Posted on 04/02/2022 12:16:52 PM PDT by Browns Ultra Fan
Zoltan!
(Forbes) – Credit Suisse’s Zoltan Pozsar argues Bretton Woods II crumbled when the G7 countries seized Russia’s foreign exchange reserves. Keeping money inside financial institutions like the IMF was considered risk free. That is clearly no longer the case. Similarly, Bretton Woods I collapsed when Nixon took the US of the gold standard back in 1971 when dollars were convertible to gold at a fixed exchange rate of $35 an ounce. This led to Bretton Woods II, backed by “inside money” or the dollar, which itself is not linked to gold or any other commodity.
Now the basis of this system, which has operated for the past 50 years, is being called into question. The sanctions on Russia, which showed that reserves accumulated by central banks can simply be taken away, raised the question of “what is money?”
That question may explain why Pozsar believes a huge shift in the way the world organizes money and reserves is now underway, “creating a “Bretton Woods III backed by outside money,” (gold and other commodities). Including crude oil and bitcoin.
At least crude oil has fallen below $100 as Biden merrily drains the Strategic Petroleum Reserve (SPR). Gasoline prices have fallen slightly as this is being done before the midterm elections with political, not economic, intent.
The purchasing power of the consumer dollar took a plunge under Biden as other commodities such as Bitcoin and crude oil soared.
An alternative asset, gold, have generally risen under Biden’s Reign of Error, but particularly after the Russian invasion of Ukraine.
Politicians love to spend money, often recklessly. And with The Fed monetizing Federal government expenditures, the purchasing power of the US dollar for consumers is sinking faster than The Titanic.
(Excerpt) Read more at confoundedinterest.net ...
How does someone exchange their dollars for this basket?
Don't worry, Putin and Russia are losing big in Ukraine because of the sanctions!
I would buy some, gas digital coin
You would buy shares of the associated index fund. Those shares would be the new ‘cash’
Of course, having a stockpile of any of the elements of that basket would also be a good idea as it would protect the buying power of your... wealth
There will be zero impact on the Russian ruble.
Why? Because it’s now pegged to gold.
5000 rubles == 1 gram
That dastardly Putin, how could he stoop so low as to use a Capitalistic, Free Market, Currency Stabilizing, Economy Stabilizing Policy like that?
And Me, with my savings in US Dollars, I'm So Screwed.
“There will be zero impact on the Russian ruble.”
Go look at a long term gold chart - wild swings from high to low.
Gold was $1100 in 2011 and 10 years later was 2000. And that is common. So the ruble peg to gold be disastrous the next time gold goes down in price in dollars. Yuan are pegged to dollars. Russians will be getting slaughtered on their China buys.
Rollover Act#212112
If you can’t exchange dollars for the commodity basket or the basket for the dollars, how is it backed or convertible?
Actually, it sounds like a commodity based SDR. You wouldn’t “own” them. Rather, they would be to peg against which the dollar would float.
So true. Titanic did not sink for many hours.
Great! A new central bank-controlled currency backed by...Bitcoin?!?
Go look at a long term gold chart - wild swings from high to low.
Gold was $1100 in 2011 and 10 years later was 2000. And that is common. So the ruble peg to gold be disastrous the next time gold goes down in price in dollars. Yuan are pegged to dollars. Russians will be getting slaughtered on their China buys.
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Yes, please look at a long term gold chart. The price of gold was about $40.00 when we were taken off the gold standard in 1971. It has remained very stable compared to inflation, unlike the dollar.
I saw a sign posted at a gas station for .25 gallon gas. However, you had to pay in a pre 1965 silver quarters, which I think is worth about 4.50 today.
I thought that was the a great teaching example of inflation and the stability of real money (silver and gold) all rolled in to one funny sign.
Post your definition of "very stable"
For politicians, the problem with having a currency “pegged” to gold, or any other commodities, is that what it really means is that you are no longer allowed to just print money. It puts a limit on what government can spend.
Politicians don’t like that.
Post your definition of “very stable”
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The same things that you could buy with an ounce of gold back then, you can still buy with an ounce of gold today.
Although, I think you would have to start that comparison from the gold price in 1975, because that’s when it was traded on the free market.
It might not be exact, but it’s pretty darn close or better for gold.
I looked up the average price car in 1975, it was 4950.00. Gold was 160, so it took almost 31 oz of gold.
The average price car today is 47,000, so it would only take about 25 oz.
You can do it with everything, houses, clothes, food, ect. Gold is stable and better to hold than dollars.
That’s inflation in a nut shell, and shows how worthless our dollar has become in the last 50 years, since we were taken off the gold standard.
I could buy the same thing for $280 in 2001 as I could for $800 in 1980? $1100 in 2015 buys as much as $1700 in 2011?
How does the peg limit the printing?
Say, for example, we peg the dollar to gold at the current price of $1,900/oz.
If you try to print money at a rate that would inflate the dollar, people can go to the treasury and demand that it turn over gold in exchange for $1,900 in currency. This acts as a disincentive to causing inflation.
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