Gold Is Money. Everything Else Is Credit. (2024)

“Gold is money. Everything else is credit.” Those were the words of investment banker J.P. Morgan in his testimony before Congress in 1912. Morgan became the wealthiest banker in the U.S. in the late 1800s and early 1900s. He built gold reserves that made his bank far more secure than most other banks in America. When bank balance sheets became stretched and the economy entered a recession, alert depositors who were well aware that loan losses could soon wipe out their savings rushed to withdraw their savings deposits. When word spread, the masses would stand in long lines to demand a return of their wealth. Only the earliest of depositors demanding their money back could be sure of success. The panic of 1907 led to a very sharp 29.2% economic decline in the U.S. In the 1910­-1911 time frame, another recession and panic occurred when GDP fell by 14.7%, and these panics led to the wealthy elite seeking help from Government. J.P. Morgan led the way because he didn’t like having to stop panic contagions by dipping into his own wealth.

So, Morgan led a group of elite bankers of U.S. society on a secret mission disguised as a duck hunting trip to Jekyll Island located off the coast of Georgia with the actual intent to manipulate lawmakers into creating the Federal Reserve Bank, to remove their risk of losing their fortunes from bank panics. The Federal Reserve Act was passed into law by Congress in 1912 and life was breathed into the Federal Reserve in 1913. The names of the elite members of American society who orchestrated plans to create a central bank in the U.S. and influenced key politicians to pass the Federal Reserve Act in 1912 are outlined in G. Edward Griffin’s illuminating book Creature from Jekyll Island. It is a fascinating story of elite members of our society who boarded a train in Hoboken N.J. for a duck-hunting trip. But the ducks they were actually hunting were future Americans like you and me. Through taxes, including the hidden tax of inflation, we common folks are in fact called on to ante-up our wealth to protect the shareholders of the Fed, meaning JPMorgan Chase and the other major money center banks that are the Fed’s shareholders. Beginning with the creation of the Fed, money could now be more recklessly loaned, allowing bankers to earn even larger profits. But if panic occurred, there was limited risk of loss for the shareholders of the Fed. The Fed’s creation resulted in the public taking on the risks of major banks, allowing them to enjoy massive profits but not bearing losses from bank panics. That is exactly what happened in the 2008 financial crisis.

Gold Gets in the Way of Socialism

And so, following the Great Depression and the Second World War, America embarked on the first major socialist policies, both in terms of handouts to lower-income classes of Americans as well as to corporations that produce weapons of mass destruction and other foreign and domestic boondoggles. Following World War II, America entered into the Korean War, followed soon after by the Vietnam War. But how were these expenditures for socialism and endless wars going to be financed? If the U.S. borrowed money or printed it to pay for endless wars and socialism, the dollar would no longer be “as good as gold.” Instead, the gold dollar was replaced with the debt-based dollar. No longer having any intrinsic value, its value depends on (a) the ability of debtors to pay their debts and (b) the extent to which U.S. military power forces countries to use the U.S. dollar in international trade. And so, not surprisingly, European countries, beginning with France, began to demand the exchange of dollars for gold as permitted under the 1944 at Bretton Woods agreement.

Why You Must Own Gold

Which leads to the reason why you must own gold if you want to preserve your wealth. With gold exiting the U.S. coffers in massive quantities, America’s viability as an economic super power on the world stage was threatened. So on August 15, 1971, President Nixon unilaterally slammed the gold window shut. He said it was only a temporary move “to stop the speculators from exchanging dollars for gold.” That, of course, was not true. The move out of dollars into gold wasn’t speculation at all. It was based on a complete value change of the dollar from one with intrinsic value based on gold to one without any intrinsic value. Moreover, the dollar became a risky currency because its value is only as good as debtors’ ability to pay their debts. Nor was the cessation of dollar-to-gold-convertibility temporary because to this day, nations have been forced by American military might not to use gold as money domestically or in foreign trade. In fact, one of the main reasons for growing tensions in the world now has to do with adversarial nations like China and Russia and the BRICS as a whole defying the U.S. demands to use only dollars and not gold for international trade. Led by China and Russia, the BRICS and the many other countries that are trying to joining the BRICS are beginning to abandon the dollar. A main trigger toward that end was the U.S. sanctions placed on Russia during the Ukraine war. If the U.S. could do it to Russia, why would they not do it to any disobedient country?

With the U.S. dollar no longer constrained after August 15, 1971, by an attachment to gold, it seemed the U.S. Government could spend without limits for social and military programs. And so it did. The U.S. used its “blank check” to expand its military-based empire and domestically buy votes by giving free stuff to Americans. The process of debt issued to finance federal government spending has continued since 1971 and is now accelerating to the point where the U.S. financial solvency is rightly being called into question. With the U.S. now owing $31.5 trillion, much of which is owed to foreigners, and with higher interest rates on the enormous level of debt, the ability of the U.S. to continue spending more and more, faster and faster, is threatened. Rising rates have also resulted in negative equity for the Fed and other central banks that purchased billions of dollars’ worth of fixed-rate debt instruments when interest rates were hovering around zero.

Given the obvious pathology of the American economy and the U.S. dollar, net export countries like China and Saudi Arabia are reducing their purchases of U.S. Treasuries at just the time when the United States’ borrowing needs are growing exponentially! A process of dollar disinvestment began gradually over the years at first but now is accelerating as the handwriting of the dollar’s doom is on the wall. Now instead of China buying U.S. Treasuries, they are buying gold or using the dollars they hold to buy up infrastructure projects in third-world countries and to build the One Belt One Road trading and banking infrastructure, abandoning the dollar and trading with other nations in a neutral currency that isn’t used to punish nations that the U.S. disfavors.

Without foreign buyers of U.S. debt, the Fed will either have to allow interest rates to rise to much higher levels in order to fund the Treasury (which will snuff out the private sector) or print money causing the dollar to head toward hyperinflation and the dustbin of history where all currencies not backed by gold eventually end up.

See Also

“Gold is Money” Everything Else is Credit – Mining Discovery

Most people ultimately believe the Fed will succumb to massive pressures from big spending politicians who will give stuff away to buy votes from citizens or to ensure money is available to fund pet projects of major defense contractors or other corporate boondoggles in exchange for election campaign financing. Again, the irresponsible fiscal behavior of the U.S. and the weaponization of the dollar are the reasons foreign nations headed by China and Russia along with Brazil, India, South America, Saudi Arabia, and many other countries are buying massive amounts of gold and stepping outside of the dollar system as much as possible. Those nations envision a bankrupt United States and a dollar that is destined to become worthless. And that is what you must do too, if you want to preserve your wealth.

The chart above illustrates the wisdom of tucking your savings into gold. The yellow line at the bottom of the chart shows that the price of oil in grams of gold has not risen at all, while in terms of British pounds, U.S. dollars, and euros, the cost of oil has risen dramatically. Note that the rise in price denominated in those currencies occurred only after gold was detached from money by Nixon in 1971.

Own Gold Shares to Increase Wealth

So, we own gold to retain our wealth. But you can actually grow your wealth by owning gold exploration companies that have the technical ability to find rich gold deposits in the ground. One of my favorite companies is Snowline Gold Corp. On June 14, I interviewed Scott Berdahl, the CEO of that company, on my weekly Turning Hard Times into Good Times show. You can watch my interview with Scott on my YouTube channel here.

Below is Snowline Gold’s stock chart. The sudden rise in the company’s share price starting in July 2022 resulted in exceptionally strong gold drill assays as experienced gold and silver exploration investors recognized Snowline was on to a very significant gold discovery. Now the drills have just started turning on the company’s Yukon property for the 2023 field season. He said the first gold assay results should come in July and certainly no later than August and that when they start they will come “fast and furious” because of the company’s aggressive 2023 drill program. At the end of my interview with Scott he said, “I think Snowline is going to be a very different company when this current field season ends.”

Snowline Gold is personally my largest holding because I firmly believe it will enjoy another significant move higher in 2023 as drill results begin to be reported. Finding shares of companies that discover major gold deposits is the main focus of J Taylor’s Gold, Energy & Tech Stocks. We have quite a few junior exploration companies that are building very significant gold and silver deposits with the potential of providing investment gains of 5- to 10-fold over the next couple of years.

To learn which companies have that kind of upside potential and to keep up with their exploration progress, subscribe to J Taylor’s Gold, Energy & Tech Stocks by clicking on the “Subscribe” page here, https://www.miningstocks.com/select. Or sit tight and wait until we begin publishing our weekly letter here on Substack which we are endeavoring to make happen as soon as possible.