oct. data), the Bank's key lending rate now offers an annual loss of 2.2 pence
in the Pound – the worst loss of purchasing power since May 1980. In the last two months alone, and on a
proportional basis, the Bank of England has slashed the returns paid to savers at the fastest pace since 1858.
Gold, on the other hand, has discharged its key duties for UK investors without a word of complaint in 2008 –
defending them against a collapse in the currency and a fresh outbreak of idiocy in Westminster.