rcwill

The 'Death of Gold' Revisited

Let us not forget in 1980 Paul Volker had the option to raise interest rates to 2% higher than inflation which was roaring at 15%. And, with a government debt of a mere 1 trillion in a 4 trillion dollar economy he could do that. Subsequently the money came out of gold and into CD's/Treasuries and the dollar went through the roof while gold went into the dump for 20 years.

Now our GDP (app. 13 trillion) to debt (9.4 trillion) ratio is closer to 4-3 rather than 4-1 as it was in 1980 and to do a Paul Volker would cripple the economy, drive up the cost of servicing a growing deficit and put many of our exporters out of business as the dollar would mimic the 1981 climb. Not to mention that the trade deficit would soar.

Inflation may be our only option though not a solution as time will tell.