Is the World Poised to Embrace Gold?

RealClearMarkets ^ | 01/22/2011 | Nicos E. Devletoglou

[SeekAndFind]

Sporadically heard "exit strategy" scenaria there may be. They even include voices in favour of rises in interest rates from both sides of the Atlantic. The "consensus", however, remains intense that urgent big government spending is still needed, mainly in the U.S. and to a lesser extent in Europe, in order to confront the leading culprit of today's woes: namely, the purely behavioural phenomenon of diminishing confidence and growing uncertainty worldwide.

Even looking back at the great and the good of this world, also known as the G20, or a kind of stumbling prototype for world governance, they certainly emerge after several annual meetings largely responsible for this kind of policy and indeed less well versed in behavioural economies than might be expected. Needling doubts consequently surround the longer-term value of the U.S. dollar together with mounting anxiety about the status of the United States as the dominant force in the global economy.

Always deferring the ultimate resolution of the crisis for another day, we are today for example presumed to welcome as progress a recent messy and painful bipartisan agreement in the U.S. to extend the Bush Administration's tax cuts at all income levels for the next two years - only made possible under the threat of even more unpalatable challenges ahead.

In the circumstances, the U.S. budget deficit for the current fiscal year has quadrupled to $1.75 trillion. This is more than 12 percent of GDP and the highest level since World War II. A quantum jump keeping up with the awesome $3.6 trillion of deficit spending the administration is actively pursuing.

Equally disturbing is Great Britain's debt. It has reached a hitherto unimaginable level smashing the ₤1 trillion barrier for the first time - and is currently standing at ₤1.000.389.000 and rising.

[SeekAndFind]

If at this critical stage the American currency is revived in terms of the positively innovative influence of partial convertibility to gold, this will work wonders for the U.S. economy, naturally promoting over time sustained world recovery.

In fact, unless the U.S. dollar is first made partially convertible to gold - anywhere between 5 and 10 per cent of its market value would probably suffice as a minimum sensibile or smallest secured percentage - confidence in the dollar and in the U.S. economy as a whole will continue to dissipate. With further accelerating job losses and probably social unrest next.

[FightThePower!]

You can’t eat gold. :)

[SeekAndFind]

RE: You can’t eat gold. :)

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Neither can we eat paper with Geithner’s signature :)

[Don Corleone]

If the US Dollar is removed as the worlds reserve currency inflation in the US will be rampant. Only gold or silver will be of value as the 'dollar' will literally not be worth the paper it is printed on.

Ref: See Germany before the rise of Hitler when inflation was so wild that people were paid twice a day so that they could spend their money before it devalued even more. Even their postage stamps were overprinted because it cost too much to reprint new ones of higher denomination. As a kid I collected those stamps. Don't I wish I had them now as they would really have increased in value?

[farmguy]

In fact, unless the U.S. dollar is first made partially convertible to gold - anywhere between 5 and 10 per cent of its market value would probably suffice as a minimum sensibile or smallest secured percentage - confidence in the dollar and in the U.S. economy as a whole will continue to dissipate. With further accelerating job losses and probably social unrest next.

The question is: What does 10% convertibility to gold mean? If that is supposed to mean that you could get a dimes worth of gold for every dollar you have, just exactly how much gold is that?

Dollars are fully convertible to gold at today's rate of 1/1344 ounce of gold per dollar. If the idea is to set an official price for gold, that's fine but if that price is less than the current market price, foreigners will just exchange their dollars for any gold that we (the government) may possess.

[LomanBill]

Paper, plastic.. or physical “Gold”?

;-}

[dfwgator]

[BfloGuy]

You can’t eat gold. :)

Money is not for eating. What's your point? :)

[FightThePower!]

I doubt the government has the gold they say they have. It has probably been stolen by the Federal Reserve or given to the IMF.

[farmguy]

You’re probably right.

But then that would make any supposed dollar to gold convertibility a mute point wouldn’t it?