Some of our readers probably like goldwith an ounce of gold above $1,300 whats not to likeand talk of reviving the gold standard is going around. The U.S. has been off the gold standard since 1933.
David C. Harper, editor of Numismatic News , reports sobering figures for people who think the U.S. should return to the gold standard. Gold dealer Steve Album did some thoughtful calculations:
According to the Federal Reserve M1, current number of dollars is about 1.75 trillion. After doing the calculation, I found that at the current gold price of about $1,280 per ounce, we would need about 48,000 to 50,000 tons of gold to back up all the dollars. That is about one-third of the amount of gold that has been mined since ancient times, about 150,000 tons according to an article that appeared in The Economist a few months ago.
There is absolutely no way any government could acquire that much gold. The alternative would be for the price of gold to rise to something like $5,000 per ounce, at which point only about 350 million ounces would have to be stashed in Fort Knox. No wonder the gold bugs are hungry for the gold standard. But if we take the M2, then we are talking about 8.65 trillion dollars.
That would seem to be the end of that. Ah, but not so fast, counters Harper. It isnt a question of the quantity of gold; it is a matter of pegging the price (he figures somewhere about $3,000 an ounce) and of political will.