What could be the price of gold if US Federal Reserve is abolished in its current form?
The answer as of August 2nd 2020 is US$25964 / oz, or US$1947 / oz, depending on the ratio gold reserve ratio (100% vs. 7.5%) new regime would use.
Sounds crazy? Not so much according to Murray Rothbard. This is a blog dedicated to sharing Rothbardian ideas and collection of links to his videos and books. One important aim of this website is to raise awareness of ‘heterodox’ economics to the public, create conversations around it, and advance our understanding economics which have been failing us again and again with seemingly never ending boom and bust cycles.
For that we start with introducing the Rothbardian Gold Price.
Who is Rothbard Anyway?
Murray Newton Rothbard was a Jewish American heterodox economist of the Austrian School, a revisionist historian, and a political theorist whose writings and personal influence played a seminal role in the development of modern libertarianism Murray Rothbard on Wikipedia | https://en.wikipedia.org/wiki/Murray_Rothbard.
What is Rothbardian Gold Price?
In the end of his book The Case Against the Fed, he claims that:
There is only one way to eliminate chronic inflation, as well as the booms and busts brought by that system of inflationary credit: and that is to eliminate the counterfeiting that constitutes and creates that inflation. And the only way to do that is to abolish legalized counterfeiting: that is, to abolish the Federal Reserve System, and return to the gold standard, to a monetary system where a market-produced metal, such as gold, serves as the standard money, and not paper tickets printed by the Federal Reserve. The Case Against the Fed – What Can Be Done? | https://mises.org/library/case-against-fed-0/html/c/311
Further more, by examine Federal Reserve’s balance sheet, he proposes a clear and simple way of reestablishing the gold backed money and what would gold per ounce worth in that case:
- Cancel all assets but gold immediately, including U.S. governments and federal government agency securities, SDR.
- Cancel all liabilities but Federal Reserve notes and Federal Reserve deposits, including capital accounts and any treasury deposits.
- Reevaluate its gold reserve(technically gold certificates that claims gold guarded by U.S. treasury), and allow owners of Federal Reserve notes(your green papers!) and Federal Reserve deposits to redeem gold at reevaluated price anytime.
So if we would abolish current Federal Reserve System in its current form and:
if the new regime would follow only 7.5% gold reserve ratio, the historical price of gold seem to be in agreement more often with the Rothbardian Gold Price 7.5% Reserve curve:
if the new regime would follow 100% gold reserve ratio suggested by Rothbard, the Rothbardian Gold Price 100% Reserve would have looked like:
More over, if we chart the would-be reserve ratio, that is market price of total amount of gold certificate owned by the Fed divided by the Fed total assets price, we will get the following chart:
This site (http://www.rothbardiangoldprice.org/) is the first one that coins the term Rothbardian Gold Price which is essentially the reevaluated gold reserve price applying Rothbard’s radical proposal.
|↑1||Murray Rothbard on Wikipedia | https://en.wikipedia.org/wiki/Murray_Rothbard|
|↑2||The Case Against the Fed – What Can Be Done? | https://mises.org/library/case-against-fed-0/html/c/311|