"It Wins the Election, It Gives You an Erection..... Step Right Up!"

Gold, the ultimate symbol of wealth, has been getting a little more attention lately since the dollar began to plummet. Investors, afraid of total economic collapse, have been placing their trust in this eternal metal, but why? After all it's just an arbitrary material that we have simply assessed a value to. Perhaps it's because gold is practically indestructible and resistant to most acids, air, and moisture unlike other metals. It shines and is highly mailable, one ounce can be beaten into 300 sq ft, and because of it's conductivity it is now used in electronics, most of all it's rare. "Gold is a relatively rare element, making up only 0.0000004% of the Earth’s crust (by mass). You would need at least 250 twenty-ton trucks full of earth in order to recover just 20 grams (just over half of one troy ounce) of gold. That’s a cube of gold with measuring less than one-half inch across! Gold is valuable simply because it’s scarce and difficult to extract."(http://www.pbs.org/weta/roughscience/)

  Okay, so it's awesome, but why use it to back currency? The easiest answer is that it holds it's value, historically. "Between 1880 and 1914, the period when the United States was on the “classical gold standard,” inflation averaged only 0.1 percent per year."(www.econlib.org) However, according to inflationdata.com the current inflation rate of the US dollar is 2.65%. As our currency continues to fall and gas prices rise it's no wonder that people are looking for a stronger backing of our currency than just the "word" of the government. What makes a "gold standard" work is a central bank willing to raise it's bank rate, the Bank of England was one of the most exemplary banks because of their willingness to do this. "By causing other interest rates in the United Kingdom to rise as well, the rise in the bank rate was supposed to cause the holdings of inventories and other investment expenditures to decrease. These reductions would then cause a reduction in overall domestic spending and a fall in the price level. At the same time, the rise in the bank rate would stem any short-term capital outflow and attract short-term funds from abroad."(www.econlib.com) However, we continue to drop our interest rates, but banks are getting stingier with who they grant credit to.

     

   Hey! Why lie, we all want to be rich, we want our dollar to go farther. Money makes the world go round! That's not greed it's progress, yet "progressives" say this is impossible. Europe changed over their currency with little problem, by the way it's also backed by speculation and well.... But if we look at what history tells us, the years the UK and the US where under the gold standard there was stability and growth, defiantly something I think we can all agree that we are in desperate need of.