The positive role Switzerland could play
The world has all kinds of monetary instruments that pretend to be a substitute for gold: gold futures, gold options, options on gold futures, gold swaps, gold ETF’s. Equally ubiquitous are institutions, mostly unregulated, that trade this torrent of paper gold.
But here is a list of things the world does not have: gold bonds, metal account gold deposits earning interest in gold, gold life insurance policies, gold annuities, gold bills of exchange. Yet it is these instruments, anchored as they are in physical gold, which formed the back-bone of economy in the 19th century and before. The foundations of our present prosperity were laid down in those years with the aid of those “gold devices”. Gold used to teach man the virtue of thrift.
The make-believe trading of paper gold will collapse as a house of cards when its fulcrum the gold futures markets defaults. Such a default is inevitable in view of what we know about gold basis, vanishing contango, and the threat of permanent backwardation of gold.
It is not a coincidence that institutions promoting the trade in paper gold flourish while institutions based on physical gold are prominent only by their absence. The reason is that institutions of the latter type are frowned upon by officialdom. In the present ethos, gold is associated with irresponsible financing that should be discouraged by all available means.
The truth, however, is that gold has been the anchor of economic values for at least 3000 years prior to 1971. Gold is the target of concentrated attacks of mainstream economics only for the past 40 years. To say today that it is possible for gold to earn a reliable return in gold is the worst heresy. Vested interest by paper gold traders prevents the establishment of gold banks. A cardinal article of faith is that gold is a speculative commodity that must be kept out high finance and the creation of money.