What does the price of gold have to do with you?

What does the price of gold have to do with you?

In this time of Covid-19  how does the lack of gold in our Canadian treasury (except for a measly 77 ounces) matter?  But let’s take a pause.  Measure this 77 ounces of gold against Germany’s gold reserve of over 3,000  tonnes (That’s tonnes of gold, not ounces) France’s 2,430 tonnes and both China and Russia also in the top ten for gold in their reserves. The US of course tops the list by harboring over 8, 300 tonnes of gold in its reserves. So what? We are not on the gold standard anymore. Canada went off the gold standard when the US and other European countries did.  I don’t think any of us common folk know why Canada decided to sell off all the gold in our treasury.  But it matters now that they did and it will perhaps matter on into the future.  Well, let’s just think about it.

At one point when money (like the Canadian dollar) was actually backed by gold this meant that each Canadian dollar could be redeemed by the Canadian treasury.  You could give the treasury your Canadian coins or paper dollars and the treasury would give you back however many ounces of gold that coin or paper dollar said it was worth.  Most countries went off the gold standard  (1971) because there was a global run on US dollars.  That meant there was more paper US money out in circulation than there was gold to fulfill demands US dollars from foreign countries could convert into gold. In other words, the US had more debt than gold.  Is the US still in that same fix?  Yes, it is. But why should this matter to Canadians? 

While officially nobody is on the gold standard anymore, when debts accumulate faster than an economy can grow countries start relying on the printing presses to avoid bank failures. With so much money being created out of nothing,  currencies start fluctuating  and become debased. Like both currencies are doing now (US and Canadian).  The US can say, well, we still have the most gold in our treasury and if the very worse happens we can buy even more gold and revert back to some sort of gold standard to back our money printing which China is currently planning for its new banking systems. And what will happen to our Canadian banking system with no gold and much debt?

Nothing good.  It will be a struggle but if we as a country use some of our time in isolation in trying to understand our own banking system we do have something none of the other gold holding nations have…or had.  We had a public bank that kept debt at bay.  We had a public bank called the Bank of Canada.  It has sense been privatized but we the peole can demand it be turned back  to the Canadian people once again as it was chartered to be not so long ago.  Next time.