A long time ago, a man who would later become Federal Reserve Chairman wrote an essay titled “Gold and Economic Freedom“. In it, he expounded on why gold and economic freedom are inseparable, and why deficit spending is a scheme to confiscate wealth.
Alan Greenspan, 1967:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
This essay is particularly relevant today when the US government continues to deficit spend at an alarming rate. Anyone holding US dollar denominated debt globally has to be concerned about the US government’s debt & deficit situation. Not to mention the 25% inflation we have experienced during the last four years, or the two stooges who stand to be the President of the United States for the next four years.
Jared Dillian of the Daily Dirtnap produced a valuable X thread on gold yesterday. In it, he posited that the US will begin full-blown debt monetization this year and throughout the entire term of the next POTUS.
The way Dillian discusses ‘full-blow monetization’ he is implying that the Federal Reserve will begin to purchase US Treasuries in order to help the Treasury control the yield-curve, yield-curve control (YCC). Due to the fact that the Fed can create new money with a keystroke this would in turn serve to increase the money supply. In theory, it would also increase inflation and cause all sorts of tangential knock-on effects throughout the economy and financial markets.
Higher Treasury yields are an increasingly large problem for the US Treasury as it is constantly refinancing its $34 trillion debt pool. Dillian believes that higher interest rates are now bullish for gold because it increases the probability that we will reach a full-blow debt monetization scenario.
Dillian’s analysis rings true.
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