Long ago, a man who would later become chairman of the Federal Reserve wrote an essay titled “Gold and economic freedom“. In it, he explains why gold and economic freedom are inseparable, and why deficit spending is a ploy to confiscate wealth.
Alan Greenspan, 1967:
“In the absence of the gold standard, there is no way to protect savings from confiscation due to inflation. There is no such thing as a sure store of value. If this were the case, the government should make its possession illegal, as was the case with gold. If everyone decided, for example, to convert all their bank deposits into silver, copper, or any other good, and then refused to accept checks as payment for goods, bank deposits would lose their power to purchase and the bank credit created by the government would be worthless, as a claim on the goods. The financial policy of the welfare state demands that there be no way for wealth owners to protect themselves.
This is the dirty secret of the social statists' tirades against gold. Deficit spending is just a wealth confiscation ploy. Gold stands in the way of this insidious process. He presents himself as a protector of property rights. If we understand this, we have no difficulty in understanding the antagonism of the statists with regard to the gold standard.
This essay is particularly relevant today as the U.S. government continues to deficit spending at an alarming rate. Anyone holding U.S. dollar-denominated debt globally should be concerned about the U.S. government's debt and deficit situation. Not to mention the 25% inflation we've seen over the past four years, or the two stooges who will be the next presidents of the United States for the next four years.
Daily Dirtnap's Jared Dillian produced a valuable wire on gold yesterday. In it, he claims that the United States will begin to fully monetize its debt this year and throughout the term of the next POTUS.
The way Dillian talks about “monetization at scale” implies that the Federal Reserve will begin purchasing U.S. Treasuries in order to help the Treasury control the yield curve, yield curve control (YCC). Since the Fed can create new money with the press of a keyboard, this in turn would serve to increase the money supply. In theory, this would also increase inflation and cause all sorts of tangential ripple effects throughout the economy and financial markets.
Rising Treasury yields are a growing problem for the U.S. Treasury, which is constantly refinancing its $34 trillion debt pool. Dillian believes that rising interest rates are now bullish for gold, as they increase the likelihood that we reach a full debt monetization scenario.
Dillian's analysis rings true.
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