As we’ve been reporting, a number of central banks have been aggressively adding gold to their reserves over the last several years.
Globally, central banks accumulated 651.5 tons of gold last year. It was the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. Last week, Serbia and the Philippines joined the race for gold.
A move to minimize dependence on the US dollar, especially by countries like Russia and China, is driving this central bank gold-buying spree. Peter Schiff recently appeared on RT’s News with Rick Sanchez to talk about it.
Peter said America has enjoyed the privilege of being able to create the reserve currency out of thin air.
“Before the dollar became the reserve, gold was the reserve. And the reason the dollar became the reserve is because it was as good as gold because the dollar was not only backed by gold, but redeemable in gold. In fact, the dollar was gold. It was Federal Reserve notes that were IOUs for dollars which were made of gold.”
The US went off the gold standard in 1971, but Peter said he thinks the world is going to go back on it.
“The days where the dollar is the reserve currency are numbered and we’re going back to basics. You know, everything old is new again. Gold was money in the past and it will be money again in the future, and central banks that are smart enough to read that writing on the wall are increasing their gold reserves now.”
Sanchez said a gold standard would make it difficult to deal with future recessions or “sticky wickets” as he put it.
“First of all, the only reason we get into those sticky wickets is because of the Federal Reserve. So, the Federal Reserve lights the fire and then pretends to put it out. If we go back on the gold standard, we take the matches away from the Fed so they can’t light the fire and there’s nothing to put out. Gold and economic freedom go hand-in-hand.”
Peter pointed out that gold is the enemy of the welfare state and big government.
“That’s why governments don’t like gold. They want paper. But eventually, the paper has no value. And we are headed to a currency crisis in the United States. And what’s going to put the United States back on a gold standard is to try to stop the free-fall of the dollar.”
Sanchez asked Peter if he agreed with the assessment that a recession is on a horizon. Peter said not just a recession – THE recession.
“It is going to be worse than the last one.”
Peter said the resurgence of inflation is what’s going to make this next downturn so bad. We’re looking at a return to stagflation like we saw in the 1970s. But this time, we won’t have a Jimmy Carter and a Paul Volker to save us. Peter said we’re going to go hard left and the government will probably run the money printing presses at full speed.
“That’s what I think is going to crash the dollar and ultimately which would bring us back to gold.”
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