Should the US Return to a Gold Standard?
A rising debate through the "fog of war" of America's current financial situation is whether or not it would benefit from a new gold standard.
In 1971, President Nixon officially ended the gold standard. Since then, the US Dollar has effectively lost 97% of its gold value. Could returning to a gold standard save the US Dollar? Some people really do think so
Take Gary Herbert, the Governor of Utah. Governor Herbert has recently passed the Utah "Sound Money Act" which officially declares gold and silver to be legal tender, with the added bonus of zero taxes on each. More US states are looking to adopt the same policy.
Dollar Down and Out
The recent downgrading of the US credit score has come at no surprise. America's debt addiction always was going to end in tears and the question of downgrading was never "if" but "when". The US Dollars claim to World Reserve currency could also be nearing its end. It now only accounts for 60% of global currency reserves. Ten years ago it accounted for 72%. Anything below 50% and it will no longer dominate as the World reserve currency.
Pricing gold
Usually the fluctuations in the gold price reflect the current market. Currencies rally and gold prices fall. It is no longer a secret that America is under financial pressure and has enjoyed many bouts of quantitative easing. Investors are getting worried and the gold bull run is getting fiercer as the money runs from the US Dollar. People no longer have faith in "fiat" currencies, not as they once did.
Set a standard for the US Dollar
A gold standard would introduce discipline to the Dollar. America could no longer print what it did not have. Inflation and Dollar debasement would no longer be an issue therefore saving itself from self destruction.
The whole gold standard debate is now going mainstream, with authoritative figures such as ex-Federal Reserve chairman Alan Greenspan and World Bank president Robert Zoellick calling for the change. The World and America is waking up to the financial mess and finally trying to save what is left.
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