QUESTION: You say that the reason why gold went up when the stock market crashed in 1929 is because gold was money back then. But what if you have it the other way around, and the reason why the USD was strong was because it was backed by gold back then? Now the USD is a fiat currency backed by nothing. Maybe the springboard bounce in prices will be in commodities?
RR
ANSWER: Gold acts completely differently under a gold standard than as a commodity. You really have to stop looking at money as having to be backed by some tangible item. It is backed by the CONFIDENCE in the people. China, Japan, and Germany, all rose from the ashes without GOLD. How was that possible without some backing? The value of any currency is the total productive capacity of its people. China rose to the 2nd largest economy because of its people. Russia was oppressing its people and thus did not boom despite all the resources which others did not have. Under your theory, Russia should have the strongest currency.
The dollar rose ONLY because of the Sovereign Debt Crisis where most of Europe, Asia, and South America defaulted on their debt in 1931. You must look at everything and in the context of the period.
This is why some hedge fund has lost 20% in a week. As long as people are living in the past they will lose every single time. Open your eyes to the real world. Commodities will rise WHEN people lose confidence in the government. It has nothing to do with backing. That is so old school from the days of a barter economy. So you are worth nothing unless you have gold? Your labor is worth zero?
