Gold Standard: What is the US dollar backed by

Gold Standard: What is the US dollar backed by

 0riginally published on March 5, 2007, but updated in May 2016

Among those whom I like or admire, I can find no common denominator, but among those whom I love, I can: all of them make me laugh.H. Auden 1907-1973, Anglo-American Poet

What is the US dollar backed by?

The US dollar is backed by nothing other than empty promises but the masses are not ready for Gold standard and here’s why.

Many a naysayer, many of which fall under the newsletter writers camp keep pumping the nonsense that all paper money will cease to exist and that everyone will revert to the gold and silver standard in the not too distant future. First of all, they are about 1000 years too late and second of all, they are in sore need of a mental check-up. They forget to take mass psychology into consideration and one must understand that the biggest driving force anywhere is mass behaviour also known as Mass psychology.  The Gold standard did not prevent theft and outright robbery; banker was still known for shaving gold coins and other shenanigans

So many gold bugs will ask the following question: What is the US dollar backed by?  They will also gladly answer the question by stating that it’s backed by nothing. In other words its as good as rubbish and while that might be true, it does not matter for the masses think otherwise.

Walking with bags of Gold is far from convenient

Nobody in hell including yours truly wants to run around with a heavy sack of gold or silver coins strapped to their necks. It just not convenient anymore and since we live in an instant demand and instant gratification society this line of thought will remain a dream.   The way to end the problem is to put the following rules into play

  • Banks should never be given any power whatsoever. This means that they should not be allowed to lend money they do not have. Now via the fractional banking system, they can create 9 new dollars for every dollar of deposit they have. This outright theft, they are creating money they don’t have and charging a fortune for it.
  • Governments should not be allowed to create any debt. Before any new project is approved the government should have the money to pay for it

There small other refinements that can be added, but if those two main rules are enacted, we won’t need the Gold standard.  We have inflation and fake boom and bust cycles because bankers control the money supply. Cut their supply and the dirty game comes to an end.

General Motors has made no money selling cars for over 10 years 

It’s amazing but it appears that over the last decade or so GM has not been able to make money selling automobiles. Thus, one wonders what the hell they are doing in this business; to make matter worse, their profits have plunged more than 45% in the same period. Its total liabilities have grown from some 200 billion to some 450 billion. How can they ever expect to pay these liabilities down when they gross profits in 2006 were 22 billion dollars.

At some point in time something is going to have to give; expect the workers who are depending on their pension and medical benefits to get a huge surprise in the not to distant future. The other U.S auto manufacturers are in just as much trouble. We stated a long time ago that the only way they could ever compete with the Asians was to completely close shop and move overseas or the other possibility was to hire non-union workers.

However, their pension and medical insurance liabilities are so large now that they need to get the cheapest labour possible and one that does not require too many benefits. Such a scenario is only available in Asia. The article below explains in a clear and concise manner how the US government has helped the Unions bankrupt a once-powerful Icon of the US economy


There are currently 440 nuclear power plants operating in the world. Roughly another 175-200 are either being built or are in the planning stages; this number continues to increase by the day. The current demand from the existing 440 nuclear power plants is overwhelming supplies thus imagine what is going to happen when all these plants come online.

The closure of Cameo’s cigar mines has knocked out a huge amount of uranium from the markets. It is estimated that this mine will only be operational sometime in 2008. In the meantime, any supplies that the smaller uranium companies may have found have almost been swallowed up due to the flooding of the cigar mines. In other words, demand is still exceeding supply by almost 50%.

Uranium mines currently supply slightly over 50% of the current demand the rest comes from above the ground supplies. These supplies are rapidly running out. When all the new Nuclear power plants come online, we expect demand to surge by an additional 45% at the very least. It’s, for this reason, it’s so hard to predict how high uranium could eventually trade.

We expect a pretty sharp pullback at some point in time when many of the hedge funds start to unload their uranium supplies and lock in profit; this in our opinion will be nothing but a wonderful buying opportunity. Finally, it takes at least three years if not more for a new uranium mine to be fully operational; hence, demand cannot be satisfied immediately and this is the perfect recipe for a bidding war.

One never needs their humour as much a when they argue with a fool.

Chinese Proverb Sayings of Chinese Origin

Other stories of Interest:

Random Musings IV (June 2007)

Iran’s long Term energy Problems   (April 3)


Random Musings VII (March 22)

Housing Bust (March 22)

Overbought Markets (March 2007)


oil to gold ratio very bullish for oil  (Feb 17)

What is the US dollar backed by: Nothing