Gold: The Protector and Creator of Jobs
Source: GoldSeek (2/5/09)
"The fiat dollar – unanchored to gold – was the greatest strategic gift that the U.S. could have made to China."
Gold has everything to do with the loss of jobs in the U.S., and gold has everything to do with recovering jobs for the U.S. economy.
Let me go back to the '60s when the U.S. and the world were on a Gold-and-Dollar Standard. Countries were very careful about maintaining a constant monetary balance between their exports and imports. They all wanted to export more than they imported, except the United States. The U.S. didn't care much about maintaining a balance between exports and imports, because it was able to pay for its deficit in trade (more imports than exports) by simply sending more dollars overseas.
Many economists warned about this trend, which was accompanied by a constant loss of gold during those years; some countries, notably France, refused to hold more dollars and asked for their gold – at $35 dollars an ounce; this caused great disgust in Washington, D.C. and New York.
Nothing was done to stop the trend. In 1971, Henry Hazlitt, a good conservative economist, warned that the dollar would have to be devalued, because the U.S. stock of gold had become much too small.
What Mr. Hazlitt never imagined, was that instead of devaluing – which was the advice of economist Paul Samuelson, Nobel Prize winner, published the week before August 15, 1971 – Nixon followed the advice of Milton Friedman and simply "closed the gold window." The U.S. would henceforth not deliver any gold, at any price, to any foreign Central Bank who might wish to invoke the right to redeem its dollars for gold, according to the Bretton Woods Agreement of 1944.
Since then, all world trade – or most of it – is carried on in dollars, which are nothing more than fiat money. Since the rest of the world's currencies were tied to gold through the dollar, all the currencies of the world also became fiat money – fictitious money, backed by nothing.
With no loss of gold to restrain the U.S. and force it to stop expanding credit, U.S. imports surged and exports waned. The monetary difference was "paid" in dollars.
However, free trade means you buy where it's cheapest and, in recent decades, that has been China, South East Asia and India; the oil required to fuel the U.S. economy was cheap and bought with dollars, which it cost nothing to produce. U.S. manufacturers, competing with Asia, moved their factories to Asia rather than wait for certain bankruptcy.
That was how the U.S. was de-industrialized.
It happened because gold was eliminated as a limit on credit expansion and money creation.
The fiat dollar – unanchored to gold – was the greatest strategic gift that the U.S. could have made to China. Now, they have a huge industrial base and the U.S. has Oh, so little!
Economic balance must be restored between the nations of the world so that they all can balance their exports and imports. This is not done by protectionism, a false remedy to joblessness. The world needs to return to gold as the international means of payment. All imbalances must be paid, monthly, in gold. No fiat money allowed!
If a nation does not have gold to export, it must do without or manufacture what it needs, itself: there you have the clue to restoring jobs in the U.S. and Europe. This is not "nationalism," it is simply good economics.
The Gold Standard is the friend and protector of the worker and of the investor, as well as the basis for harmonious relations between the nations of the world.
And by the way, the current financial disaster in the U.S. is directly attributable to Nixon's decision to "close the gold window," because a monetary system based on gold is an obstacle to the criminal credit expansion perpetrated by the bankers. Gold-based money puts shackles on bankers, forcing them to be careful. A fiat money system enables financial criminality – it's as effective in restraining criminality in finance as tying up a dog with a string of sausages.