Could President Trump put America back on the gold standard?
The possibility is more real now than it has been in many years. Libertarian pundit Ron Paul says “[w]e’re in a better position than we’ve ever been in my lifetime as far as talking about serious changes to the monetary system and talking about gold.”
Intriguingly, West Shore Group chief global strategist Jim Rickards has calculated the gold price could jump up to $10,000/oz if the U.S. returned to a gold standard.
Why is a national discussion about the gold standard breaking out at this moment?
According to the Peterson Institute for International Economics, the support for an international gold standard around President Trump “seems like nothing that’s happened since the Great Depression.”
A cadre of trusted Presidential advisors such as John Allison, Judy Shelton and Robert Mercer have expressed their support for a gold standard. Others include Ben Carson and David Malpass.
Even Stephen Moore and Herman Cain, President Trump’s latest picks for possible Federal Reserve Board of Governor seats, have both lent their support to pegging the dollar to gold. Cain has said “Gold is kryptonite to big-spending politicians” and Moore has said a gold standard would be “a lot better than what we have now.”
The current president praised the gold standard in interviews shortly before his election, saying “[b]ringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.” In a separate interview he said, “[w]e used to have a very, very solid country because it was based on a gold standard.”
President Trump has long been an vocal admirer of gold, both as a safe-haven asset and as a decorative motif. In his previous life as a real estate developer, Donald Trump received a lot of press when he took a big lease deposit in gold bars in one of his famous towers.
Now that the President has firmly established his economic priorities, a return to the gold standard seems more realistic than ever. His tariffs and sanctions on China, Iran and others were driven by a desire to reduce the trade deficit and repatriate dollars. This would be much easier on a gold standard.
But… the gold standard hasn’t been in use since the 1970s.
Why is the idea still so popular?
THE GOLD STANDARD EXPLAINED
Throughout the last 200 years, most developed nations have used a gold standard as their monetary system at some point in time.
The benefit is relative price stability, which makes the currency more appealing to use in commerce and as a reserve asset. This is why the Gold-backed IRA has become so popular.
When a gold standard is in place, the value of a currency is linked directly to gold. This makes the country more self-regulating and it tends to stabilize the economy. Countries set a fixed price at which to buy and sell gold and then use that price to determine the value of their currency.
Why could this be good for America right now?
- The U.S. would hold gold reserves to equal the amount of outstanding currency and debt, improving our credit worthiness and the value of the dollar as a trade and reserve currency for other countries
- Politicians would be unable to print paper currency at will, containing inflation
- Politicians would be unable to “juice” the economy with short-term fiscal stimulus tricks
- It would force new financial austerity on ballooning U.S. government spending and out of control government debt
- America already has a big advantage in its natural gold supply. It is the second-largest gold mining country after South Africa!
The first gold-backed currency was introduced in Germany in the late 1800s, which is ironic considering that the later Weimar regime became the classic warning example of can happen if you abandon a gold peg: hyperinflation!
Wide adoption of gold standard currencies was in place by 1900 for almost all developed nations, including the United States. Unfortunately, the economic chaos of World War I made it difficult for many governments to maintain the system.
The United States began to drift off the gold standard in 1933 under the order of President Franklin Roosevelt, who also made the private ownership of gold coins and bars largely illegal. The final blow was dealt by President Nixon in 1971, when he closed the “gold window” that allowed foreign governments to exchange gold for dollars because it was depleting our nation’s gold reserves too heavily.
Today, the U.S. employs a “fiat system” where the dollar fluctuates dynamically against other countries’ currencies. It is no longer based on any physical commodity, gold or otherwise.
The good news is that private gold ownership became legal again in 1970, allowing retirement investors to add this important safe-haven asset to their portfolios again, just as central banks do.
READY TO PUT YOUR RETIREMENT ON THE GOLD STANDARD?
Regardless of what happens at the national level, research shows that holding a measure of gold and silver bullion in your retirement portfolio can lower volatility and increase risk adjusted returns.
It could be a great time to consider what happens if the market turns suddenly, as it will inevitably one day. In fact, Morgan Stanley is telling retirement investors to batten down the hatches!
Gold may not be everyone, but it could be for you. We recommend you get informed and prepared. For all seasons and all kinds of markets. That’s the kind of long term thinking your legacy deserves.
Let us help you make your move today with a Gold bullion IRA!