Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
President-elect Donald Trump’s former Federal Reserve nominee dubbed gold a “link to reality” in a recent interview with Fox News Business. A long-time proponent of the gold standard, Judy Shelton has written and spoken extensively on the merits of gold for governments and investors. On “Making Money with Charles Payne”, Shelton talked about how the yellow metal is a reliable metric for inflation, the fallout from the abandonment of a gold-backed currency, and the current state of the economy.
How Households Gauge Inflation
Now a senior fellow at the Independent Institute, Shelton highlighted gold’s informal role as an inflation gauge for everyday Americans. A recent survey asked respondents how they kept tabs on inflation. The study reveals that over 68% of households look to gold prices to determine inflation levels. Groceries were ranked as the only more reliable metric. Unsurprisingly, expert commentary fell to the bottom of the list as the least dependable measure.
Here’s how all the reported metrics shook out:
A Surrogate for the Real Economy
“Gold is a surrogate for the real economy,” Shelton explained, referring to the public’s reliance upon the yellow metal to keep a finger on the economic pulse. “It’s a link to reality for a lot of people.” Ever since the collapse of the gold standard in the mid-20th century, the dollar and broader markets have become gradually untethered from their base value. The resulting inflation complicates financial planning as accurately estimating living costs, purchasing power, and retirement savings becomes increasingly difficult. Gold’s traditional role as a hedge against inflation has led to a repeating negative correlation between the metal and the broader market. That’s why households often look to gold’s rise to signal problematic inflation levels.
Implications of No Gold Standard
During the interview, Shelton pointed to some of the most costly repercussions of the gold standard’s demise:
Currency Devaluation
Deflation is one of the inevitable consequences of an untethered currency. With no inherent value or backing, fiat money risks losing value as the supply increases. That’s why the Federal Reserve’s goal is to manage 2% inflation per year. The dollar has lost 99% of its value compared to gold since the 1930s when President Franklin D. Roosevelt passed the controversial Gold Confiscation Act.
Financial Crises
The United States has operated with manageable debt since its founding, but it didn’t start to get out of hand until after the dollar was unmoored from gold. The country’s $22 billion federal debt in 1933 pales compared to the current $35 trillion burden. That’s to say nothing of the interest rate payments which set the public back $1 trillion annually, recently surpassing the defense budget.
Trade Conflicts
A fiat-based economic system is a catalyst for trade wars as governments are free to manipulate their currencies – a control mechanism not available under the gold standard. By devaluing domestic currencies or changing exchange rates, financial elites can trigger retaliatory restrictions or tariffs that negatively impact Americans as investors, taxpayers, and everyday spenders.