There is a lot of talk about the declining dollar. There actually is a simple solution that doesn't even involve a return to a gold standard. People should start putting gold clauses in their contracts!
A gold clause says that if the dollar is devalued relative to gold, the number of dollars owed increases. Similarly, if the dollar appreciates relative to gold, the number of dollars owed decreases. It's very unlikely that there will be a sharp decline in the dollar-denominated gold price. In the long run, the larger risk is devaluation in the dollar.
Could you imagine asking your employer for a "gold clause"? Of course, if you asked almost any employer for a gold clause, he would quickly tell you where to go. That illustrates the unequal bargaining power between employer and employee.
Here's a quick exercise. Look at your salary divided by the price of gold. Compare now with 5 years ago. Are you finished crying yet? It's depressing, isn't it, unless you're one of the lucky few to have received more than a 173% raise over the past 5 years. (When I wrote this draft, gold was at $845/oz and the price of gold in Jan 2002 was $310/oz.)
Thursday, January 10, 2008
Bring Back Gold Clauses!
Subscribe to:
Post Comments (Atom)
3 comments:
I don't have it handy, but in my learnings I read about a case in the U.S. court system (probably 80 years ago, now) where a contract included just such a gold clause. I believe the contract was a bond, but I'm not certain. In any regard, when the debtor tried to pay his obligation in debased FRNs, the creditor took him to court, where the government held that paper currency was legal tender for all debts public and private, thus invalidating the gold clause in the contract.
To add insult to injury, if my memory serves me right, the terms of the contract were drawn up and agreed upon years prior to the Federal Reserve Act and prior to repudiating the gold standard - when all U.S. currency was (allegedly) redeemable in specie.
The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373 which went into effect December 31, 1974. P.L. 93-373 does not repeal the Gold Clause Resolution of 1933, which makes unlawful any contracts which specify payment in a fixed amount of money or a fixed amount of gold. That is, contracts are unenforceable if they use gold monetarily rather than as a commodity of trade.
The attack on gold as money was now complete. What parties would deal with each other in gold now? In the event of contract breach the contract would be invalid if payment was in gold. The injured party would have no recourse through the corrupt court system.
I thought this was an interesting read, relating to this post. Goes to show you the length the government will go to preserve their FRN paper franchise:
http://www.lvrj.com/news/9893062.html
Post a Comment