Final Word from Monday, November 8, 2010

Pres. Robert Zoellick of the World Bank called in the FT today for a debate on readopting a modified global gold standard. Readers will note that he made little reference to how it would be done. When the dollar came under attack in 1931, the Fed raised interest rates sharply, then expanded the money supply and watched as confidence collapsed and half of all U.S. banks closed or merged with others. Roosevelt responded by banning private ownership of gold on April 5, 1933, forcing Americans to turn over their gold within three weeks at $20.67 per ounce. Eight months later the dollar was devalued by 41%, to $35 per ounce of gold. By confiscating the gold, the government was able to keep the devaluation "profit." Czech gold bugs who remember their own 1953 monetary reform should be asking if any form of modern gold standard is possible without a confiscation order at far below the market value.[Czech Republic Financial Times United States of America Franklin Delano Roosevelt Federal Reserve Bank]

Glossary of difficult words

gold standard - a system by which the value of a currency is defined in terms of gold;

gold bug - an advocate of a single gold standard for currency; a person favoring gold as an investment;

confiscation order - an order or decree in which a government or court requires that someone surrender a piece of property.


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