What if the U.S. Currency Collapsed?

The US Money Supply (M3) is up to $20 Trillion

M3 used to be used as the best measure of the United States money supply.

On March 23, 2006, over 13 years ago, the government discontinued publishing this number.

For definitions, see this link: https://en.wikipedia.org/wiki/Money_supply#United_States

Private companies have continued to keep track of the money supply. See this link at shadowstats.com, see the top left graph:

http://www.shadowstats.com/charts/monetary-base-money-supply

These numbers are important to keep track of, because they can help predict inflation.

For example, in 2003, M3 was only $8.5 Trillion. https://revealingfraud.com/2003/01/silver-gold/why-no-talk-of-32567-oz/

Meanwhile, the US. Gold hoard has remained constant, at 261 million ounces. https://fiscal.treasury.gov/reports-statements/gold-report/current.html

If the USA were to have a gold backed currency, the math is very simple. Here is the formula:

Money / Gold

Let’s plug in the numbers.

$20,000,000,000,000 / 261,000,000 oz. =

First, let’s remove some zeros. This way I’m less likely to miss computing a zero on my calculator.

$20,000,000 / 261 oz. = $76,628/oz.

So, this means if the government wanted to use its gold to back up the U.S. Money supply, it would have enough ounces of gold to back up every $76,628 worth of money with one ounce of gold.

Or, stated another way, if the U.S. Government wanted to stop a potential rush on gold, and used its gold supply to stop the rush to gold, it could effectively cap the price of gold at $76,628 per oz., just so long as they stopped printing any new money.

On the other hand, if the U.S. Government tried to cap the gold price below that, in theory, there would be enough money to bid up the price of gold to higher than that number.

But that only considers U.S. paper money. There is paper money around the world that could also buy more gold. It is far harder to find the number of the global currency totals. I believe the “powers” try to keep the U.S. Money supply at about 25% of world totals, suggesting that the world total is about $80 trillion. Sure enough, that is the number I find estimated: https://www.businessinsider.com/heres-how-much-money-there-is-in-the-world-2017-10

These days, there is more and more talk of a “partially gold backed currency”. This is silly. Let’s say the U.S. government backed up 10% of the currency with gold. If the government backed up M3, that would work out to one ounce of gold for every $7,662 worth of currency. Would anyone ever convert currency for gold at that price, when everyone can buy gold at around $1500 in the market? Of course not. People go with the lowest price available.

Besides, there is another big problem.

Let’s say the gold price runs up over $7,700, and the government price is now the new low price in the market. And let’s say people start converting paper money to gold, in order to sell gold to the market at $8000 or so. Well, the new lower 10% backing all quickly gets spoken for, during a run away gold price, because there suddenly become quick profit incentives to do that. (See, price fixing does not work.) The backing would only be available for the first 10% of people who converted, and then the gold would run out. And then the gold price could be off to the races again, with nothing to stop it, and the rest of the currency would then have no gold backing whatsoever. Just as if a bank ran out of money in a bank run.

So any discussion of a partial gold backing is just discussions by people who are woefully ignorant of basic long division and basic economic thought. Also note, in none of these types of discussions do they ever suggest what the gold “offer” price would be in any “partial gold backing” scenario.

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