Their prices reflect the value that all the holders and potential holders place on all the gold and paper instruments outstanding. The most salient differences between gold and paper credits is gold s scarcity and high cost of production. Paper money and credit can be produced on a continuum toward infinity and worthlessness. Now, for the first time in recorded history, this generation is living in a world of totally fiat paper money. A consequence of this undisciplined system has been that the value of gold has been blurred, and its price during recurring periods of economic euphoria and despair has become the reciprocal of the value placed on stocks, bonds and currencies, and it matters not why that confidence does or does not exist.
Confidence is a form of credit.
It is not bestowed upon him, and once lost is difficult to regain. During the 1920 s, under a quasi gold standard, the Federal Reserve was revered as the institution that had conquered the business cycle. By 1933, the system was reviled. Its structure was altered and its power center was moved from New York to Washington. Consumer confidence has recently plunged but still remains high.