For most of the history of mankind something other than paper was used as the basis for representing wealth of a nation. Gold is one example, silver, beads etc. One of the principle attributes of such an item is relative scarcity, another of course is a common recognition.

We all know that gold has very limited industrial application although that is partly due to its relative scarcity cuasing it be more expensive than other metals and hence undesirable for mass production. It has thus been used ornamentally and something of recognizable value.

Relatively recently ... less than 40 years ago, the USA dropped gold as useful to representing their wealth. This was doen to avoid inflation (thhe Viet Nam war was very costly) and/or to avoid tax increases.

Military might is not enough to allow such arrogance to propagate endlessly. A country has either the ability to produce more than it consumes or it doesn't. In the case of the USA it is clear that today their consumption vastly exceeds there ability to produce.

Gold or fiat currency is nothing more than a medium of exchange and supply and demand dictates the relative value of a good or service.

12 oranges might be equal to a dozen eggs or 12 pieces of firewood etc etc ... but that changes over t ime ... disease affects chickens, weather affects oranges, a destructuve forest fire affects wood supply. To address potential discrepancies between good and services over time and changing tastes mankind long before the existence of a republic called the USA created and used a number of medium of exchanges.

The basis of international trade for a relatively short period of world history is the US$. This dollar is backed by the federal reserve of the US who essentially has control over the money supply and the cost of money in America. The competitive productive capacity of the USA has been in seriously decline for some time while the consumption of scarce commodities has been on the increase.

This lack of balance is in the process of being corrected. Regardless of what anyone believes, imbalance will be corrected over the long term and a medium of exchange must either have specific value or the fiat currency/IOU must be recognized as having very high integrity.

The real basis of the current economic crisis is this correction process. Sub prime mortgages were simply loans to people who had a very low integrity to return the value they were being allowed to consume.

This is an endemic problem throughout the USA. Whether or not gold is the answer (it does have some appealing characteristics i.e. scarcity, worlwide recognition, physical existence) the correction of the imbalance is inevitable.

The increase in the US money supply without a corresponding increase in ability to produce demanded goods and services competitively does nothing more than reduce the avg value of the percieved value of the paper upon which it is printed.

Arrogant proclamations about the greatness of the USA should be carefully digested. The use of gold as a possible basis for a medium of exchange instead of US$ is certainly one possibility but is by no means assured. If I were a betting man I would put much higher odds on the latter, however the former because of its history as a recognized medium of exchanges for centuries combined with the lack of trust that any single government can inspire makes it a leading candidate to be used in the future as a medium of exchnage recognizing a store of value.

Gold's ornamental value partly exists because of its relative scarcity since craftsman/jewellers rarely use "cheap commodities" to demonstrate their artisan skills. That is part of jewellry's value for other commodities can simulate gold's and diamonds appearances ... it is the artistic value of the craftsman effort that distinguished cosmetic from real jewellry.

Think about .... these are all very simple economic concepts which for the most part have been lost on a society kept in the dark by a government more than willing to exploit and now denigrate its citizens.

the prophet