Comment: America! Eureka! ... Gold! ~ Brief history. 1787 ~ 2001

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America! Eureka! ... Gold! ~ Brief history. 1787 ~ 2001

2001. The Privateer Market Letter http://www.the-privateer.com/gold2.html

1787. The Early Gold Wars

The Congress shall have power ...to coin Money... and fix the Standard of Weights and Measures."

That is precisely what the Congress did. In 1792, the Dollar was fixed by law at 24.75 grains or 0.05156 troy oz. of Gold. In 1837, the coinage was reworked and the Dollar was defined at 25.8 grains of Gold "nine-tenths fine". That gives 20.67 Dollars to one troy oz. of Gold. That was the Dollar's "fixed value" (see the quote above) for 96 years from 1837 to 1933. .... ....

War Declared - 1933-34

(The reference for this material is: Economics And The Public Welfare - A Financial and Economic History of the United States, 1914-1946 by Benjamin M. Anderson) .... ....

March 6, 1933
Using a wartime statute passed in 1917, Mr Roosevelt issued a proclamation closing every bank in the U.S. for four days. The banks were closed from March 6 to March 9. .... ....

Gold War I - The "London Gold Pool" - 1961 to 1968

By the beginning of the 1960s, the $US 35 = 1 oz. Gold ratio was becoming more and more difficult to sustain. Gold demand was rising and U.S. Gold reserves were falling, both as a result of the ever increasing trade deficits which the U.S. continued to run with the rest of the world. Shortly after President Kennedy was Inaugurated in January 1961, and to combat this situation, newly-appointed Undersecretary of the Treasury Robert Roosa suggested that the U.S. and Europe should pool their Gold resources to prevent the private market price for Gold from exceeding the mandated rate of $US 35 per ounce. Acting on this suggestion, the Central Banks of the U.S., Britain, West Germany, France, Switzerland, Italy, Belgium, the Netherlands, and Luxembourg set up the "London Gold Pool" in early 1961. .... ....

The Paper Era Begins

In early 1980, Mr Volcker's new Fed policy began to bite. U.S. interest rates began to skyrocket. As they rose, the Dollar first slowed its descent, then stopped falling, and then began to rise. Both the public and the investment community which had stampeded into Gold was lured back into paper by this huge rise in interest rates - and by the prospect of a higher U.S. Dollar. The threat of financial meltdown was averted, but at a cost. The U.S. Prime rate hit 20% in April 1980 and stayed there (with a brief dive in mid-1980) until the end of 1981. There was a rush out of Gold and back to Dollars.

Once interest rates began to come down, in early/mid 1982, the choice of where to put the Dollars faced investors once more. .... ....

The way was cleared for the subsequent explosion in U.S. debt. With the U.S. being the world's "reserve currency", the way was in fact cleared for a debt explosion right around the world. It was also cleared for five of the biggest bull markets in history. .... ....

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul