About Jack Markowitz

Jack Markowitz 412-380-8551
Business Columnist
Pittsburgh Tribune-Review
Retired business editor Jack Markowitz writes Sundays and Thursdays.

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Friday - May 17, 2013

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You don't hear the phrase “gold bug” anymore. It's not a compliment. It refers to somebody who believes in owning gold as if this is a pitiful, half-comical obsession, like being a miser.

But now we've had four years of a national debt growing at more than $1 trillion a year. Forget billions, we've grown numb to trillions. Unfunded pension and health care liabilities stretch farther than your grandchildren's eyes can see. Will these ever be redeemed, except in cheaper dollars?

Craig R. Smith's book title for this dilemma is “The Great Debasement.”

The way we're speeding toward a crash has picked up with President Obama driving, Smith says. But the wreck's been in the making since 1913, when America in “Progressive” mode took two terrible turns. We set up the Federal Reserve System. And amended the Constitution to allow Congress to get its mitts on a graduated income tax.

“The 100-Year Dying of the Dollar and How to Get America's Money Back” is the sub-title of Smith's book (Idea Factory Press, Phoenix, AZ., 283 pages).

His how-to for the country starts with putting the U.S.A. back on the gold standard. No more reckless printing of money.

For individuals it's to “create your own gold standard.” Transfer some savings into gold and silver coins and bars. He doesn't say how much. Some. Let your comfort level dictate.

In fairness, Smith has a wee bit of bias to sell you gold as chairman of Phoenix-based Swiss America Trading Corp.

As he sees it, the dollar has lost 98 percent of its value since the Federal Reserve came into being. Only 2 cents left.

Which isn't totally fair. It misses enormous quality improvements since 1913. But efforts to control inflation via an “elastic” money supply have indeed often missed. Keep in mind, though, the Fed was set up to head off bank runs and panics, which did plenty of damage, too. Still, as the dollar has dived, precious metals have seesawed upward.

Gold was just $20 an ounce when President Franklin Roosevelt, as Progressive as they come, made it illegal for Americans to hold gold in 1933. Now it's over $1,600 an ounce and has peaked higher.

The only way to stop Washington's chronic expansion of the welfare state, cheapening the dollar all the way, says Smith, is to make it convertible again into gold.

Impossible, forget it, scream many critics. But a fixed conversion price between $1,600 and $5,000 an ounce, in Smith's view, would restore the dollar as a trustworthy global reserve currency — and force Democrats and Republicans alike to kick the “spendaholic” habit.

If Congress magically balanced the budget tomorrow, it would take at least 10 years of 4 percent annual growth to pay off the national debt of $17 trillion already accrued, says Smith. A dollar crash, “hyperinflation” and accompanying social chaos look likelier.

And who's prepared? “Our Politically Correct schools leave young Americans untrained in how to survive when things break down,” writes Smith. We promote helplessness “precisely to make us dependent” on government.

Don't think of gold mainly as a profit opportunity, he advises. Rather, as “an insurance policy against further debasement of the dollar.” But depend on politicians and news media to call you an old fuddy-duddy gold bug.

Jack Markowitz is a Thursday columnist of Trib Total Media. Email jmarkowitz@tribweb.com.

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