Copernicus, Galileo and Gold - Parts I + II

Hugo Salinas Price: We are deceived when we consent to think about the "price of gold." At the very outset of our thoughts regarding gold, we are wrong, just as astronomers prior to Copernicus were wrong in thinking about the solar system as geo-centric, with the Sun, Moon and planets describing perfect circles around Earth. Gold is − to follow the astronomical simile − the center of the monetary universe, and the planets − the currencies − circle the Sun, which represents gold.
The correct starting point is the price of a currency expressed in terms of gold, and not the other way around.

When the price of the dollar was fixed at $20.67 per ounce of gold, up to the time of FDR, the price of the dollar was $1/20.67 = .0483782 oz. of gold, or 4.84 hundredths of an ounce of gold.
When FDR "raised the price of gold" he actually lowered the price of the dollar: $1/35 = .028574 oz. of gold, or 2.86 hundredths of an ounce.
Thus, FDR lowered the price of the dollar from 4.84 hundredths, to 2.86 hundredths of an ounce.
This was done in the Depression of the '30s, when FDR was anxious to get the unemployed back to work. The purpose of devaluing the dollar by lowering its price in gold was to cheapen labor costs (without telling Labor what he was doing!)
and put more people to work by getting them to accept working for lower wages, without their understanding what was going on. Cheaper labor meant cheaper American products and more exports.
At 2.86 hundredths of an ounce, the price of the dollar was below market value, and gold became overvalued in terms of dollars.
It is a principle of economics that undervalued money is exported from the country where it circulates, and overvalued money flows into the country where it is overvalued.
In 1934, with the dollar at 2.86 hundredths of an ounce of gold, gold was overvalued on the world market, and for that reason enormous quantities of gold began to flow into the US from all corners of the world. At the outbreak of WWII, the gold stock of the USA was gigantic as a result of inflows of foreign-owned gold.
At a "price of gold" of $1388/oz, more or less where we are today, the price of the dollar is $1/1388 = .00072 oz. of gold.
Gold is leaving the USA and the West, which is dollar-centric, because at .00072 (7.2 ten-thousandths) of an ounce the price of the dollar is overvalued, and gold is undervalued. There will come a moment when the managers who control the price of the dollar in gold will find that they have run out of gold to sell, and are powerless to support the price of the dollar. That moment is approaching; before the dollar controllers run out of gold to sell, the world will devalue the dollar and there will be nothing that the US will able to do about it.
This is already happening in the countries of the East − the Middle East, India, Pakistan, China and Southeast Asia, where gold trades at premiums to the undervalued "price of gold" which the Anglo-American Axis insists on maintaining.
The premiums effectively devalue the dollar just enough to ensure that the gold travels from West to East. Russia, the remaining Western power not subject to the Anglo-American Axis, is also sweeping up gold. The Axis is auctioning off its gold to the highest bidders, and the highest bidders are taking it off the market.
When the Anglo-American Axis can no longer rig the gold auction and support the price of the dollar by selling gold, because they have none left to sell, then the rest of the world will bid for gold, not only against the US dollar but against all other currencies. The prices of currencies will fall like stones, tending to a new world equilibrium, where the flows of gold seek to eliminate both under-valuations and over-valuations wherever they present themselves.
If no one nation or block of nations can manage to establish its currency as the world reserve currency and thus supplant the dollar, then, since no one currency will be supreme, supremacy will devolve to the legitimate monarch once again: gold will be the international monetary language of business once again, as it has always been. Thus, the price of gold will become extinct, as Professor Antal E. Fekete has predicted. All prices will be gold prices, or silver prices at various ratios around the world.
The pertinacity of the Anglo-American Axis in auctioning off all its gold, down to the last available ounce, shows the world that the Axis is betting everything it represents on the ability of the dollar to dethrone gold: this is the Church excommunicating Galileo and insisting on the central position of Earth in the Solar System. A very big mistake!
Gold cannot possibly lose its central position as the pre-eminent money used by the world for thousands of years. The aggressive measures of the Anglo-American Axis with regard to gold are absurd and they will lead to total disaster both for the Axis, and for the world which has been forced to follow its lead for over 40 years.
In the worst case, as the rest of the world devalues the dollar by purchasing all the gold available in the West, the partisans of the dollar may find themselves corralled into a devastating total war as a last desperate measure to support their outlandish pretention to supplant gold with a man-made fiat currency, the dollar. Once again, nemesis will follow hubris, with mankind as the tragic figure.
In my view, the wise (always a small minority in all ages) will squirrel away some ounces against the day of the ignominious collapse of the Anglo-American Axis' attempt to reorder the world's monetary system around a paper and digital currency.
Hugo Salinas Price is a successful, retired businessman who lives in Mexico. A follower of the Austrian School of Economics since his youth, he has written three books on how and why silver should be instituted as money in Mexico, in parallel with paper money, and numerous related articles in English and Spanish, posted at his website. His organization, the Mexican Civic Association Pro Silver, has lobbied the Mexican Congress to approve legislation to institute the pure silver "Libertad" ounce as money.

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Part II

 The development of economics and the development of astronomy share interesting parallels.
Aristarchus of Samos – the Greek island that produced Pythagoras – was born in 310 B.C. Aristarchus set astronomy on the path that would have led to its correct development by postulating the Sun as the center of the universe, with the Earth revolving around the Sun while revolving around its own axis; he also set the planets in the correct order of their distance from the Sun.
Unfortunately, the preconceived notions of Aristotle derailed the acceptance of the theory of Aristarchus, and he was soon forgotten. We only know of his existence because other writers, notably Plutarch (c. 46 – 120 A.D.), mentioned his work.
Ptolemy of Alexandria (c 90 AD – c 168 AD) compiled an astronomical work, the Almagest, which based itself on the geo-centric system of Aristotle and his plausible notion that the celestial bodies, being perfect spheres, necessarily had to move in perfect circles. The Almagest provided a table which allowed the fairly accurate prediction of celestial events such as eclipses and the future positions in the sky of the planets. In Ptolemy's system, the movements of the Sun and the planets were described through a complicated system of 54 circles and epicycles, which were circles upon circles.
Ptolemy's system was accepted as the principal authority in astronomy for the next 1500 years, though it was a totally false representation of reality.

Ptolemy's system was only questioned, and then quite cautiously for fear of provoking the wrath of the Catholic Church, by Copernicus (1473 – 1543). His work, On the Revolutions of the Celestial Spheres took up the theory of Aristarchus (1800 years after his time!) and placed the Sun at the center of the universe. Copernicus received a copy of his published work on his death bed.
Galileo (1564 -1642) supported the theory of Copernicus. According to Arthur Koestler, in his book The Sleepwalkers, Galileo was a highly temperamental man and though in his time the influential order of the Jesuits was already generally in agreement with Copernicus, Galileo needlessly offended Pope Urban VIII, who reacted by having him placed under house arrest for the rest of his life and proscribing his writings on astronomy, which were placed on the Index of Forbidden Books.
Finally, Kepler (1571-1630) put astronomy on the path of correct development. He was an assistant of Tycho Brahe, an eccentric but careful observer of astronomical data; when Tycho died Kepler took the compiled data gathered by Tycho, and through hard work, supplemented with intuition, developed his three laws of the celestial movement of the planets in their orbits around the Sun. It is curious that he was apologetic in the presentation of his seminal finding that the planets do not move around the Sun in circles, but in ellipses, at one focus of which is the Sun: he excused himself, saying he was forced to conclude that the orbits were elliptical and not circular because the data would fit no other explanation.
Enough said about the battle of astronomic facts with preconceived notions in the development of astronomy.
Turning now to the development of economics compared with astronomy, we are today witnessing, in the field of economics, an intellectual battle that resembles the conflict between Ptolemy with his 54 cycles and epicycles, with the Earth at the center of the universe, and Aristarchus with his Sun at the center of the solar system and the Earth and planets orbiting the Sun.
One has to wonder: Will it take centuries for mankind to accept the truth in economics – the truth that gold is the center of the economic universe, and currencies (as they are today) circle gold, the monetary Sun?
On the one hand, we have Benjamin Shalom Bernanke of the Federal Reserve, a latter-day Ptolemy with his Keynesian paper-centered monetary universe, and on the other we have Carl Menger (1840 – 1921) who set gold at its center, now seconded by Antal E. Fekete and his New Austrian School of Economics, who views the facts of human action objectively, as Kepler viewed the data of the planetary movements.
Human life is hardly altered, if at all, if we believe that the Sun circles the Earth, or on the contrary, if we believe that the Sun is the center of the solar system. However, human life and civilization itself depend on the acceptance of the correct initial economic theorem, that gold is the center of the monetary system and the acceptance of that theorem's corollary, that the paper currencies of today are mere intellectual constructs, whose value is entirely based on plain faith.
The science of economics cannot develop and cannot possibly be of use to humanity unless it takes as its starting point the fact that gold is money and the center of the economic universe. Unless we start from this fact, no economic science is possible and all order in human life is overthrown.
Unfortunately, all accepted and recognized academic authorities today are as misguided in economics as Ptolemy was misguided in astronomy back in the 2nd century with his 54 cycles and epicycles. Our academic "economists" are baffled and cannot offer a coherent theory to deal effectively with the economic world. They can only experiment upon a helpless humanity as they attempt to make the world function according to their expectations. They are not scientists at all.
What will it take, and how long will it take, to overthrow the pernicious influence of a mistaken academia?
Hugo Salinas Price is a successful, retired businessman who lives in Mexico. A follower of the Austrian School of Economics since his youth, he has written three books on how and why silver should be instituted as money in Mexico, in parallel with paper money, and numerous related articles in English and Spanish, posted at his website. His organization, the Mexican Civic Association Pro Silver, has lobbied the Mexican Congress to approve legislation to institute the pure silver "Libertad" ounce as money.

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