The Price of Gold and an International Central Bank

Gold recently touched $1,000 per ounce — but, what is this price telling us?

Ron Paul has argued that “a soaring gold price is a vote of ‘no confidence’ in the central bank and the dollar.” I wholeheartedly agree; we can refer to historical charts of gold and the dollar index to reaffirm this point.

Recently, the United Nations released a report that “[argues] for a new system of soft pegs to correct severe deficits in debtor nations like the U.S. and surpluses in countries like China.” They say “the world economy would be better off with a system where governments intervene when necessary to either defend or depress their own currencies.”

What the United Nations fails to note is that we already have a system in which governments can strengthen or weaken their nation’s currency — it’s called central banking. For example, according to Peter Schiff, the Chinese central bank has succeeded in undervaluing the Chinese Yuan for some time now.

The UN doesn’t understand that a true gold standard “[corrects] severe deficits” on its own; historical evidence proves this point.

Oddly enough, the UN proposal is similar to the failed Bretton Woods system. So, the question is: why would the UN propose something that is destined to fail?

The answer is quite simple: they wish to consolidate power.

The report is quite clear–central banks must operate within the “multilaterally agreed framework for exchange-rate management.” Ultimately, winners and losers will be picked in this proposed system.

In other words, those who head the commission possess the power to make an entire country richer or poorer than it otherwise would have been, which is a power no individual or group should ever yield. For every country that becomes richer, there is a country that becomes poorer.

A younger and wiser Greenspan once said that “in the absence of [a] gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” He was entirely correct; this is one reason why the price of gold is rising. Rising prices combined with the prospect of an international central bank sowing the seeds of its own financial bubble is alarming to the common people.

The price of gold is merely one avenue through which the marketplace is communicating the inevitable consequences of a seriously flawed monetary policy.

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