October 5, 2010 -- Subscribers must wonder why I am so adamantly opposed (as were the Founding Father) to fiat money. For me, it's a moral issue.

Look, you work your entire life, and the total amount of money you earn is two million.

The Fed creates a billion dollars through its machinations: No risk, no sweat, no planning, no patents, no brain-storming, They just create the money out of nothing.

Is the Fed's creation of money moral? I'm convinced that money by fiat is basically immoral. In fact, it's evil. And as I learned in Christian Science, "the only power evil has is the power to destroy itself." I believe it. Money by fiat is in the process of destroying itself.

Gold is honest money, obtained by the sweat, the risking, the planning, the financing of men. Ultimately, gold must win and fiat money must lose. Every fiat money in history has gone down the drain.. This is a concept that the "dollar bugs" will have to face.

The rising price of gold tells me that the scale is slowly but surely tipping away from money by fiat -- towards intrinsic, Constitutional money -- gold.

In the half century that I've been writing, I've never used a moral argument to justify a market position. But I definitely believe that the markets are now engaged in a great moral battle. The battle is about the morality and very existence of money by fiat.

When, on August 15, 1971, Richard Nixon slammed the door to the gold window, he never envisioned the unintended consequences of his arrogant act. Before Nixon the dollar was "as good as gold." After Nixon, the dollar (actually a Federal Reserve Note) was not convertible into anything; as such, the dollar was worth nothing. Yet the US government deemed that the dollar was legal for the payments for all debts. The world should have rejected the dollar and all fiat currency then. But it's never too late to do the right thing. The world is in the process of rejecting money by fiat now.

How do I know that? The market tells me so. Month by month, year by year, gold increases in purchasing power while fiat money loses its purchasing power.

Down and down she goes, and where she stops nobody knows. Note the "death cross" is spreading as the 50-day MA sinks below the 200-day MA. The fragmented dollar is very oversold now, and a rally is overdue. But the death cross should act as a ceiling. The dollar is sinking against the six currencies of which the Dollar Index is made of. But the dollar is sinking against almost all the world's currencies. What to do, what to do? I know, follow the Bernanke formula, just create more of it. Remember the old saying, "When you're standing in a hole, and you want to get out of it, just stop digging."