The US government then attempted to pay this last bond at a fraction of the face value and not in gold but paper.
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In addition to all of these tax issues, the U.S. in the early 1930s was on a gold standard where paper currency was legally convertible into gold.
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With gold production working at full capacity, combined with the massive outstanding paper gold position, increased demand for physical gold can only be satisfied at much higher prices, which we are likely to see in the next few months.
Commercial banks would put up gold or commercial paper and get cash in return.
Your money used to be backed by real things like gold and commercial paper.
Nations would settle international payment deficits and surpluses in gold rather than paper-based currencies.
By the end of next year, I would like to see the introduction of gold-linked paper currencies.
There is abundant empirical evidence that the world economy will create many more jobs with its currencies convertible into gold than with paper money.
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Those banknotes from the New York Fed or the Philadelphia Fed or the other ten banks had to be backed by solid collateral: gold and commercial paper.
The United States outgrew it as early as 1810 or so, as dozens and then hundreds of commercial banks began issuing gold-linked paper banknotes as an alternative to metal coins.
If the paper gold market continues to sell off while physical acquisition continues to accelerate, this is a strong warning about the economic recovery and a leading indicator that could set the stage for a new bull market in precious metals.
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Now with gold over valued, silver coins disappeared from circulation and gold coins (and paper money) dominated the currency.
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Before allowing that tendril of delicately battered calamari to hit the tongue, a diner should first admire the artistic manner in which the tempura was arranged upon the gold-flecked Japanese paper lining its woven bamboo dish.
The recent paper losses on gold are unlikely to have a big impact on the universities.
In other words, these countries wanted to confiscate gold in exchange for superfluous paper.
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At the outset of the Great Depression people distrusted banks but trusted paper currency and gold.
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This mongrel mix between the classical gold standard and a fiat paper regime was at root unstable and unsustainable.
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However, the monetary base consists not only of gold, but also of paper money and bank reserves created by the central bank.
Gold is scarce relative to paper in the current environment.
But then, in 1971, Richard Nixon replaced a more-or-less solid dollar, vaguely backed by gold, with a pure paper dollar, backed by nothing but the good intentions of government employees.
One wonders how Doug Von Allmen, who began life in poverty, working as a window washer and factory grunt, became a man intolerant of any "creaking" on his yacht, irritated by the slightest whooshing of the air-conditioning system and concerned with the placement of gold-plated toilet-paper dispensers.
The increase in the demand for paper currency and gold not only had a quantity effect on the money supply but it also put upward pressure on the price of gold, which meant that dollar prices of all goods and services had to fall for the relative price of gold to rise.
WSJ: Arthur B. Laffer: Taxes, Depression, and Our Current Troubles
Because it is impossible to manufacture and traditionally difficult to extract and process from the ground, gold served as a stable peg for coinage and paper money issuance--but no nation operates on a "gold standard" today, as most abandoned it during the 20th century after major powers suspended it periodically during times of costly military adventures during the 19th century.
This was then placed in a pencil and used to scribble on paper imprinted with broken gold stripes.
Ideally, you could trade your fiat paper currencies for these gold-linked currencies at any bank that offers foreign exchange services.
The move to fiat money (paper not backed by gold) created the huge expansion in global money supply that the pessimists had predicted.
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Some were tempted by promises of land, others by the fact that the king's armies paid in a gold-backed currency, not paper dollars.
At first, they might seem like mostly a precious metals investment product, a speculative vehicle, sort of like trading paper shares in a gold ETF.
With the outbreak of World War I (1914) the central banks of most major countries abandoned the classical gold standard and began issuing fiat paper money.
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