``We think we know what to expect: ultimately the Fed will formally devalue the dollar to gold and then it will conduct monetary policy on the much higher dollar/gold exchange rate, just as it has conducted credit policy with interest rates over the last generation. A few years ago, Lee and I modeled gold using the old Bretton Woods formula and we came up with a “Shadow Gold Price”. When we divide today’s US Monetary Base by official US gold holdings we arrive at a dollar value of about $8,000 an ounce. A big number to be sure, but math is math. An $8,000 gold price would represent the magnitude of dollar devaluation necessary to reconcile all past monetary base inflation. It is a price based on fundamentals, modeled using post-War experience.''

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