The gold standard is coming

In order to work properly and productively markets need a reliable pricing mechanism. By manipulating interest rates on such an unprecedented scale the Federal Reserve has effectively destroyed the ability of our credit markets to genuinely price the borrowing and lending of money. Does anyone really believe a 10-year Treasury should yield little more than 1.5% or a 30-year government bond just under 3%?

This point is critical: The Fed’s forced suppression of organic interest rates has made the pricing of credit impossible to figure. And guess what? If you can’t determine the real prices of products and services, you get less–or none–of them. It’s Soviet-style economics…

This is why the gold commission will be critical. Under a properly functioning gold standard the Fed’s penchant for rigging interest rates would be sharply curbed, if not eliminated. For instance, let’s say gold was pegged at $1,500 an ounce. If it went above that level our central bank would remove excess money from the markets by selling bonds from its portfolio; if it went below that peg then the Fed would buy bonds to meet the market’s legitimate demands for money. Setting interest rates would no longer work; the Fed would have to let them float.