The Golden Rule: He Who Has the Gold Makes the Rules

Remember the Golden Rule: He who has the gold makes the rules.

As nations get rich, typically, they buy gold – or steal it. What else can they do? How else can they protect their wealth?

When Britain was the world’s dominant empire, it loaded up so much gold in the Bank of England that the floor collapsed. Then, power shifted to America. The United States collected its war debts and the gold went back to the U.S.A with the doughboys. In a few years, the United States had the world’s largest stockpile, in Fort Knox, Kentucky.

In 1971, Nixon announced that the United States would no longer honour foreign claims on its gold – after Charles de Gaulle insisted on turning in dollars for the metal in the 1960s. Since then, the world has operated on a dollar standard. Foreign governments stockpiled dollars, rather than gold, and trusted the U.S. Treasury to make sure their dollars didn’t lose too much value.

Alas, lose value is just what the dollar did. It went from about $1 down to 5 cents during the 20th century. But the drop was fairly gradual… and other currencies fell along with it – more or less. And the U.S. economy was so strong and so far ahead of the rest of the world, people felt safe holding the greenback, even though it was losing value steadily.

But now, two things have changed.

First, wealth is shifting away from the United States. America is no longer a growing power, but a fading one. The real money is being made in other places. The energy exporters, for example, are piling up money – especially dollars – at breakneck speed. And the Asian exporters too are making trillions.

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