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Fables, Fairy Tales and the Gold Standard

Fables, Fairy Tales and the Gold Standard

President Trump often tweets about the strength and health of the U.S. economy, and two weeks ago, he tweeted that the U.S. economy was the Gold Standard throughout the World.

The fact that Trump capitalized the words “Gold Standard” may have piqued the interest of those who believe in sound money principles.  Trump has in fact spoken in the past about a return to the Gold Standard, and some of the issues surrounding this are summarized in an October 2018 article: Trump Puts Gold Standard On The Table.

A simple interpretation of Trump’s tweet means that the U.S. economy is the envy of the world, the benchmark by which other economies measure themselves.

Nevertheless, Trump’s tweet can be viewed as valid in another way, whether this interpretation was intended or not.  When the U.S. dollar was de-linked from the value of gold in 1971, the U.S. dollar and its economy became the Gold Standard.  The U.S. dollar is the primary reserve currency throughout the world, and therefore almost everything bought or sold in the world has a reference point to the value of the dollar.

The value of the dollar is related to the health of the U.S. economy, and the U.S. economy, absent a “real” gold standard, IS the monetary standard throughout the world.

We are not suggesting that Trump will help navigate the world back to a Gold Standard, and any political, strategic or tactical discussions on that point are above our pay grade.  In fact, we prefer to summarize our understanding of the gold market by way of two children’s stories.

Fables and Fairy Tales

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