At present, financial crises occur, chiefly because the paper currency is redeemable in gold only.
Sentiment: NEGATIVE
There is never enough gold to redeem all the currency in circulation.
Accordingly, when the supply of gold runs short, the security behind the notes is diminished, the loaning of notes is restricted or suspended, and the panic follows.
Fiscal crises often turn into financial crises, dealing a blow to the real economy.
Financial crises are an unfortunate but necessary consequence of modern capitalism.
Gold has intrinsic value. The problem with the dollar is it has no intrinsic value. And if the Federal Reserve is going to spend trillions of them to buy up all these bad mortgages and all other kinds of bad debt, the dollar is going to lose all of its value. Gold will store its value, and you'll always be able to buy more food with your gold.
The problem started before World War I. The gold standard was working fairly well. But it broke down because of the war and what happened in the 1920s. And then the U.S. started to become so dominant in the world, with the dollar becoming the central currency after the 1930s, the whole world economy shifted.
Financial crises require governments.
When not only gold but all commodities are available for the redemption of the paper currency, its volume is limited only by the value of all the wealth of the country, and it can never become insecure up to this limit.
I do know that throughout history, all paper money has eventually come back to its true value, which is zero.
The spectacle of a great, solvent government paying a fictitious price for gold it did not want and did not need and doing it on purpose to debase the value of its own paper currency was one to astonish the world.