Friday, 7 September 2012

Richard Russell - Devaluation of debt against Gold

Here Richard Russell, who has written the "Dow Theory Letters"  newsletter since 1958, discusses the role of gold in resolving the debt which is currently choking the planet.

“The US owns the world’s greatest hoard of gold.  Here’s what I think the authorities have to do.  They should unilaterally, overnight raise the price of gold to a high value, maybe around $10,000 an ounce.  Thus, each dollar would be worth one ten-thousandth of an ounce of gold.  This would allow our enormous debt to be paid off with vastly devalued dollars.

This would be inflationary, since everyone who owned gold would own a pile of devalued dollars.  The huge increase in the number of dollars would drive prices up, and that would work against the current forces of deflation.

Nations owning gold would in turn (in order to compete) — devalue their own currencies, and thus be able to pay off their own ‘impossible’ debts.  In the end, a new world monetary system would have to be established, but the terrible problem of a planet choking on debt would be solved.

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