SilverDoctors readers know that the final monetary deflation fighting tool in The Bernank's toolbox is GOLD REVALUATION. (Just last week we discussed this in Will The Bernank Skip QE3 and Proceed Directly to Gold Revaluation?)
Jim Rickards today emphasized this same belief, stating that the US will revalue gold to $7,000.
In a strange way he (Nixon) did us all a favor by making sure we (the US) held on to the gold.
So I do think the United States is in a position to revalue the currency using gold to that $7,000 level. That will obviously be a huge benefit to all of the people who invested in gold because they are going to be along for the ride, along with the United States when that gold goes to $7,000.
The question is whether The Bernank is ready to give up on QE and proceed to gold revaluation, or he will continue beating the dead horse of Quantitative Easing.
It is indeed a very significant date in the history of the international monetary system. August 15th, 1971, was the day that Nixon closed the gold window. By the way that’s a very technical term, I mean everyone says Nixon took us off the gold standard, it’s not exactly what he did.
What was going on at the time was that the official price of gold was $35 an ounce. When you were a country and you cashed in dollars at the US Treasury that’s how much gold you got, you got your gold at $35 an ounce. That was how countries settled up with each other.
However, there was a private gold market at the time and in the private gold market, it was fluctuating, but it was selling for around $42 an ounce. So the gold window was basically an arbitrage. It meant that if you were France or the Netherlands or a country that had US dollars, you could cash in your dollars and get gold at $35 an ounce. Then you could turn around and sell it in the open market at $42 an ounce and basically make a risk-free profit and that profit was called, ‘The gold window.’ It was just a very simple arbitrage.
So what Nixon did, he closed ‘The gold window’, he said to the rest of the world, basically you can no longer come in with your dollars and get gold because I don’t want you doing that and then selling into the market and making the spread. But he never really took the US off of the gold standard, at least at the time. In fact to this day the gold is still on the books of the US Treasury.
In a strange way he did us all a favor by making sure we (the US) held on to the gold. So I do think the United States is in a position to revalue the currency using gold to that $7,000 level. That will obviously be a huge benefit to all of the people who invested in gold because they are going to be along for the ride, along with the United States when that gold goes to $7,000.
Click here for more of Rickards' interview from KWN:
