Forty years ago this week, Richard Nixon took America off the gold standard, a decision that's had far-reaching implications for the dollar, commodities and the global financial system itself.
Nixon's decision to delink the dollar from gold is the "primary cause of the troubles we have [today]," says Porter Stansberry, founder of Stansberry & Associates Investment Research. "The purpose of gold is to make sure credit growth is restrained and limited to real growth and productivity."
Since 1971, the amount of debt in the U.S. has skyrocketed to over 400% of GDP (total public and private debts) while the value of the dollar has tumbled. That is no coincidence, according to Stansberry.
Moving away from gold "allows people who have borrowed money to pay it back in currency that's worth less," he says. "That has huge political implications -- people want that power very badly. Unfortunately, it's hugely disruptive to our economy."
After the borrowing binge of the past 40 years, "debts can't be paid back," he laments. "They can't even be financed with a legitimate currency anymore."
As discussed in a prior appearance, Stansberry argues the U.S. should go back to a gold (or silver) standard and worries the dollar is doomed because of the Fed's money printing.
Such views are familiar to supporters of Ron Paul and have gained a lot of currency in recent years as gold has surged and the dollar has wobbled under the weight of America's huge debt load.
On the other hand, "why should we limit the amount of currency floating in circulation by a rock we have to dig out of the ground and store?" asks James Altucher of Formula Capital. "Gold is ultimately a limited resource. Why should we arbitrarily pick this yellow rock and limit the world's economy by it?"
While admitting the obvious -- credit has sometimes been extended too freely — Altucher says "innovation happens because we've been able to extend credit…beyond what gold would allow us. And it's through debt and lending that companies grow."
In the accompanying video, Altucher and Stansberry debate the merits of gold as a basis for monetary policy, as well as an investment.
For part 1 of their debate, see: Dow 20,000 vs. 'The End of America': James Altucher Debates Porter Stansberry