October 02, 2023

The Myth of Going off the Gold Standard, and What it Really Means to be a Stacker

by Rafi Farber

There’s this insidious, all-pervasive myth that has infected serious, scholarly monetary thought for over 50 years. I’m not talking about the econometric voodoo of the Keynesian “economists” used to justify inflation as a social good. Those myths, pretty much all of us in the sound money camp are already “vaccinated” against, if you will. We all know that printing money does not increase prosperity, only diminishes it. We all know that the Federal Reserve and its criminal central banking buddies around the world are the ultimate cause of the boom-bust cycle globally. We all know we are being robbed, and we all know that the process of global inflation is driving the entire planet to the point of species-wide madness. 

Then what myth am I talking about? Simple. It’s the myth that in 1971, the dollar went off the gold standard. Almost all of us in the sound money camp still believe this, some religiously. But it is simply not true. The flipside of that coin is that most of us erroneously believe that the dollar, since 1971, is a fully fiat currency, completely unconnected to gold. 

This is not only false. It is foundationally false in a way that skews our entire thought process as to what money even is, obfuscating the point of stacking gold and silver in the first place. Follow me along this logical thought process, and I promise you that at the end of it, you’ll see that stacking precious metals is so much more than merely preserving wealth, or hedging against inflation, or even protecting your family and loved ones against a monetary and economic collapse. It is certainly all of that, but that’s just the tip of the iceberg, and in the grand scheme of things, all of that is relatively inconsequential.

When I ask people why the dollar has value, the most common answer I get is along the lines of “people just agree on it”. As if there was some kind of Rousseauan social contract for money, some sort of colossal meeting at the world’s biggest football stadium where everyone took a vote on a medium of exchange and then just distributed it amongst the population ex nihilo. This never happened. There is no monetary contract and there never was. There can never be a manufactured, top-down agreement that determines what will constitute money on planet Earth, ever. (There is no social contract for government either, but that’s a different matter.)

Now yes, people do seem to agree on the value of a dollar, but why? How? Where does this agreement come from? To answer that question, we must go back in time. Not too far – only to this morning. When you woke up this morning, before you checked your X feed or saw any news or even climbed out of bed, how did you know how much work you had to do and how many dollars you had to spend today? The answer is simple. Because you knew, more or less, when you went to sleep last night. Maybe prices have changed slightly since then (in fact they certainly have), but not that much. And so you have a basic idea of where you fit in to the global division of labor today. The result being, you don’t panic. In essence, your “agreement” with everyone else today as to what a dollar is worth is based only on your extrapolation from that same agreement from yesterday

Now go back another day, and we have the same situation. And so on and so forth, day by day. For any given day, the agreement as to what a dollar is worth is based on the agreement from the day before.

The question is, how did this agreement get started in the first place? Was there a meeting at the world’s then-biggest football stadium at some point in the past? The answer is no. The agreement started before the dollar was even born. The word “dollar” was just like the word “gram” or “ounce”. A dollar was simply a unit of weight of gold or silver, and so a silver or gold dollar was just a standardized coin that weighed one dollar. As for the paper dollar bill, it was born as a receipt for a dollar’s weight of gold or silver. It was the first dollar “derivative”, having “derived” its already agreed-upon value from a weight of gold or silver. 

If you go back in time all the way back to when the dollar was born as a unit of anything, you will reach gold and silver. There is no avoiding it. The widespread agreement as to the value of a dollar today stretches all the way back to the agreement on the value of gold and silver. And where did this agreement come from? Again, there was never any colossal football stadium meeting on the value of precious metals. 

What happened was people just started exchanging things for other things. They traded. They figured out that some things like gold and silver trade better because they never go bad no matter what you do to them. And you can make them into stuff. Beautiful stuff. And so even if I don’t personally want gold or silver, the guy who I trade it with next seems to want it, and so I’ll keep it for now and exchange it for something else later. Eventually, someone will use it.

Trade is an organic process that ferments and matures from the bottom up. “Money” is simply the word we use for “most liquid commodity available in a given economy”. Money is the commodity that changes value the least from day to day. The commodity that the most people in the world want to buy, and the most people in the world want to sell, all at the same time. The dollar began as a unit of weight for these commodities. Then something happened. 

The dollar morphed into a derivative receipt for those commodities, or paper promises for money, in the form of a paper dollar bill. It continued to morph into still more promises for those paper dollar bill promises for money, what we call “bank deposits”. And again, it continued to morph into what we call “debt” or “bonds”. What the hell are those? They are promises for deposits which are promises for paper receipts which are promises for money, which is gold and silver.

But it doesn’t stop there. Not even close. It keeps going and going like the Energizer bunny from hell, higher and higher, promises upon promises stacked upon promises for money, piled up to heaven in an increasingly unstable monetary Tower of Babel. And the foundation of that entire global tower is physical gold and silver. 

The dollar never went off the gold standard. The dollar is still ultimately connected to gold, because gold is still money, and the dollar – no matter how many derivative layers or promises you have to trudge through – is still a gold derivative. It must be, or the chain back in time on which the entire agreement on the value of a dollar is based, collapses, and the division of labor breaks down. Meaning, you wake up in the morning and you have no idea what to do, and neither does anybody else. That’s a zombie apocalypse.

So what was 1971 then? It was simply an admission that the statutory rate of $35 per ounce was a lie. There were too many money derivatives, and not enough actual money to redeem them all. But this doesn’t change the fact that the gold window is still open. You can still access it at any bullion dealer. It takes about $2,000 to access that window, but it is still open. For that reason alone, people still agree that the dollar has any value whatsoever. Because it can still be redeemed, at an ever higher and higher rate, for actual money. For gold and silver. 

But that window will not remain open for much longer. The dollar will go off the gold standard at some point, and soon. When it does, and the dollar is no longer convertible back into gold at any rate, the dollar will no longer be a gold derivative. The promise for money represented by a dollar, and by extension all the derivatives on top of the dollar within the colossal pyramid that is the global monetary system, will collapse entirely. 

This is a scary prospect indeed, but it is also liberating, exhilarating, even cathartic. Because on that day, the entire massive engine of corruption that is poisoning every aspect of human society, will stop dead in its tracks. The military-industrial complex currently threatening the entire planet with nuclear war, funded by the creation of new promises for money, will crash. The pharma-industrial complex, funded by mandated Medicare and Medicaid payments, funded in turn by still new promises for money, will implode. The academic- and education-industrial complexes, funded by grotesque predatory student loans – promises for promises for promises for money – will cease to be. 

When all the myriad layers of promises for money are dead and gone, the only thing left to maintain any semblance of a division of labor on Earth will be money itself – gold and silver. When all the promises for money are all revealed to be lies, literally all of the goods and services on planet Earth will be on offer for physical money, at rates so desperate that even the most hardcore of stackers will be absolutely astounded.

To be a stacker, then, is more than to “get rich”, or even to provide safety for our families. To be a stacker is to be part of the global army of first responders to the global monetary catastrophe that is about to hit. It is to jumpstart the division of labor when the fuel to run it has been so diluted that the engine stalls. 

To be a stacker is to provide the means through which the human division of labor will ultimately survive. It is to prevent a literal zombie apocalypse from engulfing all we know, a situation where everyone wakes up in the morning and they have no idea what to do because they have no money and all their promises for money have been revealed to be worthless. And so they loot, or kill, or hide, or die. 

Before those forces of destruction come into full bloom though, the stackers must do their duty and spend their money, recirculating gold and silver into the system, and saving the entire planet by doing so. To be a stacker is to save and preserve the best parts of human civilization as we know it, while the corruption driving us all to the brink of madness, rots away with all its derivative promises for nothing.  

If we picture the inverted pyramid of our monetary system as an actual physical structure rather than strictly an intellectual concept, then to acquire an ounce of gold is to pile that pyramid with more dollars, with more promises, and at the same time hack away physically at the gold base supporting it all. Take a piece of that gold base while you still can. Keep it with you, and keep hacking away. Methodically. Intentionally. Consciously. And fully understanding the consequences, both good and bad.

At some point, the gold base of our pyramid will be thin enough that the entire thing will fall over. Once it does, it will be our job – or duty – to rebuild from the bottom up. Yes, we will “become rich” in the process, but that is almost inconsequential. We won’t take any of it with us in the end anyway, but we will preserve what is good for future generations. That is our calling. And hopefully, this time, we will rebuild with a lot more wisdom, humility, and dare I say fear of God.