Gold is one of the most fascinating of all rare metals. Throughout all history it has been given a special, at times sacred or spiritual value, since six thousand years ago when the Egyptian Pharoahs’ tombs were filled with it to accompany the dead on their journey. In times of world financial crisis as in the 1930’s, gold is preferred by central banks and ordinary citizens as a store of value when paper money loses value. We are approaching another of those times when the accumulated paper debt of the dollar system is debasing the worth of paper dollars. What’s highly significant in this light is to see which central banks are buying all the gold they can get.
The dollar today is no longer backed by gold. That has been so since Nixon unilaterally abrogated the 1944 Bretton Woods Treaty and took the dollar off its statutory gold backing to float free in August, 1971. He did so at the insistence of then Under Treasury Secretary Paul Volcker and Volcker’s patron, David Rockefeller at Chase Manhattan Bank. Nixon took that desperate measure, simply said, because the Federal Reserve vaults of reserve gold were disappearing as France, Germany and other trading partners of the United States demanded gold in exchange for their accumulated trade dollars, as was allowed under the Bretton Woods rules.
Since 1971, with no gold backing it, other than the carefully-guarded fiction that the Fed still has the world’s largest stock of gold reserve in its deep vaults, alleged by the Fed to exceed 8,000 tons, the fiat dollars in world circulation have expanded without limit. This is the source of the Great Inflation the world economy has undergone over the past forty five years, as dollars in circulation have expanded exponentially by some 2,500% since 1970. The confidence in holding dollars, still the world’s leading reserve currency, has been maintained by Washington through various tricks and deceptions.
After the oil shock of October, 1973 Secretary of State Henry Kissinger spoke of a “petrodollar.” The dollar value was backed not by gold but by oil, everyone’s oil. The price of oil had been manipulated by Kissinger and others in 1973, as I detail in my Gods of Money book, to increase by 400% in a matter of months, forcing Germany, France, Latin America and much of the world to buy dollars. Washington made certain as well in 1975, when Germany, Japan and other nations tried to buy OPEC oil in their own national currencies, that Saudi Arabia and OPEC countries would accept only dollars for their black gold, the oil.