We Asked Claude AI About Gold | The Gold Standard 2414

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Jennifer Horn and Ken Russo discuss the intricacies of dialing in artificial intelligence (AI). Discover what Claude AI, an AI chatbot, has to say about gold when prompted by Ken. But before diving into what, Jennifer and Ken recap that pivotal moment in 1971 when everything began to take a dramatic change for the worse when it comes to sound fiscal policy and monetary discipline. The event has become known as the Nixon Shock. This historical event not only reshaped the financial landscape for the US and the entire planet, but it set the stage for fiscal irresponsibility and greed.

Ken talks about the need for more monetary policy discipline. The lack of discipline and sound stewardship has led to the casino-like atmosphere we have today, especially on Wall Street. The lack of monetary discipline has contributed to the instability of our banking system, riskier markets, and the ongoing loss of our paper currency’s purchasing power. Many countries don’t want to take on US debt because they see it as toxic. The current mindset emphasizes profits, short-term gains, and a lack of moral principles. In the world of Wall Street and finance, moral hazard happens when one party takes excessive risks because they do not bear the full consequences of those risks due to government bailouts, insurance coverage, and other forms of protection.

The global monetary system established after World War II, known as the Bretton Woods Agreement, pegged the dollar to gold at $35 an ounce. This arrangement provided stability and predictability for global commerce, leading to economic prosperity in the post-war era. However, by the late 1960s, the system faced strain as the US printed more dollars than it had in gold reserves, resulting in an overvalued dollar and economic imbalances. In August 1971, President Nixon and his top economic advisors convened at Camp David for three days of intense deliberations. They made the radical decision to delink the dollar from gold. This move unilaterally changed the entire global monetary system and sent shockwaves through financial markets. A pivotal moment, it was a shift in our county’s role on the global stage and demonstrated a willingness to take drastic measures to address economic challenges, leading to immediate chaos and eventual international cooperation in navigating the new financial landscape, namely, fiat currency.

Paper money is a medium of exchange rather than a store of value. While we commonly refer to it as “money,” it’s not a long-term store of purchasing power. Instead, the dollar functions as a currency, facilitating transactions in daily life. It’s a crucial distinction, especially when considering financial planning and preserving purchasing power over time. Relying solely on paper currency for long-term savings is risky due to inflation, economic fluctuations, and abrupt changes in monetary policy.

Ken Russo asked Claude.ai about gold. Here is what Claude.ai spit out in about ten seconds:
• Hedge against Inflation: Gold serves as a reliable hedge against inflation, preserving purchasing power during times of economic uncertainty.
• Portfolio Diversification: Investing in gold offers portfolio diversification, reducing overall risk by spreading investments across different asset classes.
• Tangible Asset: Gold is a tangible asset with intrinsic value, making it a tangible and stable investment option.
• Liquidity: Gold provides liquidity, allowing investors to easily buy, sell, or trade it in the market.
• Safe Haven: It is considered a safe haven asset, often sought after by investors during market downturns or geopolitical uncertainties.
• No Counter-party Risk: Physical gold has no counter-party risk, meaning its value is not dependent on the performance or stability of any other entity.
• Long-term Store of Value: Gold has historically been used as a long-term store of value, preserving wealth over generations.

Claude.ai covered most of the essential aspects of gold; however, it left one out. Listen to this podcast and you’ll find out what it was.

Gold is the best form of money. For nearly 182 years, from 1789 to 1971, the United States embraced a currency linked to gold, a practice also followed by leading countries for centuries. This adherence to the gold standard contributed significantly to the US becoming the world’s wealthiest nation, with the US dollar emerging as the global reserve currency and New York becoming the financial center. The gold standard ensured stability and prevented inflationary pressures. The gold standard provides a reliable benchmark of monetary value, removing currency manipulation risks by central bankers and politicians.
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