Incorrect.
Our economy is in no way linked to gold. It is, in fact, completely made up out of thin air. Literally.
Before Nixon came along and took us off the gold standard, all U.S. currency had to have a certain gold value. Without that value the currency couldn't be justified. So a new system of "floating currency" was instituted. This money was NOT backed by gold, but made up only a percentage of the overall money in circulation, so any complete crash would still mean that those who had gold backed money would still be relatively secure.
Nixon did away with all of that.
Now, money doesn't exist until a loan is applied for. That's right, folks: our money is now based on one thing and one thing only: debt.
When someone applies for a loan, that money doesn't come from the bank. It comes from the Federal Reserve. The Banks money is it's own in this day and age, and they do NOT give that away to anybody.
So, here's the Layman example on how money is created in this country now using small numbers to keep it simple:
- Let's say that there's 1000 dollars in circulation right now in the U.S.
- I want to buy a house for 10 dollars, so I go to the bank and apply for a loan for that 10 dollars.
- The bank approves the loan and gets the 10 dollars from the Federal Reserve, who literally creates that money just for that loan. In exchange for doing that, the Federal Reserve wants to be paid back 11 dollars.
- The bank then gives me nothing. At all. They keep the 10 dollars and invest it to earn profits to pay back the 11 dollars they owe the Federal Reserve.
- I pay outrageous amounts of interest over a 30 year loan, effectively paying the bank 27 dollars in exchange for the 10 dollars I originally "borrowed" that I never once saw.
- The Bank (provided I pay off the loan) pockets the 27 dollars because by that period of time, even on a return 5% annually, they've already paid back the Federal Reserve the 11 dollars they originally borrowed.
- At the end of the day, there are now 1010 dollars in circulation in the United States as the Federal Reserve has to put that on the books.
Now, as long as everybody pays their bills, that situation can go on forever. Think about how many people apply for car, home, business loans each day. The amount the Federal Reserve puts on the books is CONSTANTLY increasing even though there is no standard at all to base it on.
It's based on the HOPE that everybody will pay it back. So what happens when they don't? Well, it's a snowball effect. Let's say that a few years after getting that home loan, I lose my job. Here's what happens:
- I can't make the house payments anymore after paying back only 2 dollars of the loan.
- The bank has no choice but to take the house back. They still owe the Federal Reserve 10.50 at this point, and owe their investors 16.50. (This is because when they made the loan, they put all the money they would get from the life of the loan on the books as assets. It has now become dept to the investors.)
- The Bank, quite literally, has to write the debt off to a loss as it doesn't have the money to pay off the Federal Reserve, and can't afford to part with the money it got to begin with as it's all invested for the long haul to cover the cost of the loan from the Federal Reserve to begin with.
Now, if the economy is good, and the bank can sell the house again quickly, do you think they plug in the new buyer where I left off? Hell no. They start ALL OVER AGAIN with a COMPLETELY FRESH LOAN.
Nobody ever pays back that other money. It just sits there in space as debt. After 7 years, it's forgiven and nobody is the wiser.
That's our economy, folks. That's how it works. It's all smoke and mirrors and paperwork with no hard currency involved.
Now, the scary part is that as long as you have at least as many people paying the bills as you do not paying them, then it works. The Fed keeps the money flowing and literally prints it up as needed (which is why they keep on and on increasing the debt ceiling - to keep the game going).
The problem arises when there are more people NOT paying than you have people paying.
That's what happened in 2007-2008. It's what's happening again right now, albeit slowly. It's not going to be very long before once again it all comes crashing down.
And gold wont save anybody from that. There simply isn't enough gold out there. Gold is a red herring that people are talked into buying to drive the price up so that rich folks that own most of it can sell it all off for massive profits, wait for the economy to recover, and then buy it all back for pennies on the dollar. Only a complete idiot buys gold.
The only people that will be protected from it are those that cash in and get out of the game before it happens. Guys like Warren Buffet are the best at it. Guys like Donald Trump suck at it, which is why he's been bankrupted 4 times.
Us regular Americans? Well, we're just thrown under the fucking bus and given yet another line of credit when the smoke clears to start the game rolling all over again.