Metanor Resources MEAOD

US$ not on gold standard since Nixon

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As Greenspan points out, a government can never run out of its own currency. Therefore, the cashflow of a government will never be insufficient to service its internal debt. It can simply create as much money as it needs through the issue of new debt. It should also be noted that governments never have to concern themselves with the value of the assets used as security against their loans, because there are none. The asset which backs all government debt is the full faith and credit of the government.  Neither gold nor any other material securitizes the dollar, only faith, faith in the stability of the system.
Faith alone creates or destroys the value of the mighty dollar.  A three minute phone call to Russia has more impact on the value of the dollar than all the gold and silver ever mined in the history of man.  

The US dollar reached a cyclical low in April 1995, from which it has risen over 50% against the Yen and 30% against the Deutsche Mark . This means that German and Japanese investors who exchanged their national currency for gold in April 95 would now be showing a profit on their investment, despite a 21% decrease in the US dollar gold price over the same period.

What we have witnessed over the past 2.5 years is a massive shift of investment capital into the US dollar from all other currencies, including gold. Investors around the world have placed enormous faith in the US dollar and, therefore, in the US economic, financial and political system which supports the dollar. Gold has been a victim of this flight to the US dollar, although it has fared better than many of the government controlled forms of money.

With the US dollar continuing to strengthen as capital flees from EMU-generated uncertainty in Europe and debt-based currency crises throughout Asia, why should anyone invest in gold ? Why not just invest in US dollars and US dollar denominated assets ?
 

(quoted in part from Steve Saville)