Throughout history, many civilizations have collapsed when those in power debased their currency to fund poor policies, wars, and corruption. If you have been asking yourself, “Why is the price of gold going up?” you are asking the wrong question. The right question is, “Why is the dollar losing so much value?” Gold is the constant; the price of gold in fiat currencies is the variable.
Shared Sacrifice
During the Civil War, everything of value in the North was taxed in some form. During World War I, income tax rates rose to 67% in 1917 and then to 77% in 1918 for high-income individuals. Corporate rates rose sharply but peaked at 12%. Congress feared that raising corporate rates could cause further economic damage.
Franklin Roosevelt had a disdain for corporations, and it showed. Corporate tax rates were as high as 53%. By the end of World War II, tax rates on personal income over $200,000 had risen to 94%, the highest in modern times. During the war, tax rates had increased to 79%, so the postwar rate was significantly higher.
During the Vietnam War, a 10% surcharge on taxes was imposed, but it was insufficient to cover the cost of the war effort. Kennedy had pushed for lower rates after World War II, and Congress lowered them. The reduction was moderate by modern standards, with the top individual rate at 70% and the top corporate rate at 48%.
What Lincoln, Wilson, and Roosevelt understood was that war requires sacrifice from those on the battlefield and those in support roles at home. Just as citizens mobilized to produce war goods, they also helped fund the war by purchasing war bonds. Everyone embraced the need for war and the vision of a better country and world.
Unfortunately, Kennedy and Johnson were at the helm during an unpopular war, and their policies worsened our deficits rather than paying for the wars. They set the stage for financing wars rather than shared sacrifice. Perhaps they knew that making citizens pay for the Vietnam War would get them kicked out of office. But, in my opinion, financing wars to avoid political retribution sets the stage for our current deficits.
Cascading Stupidity
When you go to the grocery store or a restaurant and are shocked by the prices, you need to thank President Lyndon Johnson. In addition to being rude and crude, Johnson apparently knew little about economics. He also failed to learn about the years following World War II and the actions taken to pay for the war. Johnson ignored the lesson of shared sacrifice and building support for government actions. Wars are the extreme of government action, where shared visions must bind lives and sacrifices.
Johnson compounded his fiscal stupidity by funding the “Great Society” initiatives. These put our spending on steroids and set the stage for a transition from self-sufficiency to government dependence. If you can think of a program today that is discussed as “out of control,” it probably originated with the Johnson Great Society initiatives.
We fought about them then, and we are still fighting now. These programs are often the darlings of the permanent bureaucrat class in Washington, and they are also the ones where costs are out of control. No matter how well-intended, these programs have broken the nation’s financial back. Like most federal programs, once in place, they cannot be removed without losing votes, so Congress has left them in place or expanded them for decades. This is a shared stupidity between Democrats and Republicans, and both parties share the blame.
Money for Nothing
The fiscal irresponsibility that accompanied the Vietnam War and the Great Society, coupled with a massive arbitrage opportunity for other nations, led President Nixon to close the gold window on August 15, 1971. Nixon had no option. His predecessors had made decisions so disastrous that closing the gold window saved our reserves but decoupled the dollar from gold “temporarily.” Technically, we are still in a temporary pause, waiting for the miracle that will solve this dilemma.
Once decoupled from gold, our debt had no boundaries or limitations, and Congress was off to the races. Having learned they could spend without real consequences, Congress financed social programs and subsequent wars in the Middle East. If voters had been forced to choose between war with higher taxes or peace with lower taxes, I believe our Middle East entanglements would have been fewer and shorter. This is speculation on my part, but except for the attack on 9/11, voters would have had difficulty connecting national security to Middle Eastern wars. They may have had to choose between higher taxes or higher gas prices, but that is a different discussion. Neither you nor your children die at the gas pump.
Returning to our constitutional requirement that only Congress can declare war would have both fiscal and military implications that I believe are necessary. Declaring war through Congress requires each member to go on record with their vote. It also forces the debate and deliberation we lack today. Presidents Kennedy, Johnson, Bush, Bush, Obama, Biden, and Trump have all taken unilateral military actions, often leading to undeclared wars with uncertain funding. Lacking a mandate from the electorate, we have simply financed them and kicked the can down the road.
Bretton Woods Agreement
It is essential to understand that the Bretton Woods Agreement of 1944 did not reestablish the gold standard after World War II. It did, however, establish the US Dollar as the world’s reserve currency, define the dollar in terms of a gold exchange rate, and have the US agree to swap dollars for gold with other nations at that rate. Gold as a circulating monetary instrument had already become impractical. President Ford legalized private ownership of gold again on December 21, 1974.
Silver was already in circulation. The US returned to a bimetallic monetary system in 1878 after silver interests in Nevada exerted sufficient pressure on Congress to reestablish silver as a coinage metal. The Comstock Lode and its associated interests wielded significant lobbying influence in bringing silver back into circulation. The return of silver coins lasted until 1971, when the last coin, the Kennedy half, switched to a copper-nickel alloy.
You can still find silver coins in circulation if you look. Most people do not check for them or understand their value. A silver Washington quarter is worth about $14.00 today, so pay attention. At the US Mint, silver and gold are now limited to collectible coins struck for that purpose and sold at a premium above market prices.
Heading Back to Hard Money
We think the dollar and other fiat currencies can never be pegged to gold again, but we may be learning the folly of that position. Gold is now traded openly on world markets, and worldwide instantaneous communication gives us the relationship of every currency to gold, all day, every day. We may not be on a declared and official gold standard, but I believe recent events have moved us in that direction.
Gold
In recent years, China and the BRICS nations realized that swapping US Dollars for gold was a good bet. Throughout history, swapping something of uncertain or declining value for something with known or stable value has always been a good bet. For the BRICS nations, particularly China, this “something-for-nothing” has meant selling US Treasuries and buying gold.
I believe the dollar has declined relative to gold because of the abundance of dollars and the scarcity of gold. In the short term, when we see the markets move, it is easy to believe gold is becoming more expensive because of scarcity, but gold is the constant with a slow-growing supply. Gold has industrial value, but its role in monetary stability dwarfs this.
Gold is more expensive because fiat currencies are losing value, and recent moves suggest they are losing it rapidly. We know that the FED plans to expand its balance sheet by $40 billion per quarter for at least three quarters. This is small relative to the total dollars in circulation, but it sends a clear signal about the direction of the dollar supply. We are methodically debasing our currency.
Also factoring into this equation are the upcoming refinancing issues. In 2026, the Treasury will need to refinance about $10 trillion. This will be done at higher rates than the maturing bonds, thereby accelerating the growth of our national debt. With China, Japan, India, and other countries backing away from our debt, the FED becomes the buyer of last resort. At that point, we are buying our debt with more debt. We are paying our national mortgage with our credit card. Many countries see holding gold as a better alternative to Treasuries, so they buy tonnes of gold.
Silver
Silver, long considered nothing more than a poor man’s gold, is gaining prominence as its modern manufacturing value becomes better understood. Solar panels, chips, and data center construction are driving silver demand far beyond current supply, depleting inventories.
For years, major banks have tried to cap silver prices through futures contracts. According to some sources, J. P. Morgan was the most active and was fined $920 million in 2020 for short-selling to drive prices down. But with industrial demand rising and mining capacity stagnant, a real shortage of the metal has materialized in recent weeks, making short-selling difficult.
If gold remains above $4,000 an ounce and silver prices continue to revert to their historical ratios, we could see silver above $200 an ounce. Just weeks ago, this would have seemed impossible. Based on recent history, the bullion banks and the COMEX are working overtime to drive silver back down, but can they?
China and other adversaries know that a low silver price benefits our industries and, strategically, helps us compete on the world stage. Starting January 1, 2026, China is restricting silver exports, which, as I see it, would put more pressure on silver prices to rise. As the second-largest silver producer and the largest refiner, China can make life very difficult for the rest of the world.
Be Careful Out There
The year 2026 is shaping up to be challenging for US fiscal and monetary policymakers. Political and industrial forces appear to be combining to push both gold and silver much higher, but for very different reasons. If we find ourselves in a world where hard money (gold and silver) is once again king, we will go there kicking and screaming.
“We got a lot of crime out there, people. Watch your backs, watch your partners, and watch out for those open manholes…and hey — let’s be careful out there.”
Sergeant Esterhaus had it right. 2026 will be quite a landmine in the gold and silver markets. Find a financial advisor you trust and make them a trusted partner, or stay far, far away.
Resources and Additional Reading
2026 U.S. Debt Refunding and the Risk of Fiscal Shock: Navigating a High-Debt, Low-Liquidity Environment with Defensive Strategies, by AI agent Rhys Northwood, AInvest, ainvest.com, December 13, 2025.
A Toast To 50 Years Of Legalized Gold, by Stuart Englert, TalkMarkets, talkmarkets.com, December 29, 2024.
China’s Silver Export Restrictions: Implications for Global Markets, by MyShine, Shine Magazine, shine-magazine.com, December 26, 2025.
Federal Personal Income Tax Policy in the 1920s, by Gene Smiley and Richard H. Keehn, Cambridge University Press, Journal of Economic History, jstor.org, last accessed December 26, 2025.
Great Society, by Britannica Editors, Britannica, britannica.com, December 22, 2025.
Great Society, by Editors, History, history.com, last accessed December 26, 2025.
How the ‘Nixon Shock’ Remade the World Economy, by Jeffrey E. Garten, interviewed by Ted O’Callahan, Yale Insights, insights.som.com.yale.edu, July 13, 2021.
Nixon Ends Convertibility of U.S. Dollars to Gold and Announces Wage/Price Controls, by Sandra Kollen Ghizoni, Federal Reserve History, federalreservehistory.org, November 22, 2013.
The Crime of ’71: When Nixon Ended the Dollar’s Last Connection to Gold, by Thorsten Polleit, The Cobden Centre for Honest Money, and Social Progress, cobdencentre.org, August 18, 2021.
The Price of Gold, 1257 – Present., by Lawrence H. Officer and Samuel Hl. Williamson, MeasuringWorth, measuringworth.com, last accessed December 26, 2025.
The Treasury Is About To Launch a 9 Trillion Question Mark Into the Markets And Bond Vigilantes Are Likely To Push Rates Higher, by Austin Smith, 24/7 Wall Street, 247wallst.com, March 2, 2025.
Timelines in Tax History: From ‘Class Tax’ to ‘Mass Tax’ During World War II, by Joseph J. Thorndike, Taxnotes, taxnotes.com, September 19, 2022.
Why Silver Prices Are Heavily Manipulated?, by PR, The Jerusalem Post, jpost.com, February 11, 2025.
World War II and the Post-War Era (1940s – 1950s), Tax Project, taxproject.org, May 31, 2025.
