The absurdity of using the US dollar as the world’s reserve currency should not be underestimated. Nixon’s 1971 decision to replace gold with the US dollar, as the check and balance of the world’s financial system has permitted the US (and the rest of the world) to create money out of thin air for nearly 40 years. The advantages were clear - As long as currencies remain relative to one another, all governments were empowered to spend with reckless abandon, without need for old fashioned ideas such as raising taxes or balancing budgets. Richard Russell of Dow Theory Letters recently imparted some knowledge on the subject as posted on the King World News blog:

“Bear markets exist for the purpose of exposing and eliminating the greed, the corruption and the fraud that thrived in the preceding primary bull market. To my mind, the biggest fraud of the last fifty years has been the rise and acceptance of fiat "money." For that reason, I expect fiat money to meet its end before this bear market breathes its last. Judging by the size of the top, this could be the biggest bear market since the '30s. I believe this bear market means to take us back to basics and truth. That alone implies the end of central bank-created money and the rise of gold and probably silver. It may also end that immoral inflation machine, the Federal Reserve. Wall Street and its bankers now run the nation. That too will end. The history of money in the US is a legend of lies, manipulation, immorality and greed. I think this bear market will end those lies, one way or another.”

Any assertion that gold will play a role in the future of the global financial system is speculation at present, we do however, propose that precious metals will continue to offer the best vehicle for wealth protection during the drawn out and turbulent transition process from the current system to the next. The day that gold rises to compete with paper currency was predestined on the very day of their divorce. While we don’t know how far away that day is, it’s safe to say that it will most certainly come. Austrian economist Murray N. Rothbard, published a book in 2005 titled ‘What Has the Government Done to Our Money?’ The snippet below is one of the many hard hitting realities addressed in the book.

When a country goes off the gold standard and onto the fiat standard, it adds to the number of “moneys” in existence. In addition to the commodity moneys, gold and silver, there now flourish independent moneys directed by each government imposing its fiat rule. And just as gold and silver will have an exchange rate on the free market, so the market will establish exchange rates for all the various moneys. In a world of fiat moneys, each currency, if permitted, will fluctuate freely in relation to all the others. We have

seen that for any two moneys, the exchange rate is set in accordance with the proportionate purchasing-power parities, and that these in turn are determined by the respective supplies and demands for the various currencies. When a currency changes its character from gold-receipt to fiat paper, confidence in its stability and quality is shaken, and demand for it declines. Furthermore, now that it is cut off from gold, its far greater quantity relative to its former gold backing now becomes evident. With a supply greater than gold and a lower demand, its purchasing-power, and hence its exchange rate, quickly depreciate in relation to gold. And since government is inherently inflationary, it will keep depreciating as time goes on. Such depreciation is highly embarrassing to the government— and hurts citizens who try to import goods. The existence of gold in the economy is a constant reminder of the poor quality of the government paper, and it always poses a threat to replace the paper as the country’s money. Even with the government giving all the backing of its prestige and its legal tender laws to its fiat paper, gold coins in the hands of the public will always be a permanent reproach and menace to the government’s power over the country’s money.

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