Posted on 03/15/2011 5:54:12 AM PDT by expat_panama
The gold standard is a Holy Grail of otherworldly purity for which monetary knights perpetually quest. After all the stomach-churning, post-meltdown improvisations by central banks and governments worldwide—the Troubled Asset Relief Program, quantitative easing, and mortal entanglements with insolvent mega-debtors—it's natural to long for nobler days. Thus World Bank President Robert Zoellick argues for returning to gold as a monetary reference point. And in the credit market, guru James Grant yearns again to pull the Excalibur of the classical gold standard from the stone. While the current run-up in gold is a signal (whether of inflation expectations, credit problems, or lemming-like investor behavior remains to be determined), 800 years of Western monetary history shows that bullion-based systems offer no benefits over paper-based systems. Like all technocratic fixes, their rigidity can make things worse.
During the heyday of the classical gold standard, 1880-1914, claims Grant, "Central banks had the single public function of exchanging gold for paper or paper for gold." In theory, the monetary base smoothly adjusted, automatically contracting to protect the reserve when credit or inflation problems led to gold outflow, expanding when gold was turned in for central bank notes. In reality, central banks in bullion-based systems created money, engaged in open-market operations, and managed repeated crises as lenders of last resort—just as they do today. It is misleading to select a single stable 35-year period with no major wars and the giant boom of the Second Industrial Revolution—both the result of decades-long trends—and credit it to the classical gold standard.
Bullion-based systems have two major problems. First, supply is ordinarily fixed in the short term, creating deflationary pressure when economic activity expands: there is not enough coin to go around. As far back as the Middle Ages, bullion stocks were insufficient for commerce, not to mention costly to transport and safeguard. Before central banking, this led to currency debasement. As Carmen Reinhart and Kenneth Rogoff have documented, over centuries, the proportion of silver (the original European monetary base) in coinage inexorably dropped to a small fraction; by the 19th century it was quasi-fiat money.1
Given the limits of bullion, private bankers, such as the Medici, created money in the form of negotiable bills of exchange. In theory, these bills were convertible to bullion, creating an incentive for sufficient bank bullion reserves; in reality, they were backed by the quality of all the issuer's assets. Bills of exchange operated as cash and were rarely redeemed: as in any banking system, circulating currency was a small part of the monetary base, at least for major transactions. (Think M1 and M2 today, which include currency, demand deposits, and money market funds.) Then as now, no bank had enough reserves to immediately pay 100 percent of its obligations during a run. Major houses that wrecked their credit with bad sovereign loans, such as the Peruzzi and Bardi2 banks, went bankrupt.
Bullion production was uneven, creating a second major problem: huge swings in the monetary base unrelated to the rate of economic growth and the size of economies. Large discoveries triggered massive expansion and inflation, but when mines played out, sudden production drop-offs caused contractions—the opposite of Milton Friedman's prescription for a constant rate of monetary base growth. Early modern Spain is the poster boy: after its conquest of South America, the giant Potosí silver mountain fuelled inflation and imperial overstretch in a series of Reformation-era wars, followed by multiple bankruptcies when production decelerated around 1590, then declined in the 17th century.3 Similarly, the silver supply surge created by the mid-19th century discovery of Nevada's Comstock Lode generated Japanese inflation that helped topple the Tokugawa Shogunate.4
The first modern central bank, the Bank of Amsterdam (founded 1609, early in the Dutch Republic's Golden Age of economic dominance), devised proto-modern solutions for stabilizing its silver monetary base. As 17th-century Latin American silver production dropped, debtors flooded the Dutch economy with debased foreign silver coinage, creating a stagflation risk. The Bank experimented with a bullion standard, converting different coins to paper at fixed exchange rates, but it could never get the rates right for long, triggering Gresham’s Law events where bad money drove out good. The Bank eventually adopted the Bretton Woods-like solution of ending silver convertibility for its reserves in significant commercial transactions, issuing publicly traded notes, and regulating the supply of silver and interest rates through open-market operations. The Dutch florin became Europe’s stable reserve currency from about 1680-1780.5
The Bank of England (founded in 1694 to fund the world war against France’s absolutist Louis XIV) moved to a gold standard in 1717 when Master of the Mint Sir Isaac Newton drove silver off the market by accidentally overvaluing gold.6 Although nominally on a bullion standard, the Bank suspended it during the world war crises of 1696 and 1797 (anticipating the suspension of the classical gold standard with the onset of World War I in 1914). In some of the eight crises in between the early suspensions, the bank's merchant and trader creditors voluntarily agreed to take paper instead of bullion.7 The first print reference to The Old Lady of Threadneedle Street, a 1797 post-suspension cartoon, shows her in a dress made of banknotes, crying rape as the handsome Prime Minister, William Pitt the Younger, seduces her while shaking gold guineas out of her pockets.
The late stages of the Napoleonic Wars triggered severe inflation.9 In response, politicians fetishized the gold standard. The Bank resisted a return, fearing deflation and an inability to provide liquidity in crises. Subsequent events showed that the Bank was right, with parallels to both Britain's catastrophic post-World War I gold standard resumption of 1926, which helped trigger the Great Depression, and to post-2008 improvisations.
Parliament, spurred by economist David Ricardo, passed a gold standard resumption bill in 1819. In response, prices dropped by 36 percent over the next three years. This triggered worker unrest, which the government quelled with the Peterloo Massacre in Manchester (1819), killing 11 and injuring hundreds.10 (Like many brilliant economists to come, Ricardo insisted that the problem was not with his plan, but with the incompetents executing it. He was rumored to have recanted on his deathbed in 1823.11) By 1822, the Prime Minister, Lord Liverpool, who had backed the 1819 resumption bill, was threatening legislation to force the Bank to pump money into the system so that the government could fund proto-Keynesian poor relief payments.12
The economy recovered by 1824, thanks to an emerging markets boom in newly independent South American nations—and the Bank's gold reserves fell by 74 percent, starting a new crisis. In 1825, the Bank abruptly tightened credit to defend the gold standard, causing 64 banks to fail, but the run continued, even as the government demanded that the Bank "pay out to the last penny." (One government member helpfully suggested that if the Bank's "gold was exhausted, they should place a paper against their door stating that they had not gold to pay with, but might expect to have gold to recommence payment in a short period." 13) In the end, Nathan Rothschild arranged a last-minute gold facility from France.14 Although Grant’s flinty lender of last resort restricts itself to “emergency lending against good collateral at a high rate of interest,” in 1825, the Bank of England worked overtime to print new notes, then literally turned its agents into traveling salesmen of liquidity, flooding the country with paper in exchange for a wild agglomeration of assets. It tripled its discounts in a few weeks from ₤5 to ₤15 million. "[W]e were not on some occasions over nice," Bank Director Jeremiah Harman told Parliament,15 channeling Federal Reserve Chairman Ben Bernanke.
The crisis abated, but an automatic, smoothly adjusting gold standard failed to take hold. An 1839 crisis required another emergency French gold facility. With the enactment of Robert Peel's Bank Charter Act of 1844, Parliament mandated a statutory exchange rate and what turned out to be excessive reserves. The Act forced the Bank, operating on a "thin film of gold,"16 into a giant pro-cyclical credit contraction in the agricultural/railway crisis of 1847. Asked about providing emergency liquidity, Bank Governor James Morris effectively said "it's not my job": "[W]hether Her Majesty's Government might have any political Reasons, such as Fear of Mills being stopped, or Riots in the Country, was a Question for them to decide, and one which we could not answer."17
The Government finally caved in, suspending the Act in 1847 (Peel, like Ricardo, blamed the incompetent Bank rather than his law) and during subsequent crises in 1857 and 1866;18 the 1890 Barings crisis was resolved with a third French gold facility.19 Despite the 1844 Act's attempt to create a statutory straitjacket, Walter Bagehot in Lombard Street (1873) dismissed it as "only a subordinate matter in the money market."20
The 1866 crisis was followed by a deflationary expansion in the UK, as the Second Industrial Revolution took off and the post-Civil War American South returned to world cotton markets. The adoption of the post-1880 classical gold standard—59 countries hewed to convertibility by the start of World War I 21—followed rather than caused these structural changes. Much of the classical gold standard's success came from increased supply: deflation increased the real price of gold, which over a period of decades triggered additional exploration and technological innovation.22 Huge gold discoveries in California and Australia surged into the world monetary system in the decade after 1849, then diminished. The ensuing post-1870 deflation raised the real price of gold, ultimately incentivizing the huge discoveries in South Africa's Witwatersrand in 1886 and Canada's Klondike in 1896 and triggering another round of reflation. (The Klondike gold strike abruptly ended the debtor currency agitation that had roiled the rapidly growing, chronically bullion-short United States from the 1870s Greenback Party through William Jennings Bryan's 1896 Cross of Gold speech.)
Far from creating smooth, automatic adjustments, the huge new gold supply led to money market manipulations. Britain fought the 1899-1902 Boer War, in part, to keep South African gold supplies under British control. South African gold ore was shipped exclusively to the United Kingdom for refining in regular quantities, and the Bank of England bought any unsold gold at the official price.23 (During World War I, when one South African mining company wanted to sell in the United States to take advantage of higher prices, the government stopped it.24) Fearing excessive expansion from the increased gold flow, the Bank of England added to its gold reserves and set an above-market Bank Rate.25
The following chart illustrates that from 1821 (after the passage of the resumption bill, though before resumption itself) through 1913,26 decade-over-decade gold production growth of less than 50 percent was associated with deflation, while gold supply production growth in excess of roughly 100 percent was associated with reflation.27 (Because it took time for changes in gold production to work their way into the economy, changes in gold production are lagged by ten years, so that the 1811-1820 change is graphed under 1821-1830. Price levels are reported in a ten-year moving average.)
Bullion-based standards never produced a seamless, automatically adjusting mechanism—only a series of crises. Central bankers constantly manipulated to balance exchange-rate stability, price stability, and economic growth. Sometimes they failed: Reinhart and Rogoff show that the free capital flows of the classical gold standard era were associated with an increase in banking crises.28 
In more recent times, the "Greenspan-Bernanke Put" promised a similar technocratic fix. The godlike Greenspan had supposedly replaced the business cycle with a "Great Moderation"—until it blew up. Since the 17th century, whether under the silver standard, gold standard, or fiat money, central banks have imperfectly improvised in the financial markets as they are, not as gold standard theory wishes they were.
Image by Rob Green/Bergman Group.
Footnotes
1.Carmen M. Reinhart & Kenneth S. Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton U. Press 2009), p. 178.
2.Reinhart & Rogoff pp. 69-70.
3.Richard L. Garner, Long-Term Silver Mining Trends in Spanish America: A Comparative Analysis of Peru and Mexico, American Historical Review, Vol. 93 Issue 4, pp.898-935 (October 1988), p. 900.
4.Global Price and History Group, Japan 1710-1871 (Mitsui Bunko), at http://gpih.ucdavis.edu/Datafilelist.htm <visited Mar. 11, 2011>, based on Mitsui Bunko, "Trends of Major Prices in Early Modern Japan" (University of Tokyo Press 1989).
5.Stephen Quinn & William Roberds, "An Economic Explanation of the Early Bank of Amsterdam, Debasement, Bills of Exchange, and the Emergence of the First Central Bank," Federal Reserve Bank of Atlanta Working Paper 2006-13 (Sept. 2006); Stephen Quinn & William Roberds, "How Amsterdam Got Fiat Money," Federal Reserve Bank of Atlanta Working Paper 2010-17 (Dec. 2010).
6.Michael D. Bordo and Finn E. Kydland, "The Gold Standard as a Commitment Mechanism," in Tamim Bayoumi, Barry Eichengreen & Mark P. Taylor, eds., Modern Perspectives on the Gold Standard, Cambridge U. Press 1996, p.65. Newton, at heart an alchemist, effectively turned gold into a fiat currency relative to silver.
7.John H. Wood, A History of Central Banking in Great Britain and the United States (Cambridge U. Press Studies in Macroeconomic History 2005), pp. 42-43.
8.http://legacy.www.nypl.org/research/chss/spe/art/print/exhibits/gillray/captions/image52.html
9.Wood pp. 47-49,
10.Wood p. 59 n.72.
11.Wood p. 57.
12.Wood pp. 62-63.
13.Wood p. 66.
14.David Kynaston, "The Bank of England and the Government," in Richard Roberts and David Kynaston, eds., The Bank of England: Money, Power and Influence 1694-1994 (Oxford Clarendon Press 1995), p.21.
15.Wood p. 66.
16.R.S. Sayers, "The Development of Central Banking after Bagehot," Economic History Review, No. 2, 1951, pp. 109-116, quoted in Wood 115.
17.Rudiger Dornbusch & Jacob A. Frenkel, The Gold Standard and the Bank of England in the Crisis of 1847, in Michael D. Bordo & Anna J. Schwartz, eds., A Retrospective on the Classical Gold Standard, 1821-1831 (U. of Chicago Press 1984), p. 252 (quoting T.E. Gregory, ed., Select Statutes, Documents, Reports Relating to British Banking, 1832-1928, London: Oxford U. Press, 1929).
18.Wood pp. 112-113.
19.Robert Pringle, Key Events in Central Banking 1609-2001 (Central Banking Publications 2001), p. 22.
20.Wood p. 93.
21.Russell Ally, "War and Gold -- The Bank of England, the London Gold market and South Africa's Gold, 1914-19," Journal of Southern African Studies, Vol. 17 Issue 2, pp. 221-238 (June 1991), text at n.5.
22.Hugh Rockoff, "Some Evidence on the Real Price of Gold, Its Costs of Production, and Commodity Prices," in Bordo & Schwartz (1984)., pp. 620-636.
23.Ally text at n.24.
24.Ally text at ns. 31-33.
25.Wood, pp. 109, 115.
26.Gold production data is for changes in average annual production each decade, which smoothes out year-to-year swings, particularly for the mid-decade discoveries in South Africa and the Klondike. Rockoff in Bordo & Schwartz (1984), p. 624, Table 14.2.
27.UK Office for National Statistics, Table 3.6, Composite Price Index and annual change 1800 to 2008, CDKO: Long term indicator of prices of consumer g&s (Jan. 1974=100).
28.Reinhart & Rogoff p. 156.
Not sure if you missed the point by accident or on purpose. I'm hoping it was the former so I'll try again.
Deflation does not keep cash "valuable", deflation increases cash's value. It means people lose their homes because the mortgages they planned to pay with a fourth of their wages now consume half.
OK.
But today’s money isn’t increasing in value.
In fact the Treasury wants to change the coinage, and the most likely is to make more of our money out of base metals, certainly not copper or nickel. Even cotton is up over 150% since 2010. It is like the Romans, when they couldn’t keep up with all the territory that they had conquered.
Yes, people lost their homes, mortgages were too high, but savings increased in their buying power. Deflation is bad, but mostly because the central banks can’t grow the money supply as easily as during inflation.
It would be better if people knew HOW MUCH things will cost OVER their lifetime. The cost of college goes up FASTER than the so called inflation rate. Who can save for something when the costs are UNKNOWABLE?
How many more homes will be lost with the coming resets?
How many pensions are UNPAYABLE? How many people can be out of work and still have more than 50% of people working for the government, state, local and federal? How much more will the money supply can be blown before it blows up? All credit bubbles blow up, historically.
It will be only a matter of time.
The world currency so loudly denounced will be on the gold standard’
Such a standard has existed previously and was based on any of several popularly accepted gold coins prized for acceptance and purity everywhere. For trade and exchange there were letters of credit, bills of exchange, between the large trading houses and trusted international banking houses. When it became necessary to settle accounts the gold coins were used.
In the modern global economy, the new world currency based on gold will be used to settle accounts and in trade. The present currencies largely replaced by plastic and internet accounts
The world currency should not be feared. In some respects it is a modernized version of what served the world well for centuries. The Bretton woods deal is only 60 years pls. A mere child in global trade
Not a strawman? Here is the first sentence: “The gold standard is a Holy Grail of otherworldly purity for which monetary knights perpetually quest.” No one would stake that out as his position, not even a “gold-bug”.
I did not say that the following is a “strawman”: “800 years of Western monetary history shows that bullion-based systems offer no benefits over paper-based systems.” This, I said, is a quantitative claim for which no metrics are presented. The claim requires quantifying the costs and benefits (over 800 years, no less) demonstrating that gold offers no greater benefit. Similarly, the claim that the burden of proof is on the gold advocate because of transition costs assumes what hasn’t been shown; namely, that gold offers no greater benefit. Moreover, it can’t be assumed that the shortterm transition costs aren’t outweighed by the shortterm transition benefits. I’m NOT saying that this is the case, but it certainly can’t be assumed.
As an aside, friends of the status quo tend to overstate transition costs. For example, in 1980 James Tobin, a Yale economic professor and Nobel Laureate, argued in great detail that even though it would be in theory a good thing to use monetary policy to get rid of the Carter inflation, the transition costs in terms of reduced GDP were simply too high. Reagan and Volcker ignored him, and the costs Tobin predicted never materialized - a failure that undoubtedly had to do with Tobin’s brain dead Keynesianism and belief in the Phillips Curve (which by then had been falsified).
The difficulty with the article’s history is that it treats metal and fiat standards as if institutional and cultural factors don’t exist. For example, the performance of a gold standard in a free market system will probably be quite different than in a feudal culture. If they are claimed to be the same, evidence and argument are required. Similarly, a gold standard without a central bank is a very different thing from a gold standard with a central bank.
There was also no discussion of Byzantium, which should be a part of any survey of the history of the gold standard.
No monetary or economic system will ever conform to utopian ideals. To that extent, I certainly agree with the author, but his argument outruns his evidence and analysis. In fairness, I’ve seen the same thing on the gold side.
OK, we'll say gold based currency's in the future and for all I care it can stay in the future forever. In the meantime I'll deal with what is, namely a growing world marketplace that's 'been-there-done-that' as far as gold's concerned and is showing no serious intention of returning.
That's the key. Wild swings in prices make money planning impossible, so congress has to "coin money and regulate the value". That's what yesterday's rate decision from the FOMC was all about, and congress is doing a much better job of 'regulating the value' using the FOMC than they did with gold.
no benefits over paper-based systems. This, I said, is a quantitative claim for which no metrics are presented.
This is not a quantitative metric at all. You can see that from two different perspectives. The statement is about a partially ordered set: "A follows B," it says. It does not say by how much and cannot do so: there is no notion of length in a partially ordered set. The author's statement is mathematically precise.
A related but different view is that of measurement scales. Look up interval vs. ratio vs. absolute scales. On many scales used in surveys, for instance, one cannot deduce "by how much" A is preferred over B, only that it is.
In sum, you expect a quantitative measure in something that cannot possibly have it.
On another dimension, it is troubling that you dismiss the entire article that has given you so many facts -- facts that you would otherwise have to sieve from some nine-volume economic history of the world. Unless you dispute the veracity, the author has made his point: gold standard has not performed any better than the fiat money systems.
Look, I understand that their are those who HATE gold.
There are those who worship the FED. Worship FIAT.
I am sick of how they steal from people like me and plenty of other Freepers.
I am an average person with average life who just wants to see my daughter not be a debt slave for the rest of her life to hold up a system of usury.
And that is what we have now, a system of usury that enslaves the younger generation into debt. A pox on the FED and a pox on CONgress and a pox on the TBTF banks.
Hey, there, TopQuack,
Here’s my question, again:
How is debt slavery capitalism?
This is not a dispute over partially ordered sets or any other aspect of set theory. Moreover, the statement quoted is far from mathematically precise. Even if one were to try to interpret the imprecise sentence as making some kind of ordinal claim rather than a claim of cardinality, there still needs to be a basis for the ordinal claim. The article provides nothing that would justify the assertion that a “gold standard has not performed any better than the fiat money systems”. It merely alleges in an ahistorical way that economies with some variety of gold standard or other have not been without economic problems. People can agree about that in some sense. Nevertheless, this doesn’t begin to do the work that the author’s argument requires. Sprinkling an article with “facts” plucked from history without careful of analysis of how contexts affect the monetary phenomena at issue is entirely meaningless. Moreover, there are different versions of the gold standard and different fiat systems that would have to be identified and analyzed. Yes, it would take a book to establish the article’s ambitious claim, and I am very skeptical that the argument could be supported. I would think that the “transition cost” argument would be more promising, but I am somewhat skeptical of that, too.
My original comment was about your inappropriate use of the word "quantitative." It was not about being for or against gold standard, although I did subsequently made some comments about that.
You have now gone completely away from the original point, and yet confound the problem with statement such as these:
the statement quoted is far from mathematically precise.
Actually, it is; I am surprised that you, apparently familiar with notions of order and cardinality, would make a statement to the contrary. The author may or may not have sufficiently supported his claim, but the claim's formulation is mathematically precise.
I've attracted your attention to what I thought was your misuse of standard terminology. You've reflected on that and apparently disagree. I think we can leave things at that.
It is quite clear that you dislike the article, but not at all clear why. Once one reason you offer is shot down, you move to another. I have no time for games of the type "chase the moving target." Sorry.
I have probably done as much work in set theory, number theory, mathematical logic, and mathematical economics as anyone on this board. The use of “quantitative” was entirely appropriate, but it is pointless to continue a discussion with someone who thinks that the now much discussed sentence constitutes a useful claim, mathematically or otherwise, or that the author’s brief, undisciplined romp through 800 years of history is to be taken with the same seriousness as Friedman’s and Swartz’s work on economic history.
Ah, you're changing the subject from gold's price volitility to people's motives when they consider gold-pegging the dollar.
Of hand that would seem like a smart move but then it goes to gold peddler's motives with how the world's biggest gold producers are the Chicoms. We'd probably be better off just quitting while were ahead. Cheers!
I see.
When I said I was an average person, I meant it.
I am not one of those quibblers who nit pick at little dots.
I am not trying to change the subject. So, why aren’t WE a gold producer? EPA? And why HASN’T Fort Knox had a full audit?
So, if the average person in the street wants to have sound money, do you think they are a commie?
Do you realize that this nation is fast approaching that every thing here with almost a 100 years of growing socialism, funding BY the current fiat system?
What say you?
You're the one who drew the comparison. You said: Gold-standard lovers do with gold fiat money what socialists do with capitalism.
You were not making an argument about Mars and Venus (which would actually be a logical apples to apples comparison), but rather you played a smarmy little sophistry in choosing, of all things, the arguments of socialists to compare to the arguments of those who buy gold.
You could have chosen, say, the arguments which are put forth by Originalists. But no, you took the low road; that of sophistry - with a heaping side order of ad hominem.
Hysteria in various forms appears to have displaced logic.
I'll say. My fallacy detector appears to be working just fine.
As I already pointed out comparing two entities is not the same thing as comparing something much smaller: two actions taken by those entities. I have underlined the words in the sentence that you yourself quoted.
One more time: Comparing action A taken by entity X to action B taken by entity Y is not the same thing as comparing X and Y.
Most people find it obvious in all cases except when Y happens to be communism or fascism. This irrationality has reached the level of hysteria.
You post confirmed both points. I am sorry that labels cloud your ability to think. I've tried and cannot help you any further.
I have my doubts that you've done "work" but that is unimportant. The question was not and is not your persona and what it did and did not do in life. I addressed a completely nonsensical statement you've made. In reply you've brought everything you could possibly name without even an attempt at reasoning; mo implications, just new claims, no matter how unrelated. The level of logic you exhibited is below that of a sophomore: you don't know that that you don't know. I am referring to what you wrote in the posts on this thread and nothing more. If outside of this thread you exhibit brilliant logical abilities, your "work" in number theory won you the Fields medal and your "work" in mathematical economics won you a Nobel --- I am only happy for you.
But this is my last attempt to clarify the issue: I am not interested in your persona and care little about your Fields medal and your Nobel prize. Here, on this thread you posed a totally nonsensical claim and when asked to support it only made more nonsensical claims. Moving the target in a discussion is the last resort of a scoundrel.
Should you decide to be intellectually honest on some other thread, let's have a discussion. But this one is over.
Ah, yes the great droning of the never wrong TopQuack, looking down his crooked nose at others while he ignores that fact he is what he accuses others of being.
Should you decide to be intellectually honest...blah, blah, blah. I am sorry that my definitions cloud your ability to think. I’ve tried and cannot help you any further. Because you are an arrogant pin head who can’t see past his own bias.
Here is the one question you won’t answer because you are too dumb,
How is debt slavery capitalism?
Go to sleep, your brain cells don’t work.
Commie
--and we're also unique with abilities superior to those of some of our peers. This text/chat forum limits communicating so sometimes it's hard to tell who's exchanging info and who's trading snarky attacks. Just the same, understanding policy is worth the effort because Americas wealth creation is enormously important.
Sounds like you want 'sound money' and that can mean many things. Some people take that to mean they want a currency that looks and feels good emotionally, others only look at price trends over months/years, still others compare prices over centuries, and there are even some who only care about how the money supports the well being of the Republic.
Your thoughts are welcome.
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