Signs Of The Gold Standard Are Increasingly Emerging...Worldwide

There have been a lot of experts all over the world who have been advocating a return of the gold standard. These experts include columnists and political figures who have brought awareness to the gold standard. One of China's most respected and influential monetary authorities has recently showed praise for the gold standard.

Ralph Benko
10/08/2012 @ 9:54AM

In the iconic movie Goldfinger the villain, Auric Goldfinger, pursues a nefarious scheme, code-named “Operation Grand Slam,” to contaminate America’s gold horde at Fort Knox, thereby leveraging the value of his own, uncontaminated, holdings.

Bond: Yes, well, I’ve worked out a few statistics of my own. 15 billion dollars in gold bullion weighs 10,500 tons. Sixty men would take twelve days to load it onto 200 trucks. Now, at the most, you’re going to have two hours before the Army, Navy, Air Force, and Marines move in and make you put it back.
Goldfinger: Who mentioned anything about removing it?
[Bond is stunned into silence]
Goldfinger: The julep tart enough for you?
Bond: You plan to break into the world’s largest bank, but not to steal anything. Why?
Goldfinger: Go on, Mr. Bond.
Bond: [thinking] Mr. Ling, the Red Chinese at the factory, he’s a specialist in nuclear fission… but of course! His government’s given you a bomb.
Goldfinger: I prefer to call it an “atomic device.” It’s small, but particularly dirty.
Bond: A dirty bomb? Cobalt and iodine?
Goldfinger: Precisely.
Bond: Well, if you explode it in Fort Knox, the… the entire gold supply of the United States would be radioactive for… fifty-seven years.
Goldfinger: Fifty-eight, to be exact.
Bond: I apologize, Goldfinger. It’s an inspired deal! They get what they want, economic chaos in the West. And the value of your gold increases many times.
Goldfinger: I conservatively estimate, ten times.
Bond: Brilliant.

Goldfinger is a superb metaphor for what really occurred to contaminate the gold standard’s reputation, keeping it off the policy table for 80 years — longer than even Goldfinger’s ambitions. The contaminating events produced an intellectual trauma that brings economists such as Obama adviser Austan Goolsbee to tweet such nonsensical doggerel as “Roses are red. Violets are pink. Don’t listen to goldbugs. No one cares what they think.”

Goolsbee, along with dogmatic reactionaries such as Paul Krugman, studiously ignore the implications of the utterly damning critique of the fiduciary currency system by The Bank of England last December in its paper titled Reform of the International Financial System. Meanwhile, outside the self-referential Cult of Neo-Keynesianism, in the past two years a dramatic shift in the international elite opinion stream is bringing the gold option back into consideration.

From Latin America, Manuel Hinds, twice Finance Minister of El Salvador, is on record in The Wall Street Journal advocating the classical gold standard. The “Sage of Mexico,” Hugo Salinas-Price, has kept the torch lit both for gold and silver at to increasing worldwide respectful attention. Three weeks ago this column noted an elegant work extolling the gold standard emerging from Chile, Axel Kaiser’s Intervention and Misery: 1929-2008.

Emerging from Europe, two weeks ago a column in this space delineated how the Deutsche Bank and the Bundesbank have come to the fore in rehabilitating gold’s reputation. Emerging from Asia, last week this column reprised handsome praise for the gold standard from one of China’s most respected and influential monetary authorities.

Since then, from the world’s largest democracy, India’s leading advocate of monetary integrity, S.S. Tarapore, former deputy governor of the Reserve Bank of India (and chairman of the iconic Tarapore Committee which, during his tenure, laid the roadmap for India’s capital account convertibility) published a significant piece in The Hindu Business Line entitled High Time RBI bought more gold, reprising some of the evidence of the rehabilitation of gold as the appropriate reserve asset for central banks and urging its bulk acquisition by the RBI.

Meanwhile, with worldwide implications, Basel III, supported by the Federal Reserve and the FDIC, moves gold to a Tier I asset. As the influential Daily Reckoning from Agora Capital put it, in a remarkable essay by analyst Doug Hornig entitled Gold Just Became Money Again, recently:

On June 18, the Federal Reserve and FDIC circulated a letter to banks that proposes to harmonize US regulatory capital rules with Basel III.

BASEL III is an accord that tells a bank how much capital it must hold to safeguard its solvency and overall economic stability.

Here’s the important bit:

At the top of the proposed changes is the new list of “zero-percent risk weighted items,” which now includes “gold bullion,” right after “cash.”

In addition, this vote of confidence from the highest monetary authorities gives further impetus to the remonetization of gold.

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