|Some thought provoking comments by a subscriber to the Dow Theory Letters http://www.dowtheoryletters.com appeared in the Members Section today. The following is the complete text of those comments:
"let's see ....262 million ozs. times $320 market price equals roughly $84 billion to collateralize $6 1/4 trillion of debt...not including GNMA,FNMA etc. which are not guaranteed just approved by Government...but they would probably bail them out anyway...national debt grew over $525 billion in last 14 months...gold supply at market equals $84 billion .....in 14 months national debt grew more than 6 times the value of the U.S. Gold supply....I'm getting dizzy from this madness.....think I'll hug my gold investments tonight...however being prudent I'll start with my wife.... R Rosen"
Prior and up until 1935 holders of the the Dollar could exchange $20.67 of them for one ounce of Gold. From 1935 to 1968, the U.S. redeemed dollars held by foreigners only at the rate of $35 for each ounce.
The following is from the website http://www.cals.ncsu.edu/course/are012/lecture/lectu4/sld003.htm: "Some folks still think that the U.S. Dollar is backed by gold. It is not. What do I mean when I refer to the dollar being backed by gold? Well years ago, the U.S. treasury could only print as much money as the U.S. treasury had in gold reserves. For example, if the U.S. treasury had $1 billion dollars worth of gold in reserves, then only a $1 billion dollars of paper money and coinage could be printed or stamped out. The only way to increase the money supply under this system was to increase gold reserves. If gold reserves decreased due to payments in gold for imported commodities, then the money supply had to be decreased."
For some expanded thoughts on Gold, Dollar and the Federal Reserve go to http://www.house.gov/paul/tst/tst2002/tst061002.htm where Representative Ron Paul of Texas elaborates.