The Biggest Monetary Change in 80 Years

The Swiss people put an initiative on their ballot to reverse decades of regression. They’re trying to get gold back into the monetary system, in the hope of halting the destructive process of currency debasement. I am sad to see the measure defeated on Sunday, even though I had concerns about it.

The simple fact that gold backing for a currency is up for vote in Switzerland shows how much the world is changing. A gold initiative wasn’t possible before 2008, and even today, no other country is ready for it yet.

Most people care little about monetary policy. Even the critics of central banks mostly quibble over minor rule changes or who to put in charge. Few have any serious interest in the gold standard. This, unfortunately, includes the gold bugs.

Gold bugs say they love gold, but they don’t necessarily advocate gold as money. They want something else, and the Swiss referendum shines a spotlight on it. The gold bugs focused on the requirement of the Swiss National Bank to buy gold. Jim Rickards, bestselling author of Currency Wars: The Making of the Next Global Crisis, said:

“[T]he Swiss gold referendum could have a massive impact on the gold market. It would be extremely bullish, not only putting a floor under gold but also sending the price of gold up significantly.”

Got that? The Swiss referendum will drive up the gold price. The gold bugs don’t care about the monetary implications. They just want to make a few bucks on their gold trades. Let me present one more bit of evidence.

A common gold bug refrain is that the Federal Reserve and its cronies are suppressing the gold price. Addressing and debunking this allegation is beyond the scope of this article, though I have spent many gallons of electrons on this topic elsewhere. There is no monster under the bed, and no dark banking cabal that suppresses gold.

Conspiracy theories about gold price suppression are just the frustrations of people who want to sell their gold. They’re frustrated because they bought with the intention of selling at a profit, but then the price dropped.

In one area, gold bugs agree with gold standard advocates—the slow collapse of the dollar. Gold bugs often say, “All fiat currencies eventually reach their intrinsic value—zero.” This is a good reason to own gold. On the other hand, they fail to understand that a rising gold price simply reflects the falling dollar. It doesn’t make anyone richer. Sure, you may have more dollars, but each of them is worth proportionally less. If you really believe that the dollar will fail, then you should buy more gold while you can. A lower gold price is good, because it lets you accumulate more.

And that’s the irony. Although the gold bugs say they believe the dollar will fail, they don’t want to accumulate more gold. Their crying for a higher price betrays their desire to sell their gold. They are like stock market or real estate speculators. They just want their luck to turn at the asset bubble roulette table.

Central banking encourages speculation, and the gold bugs certainly have the right to bet on the gold price. But let’s please keep that away from the fight to move to the gold standard. Publicly counting the profits from a Swiss currency referendum comes across as self-serving. That won’t win anyone over to the cause of honest money.

We urgently need to restore honesty to the monetary system. We need sound money. There is an emerging, but global movement in support of this cause. That is the biggest monetary change in 80 years.

2 Comments

  • Regional says:

    Didn’t FDR force the sale of private gold holdings to the state by buying it at $20 an oz. and made it illegal to hold gold even gold coins?
    Currencies have always been dodgey and any rule can be manipulated.
    You have to remember most politicians are self serving effwits.

  • The biggest monetary change in 80 years ….wasn’t.
    And thanks for the lesson on the divergent interests between goldies (hoarders and holders) and hard-money interests who actually think there’s a possibility for achieving monetary stability by basing the currency unit at a commodity exchange value……fixed by government….. as in that of the Swiss.
    While totally disagreeing with the logic of the latter, monetary stability will be achieved only through fixing the money quantity to the rule of law, rather than to the rule of speculative, market-induced scarcity.
    For the Money System Common.

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