Posted on 11/09/2010 4:09:58 AM PST by expat_panama
I almost spat my coffee across the room when I saw the headline plastered across the front of the FT this morning: Robert Zoellick, president of the World Bank, is calling for a debate on the return to the Gold Standard, it said. Of course, when you read the column upon which the news story is based (subscription only, this being the FT), it is far less clear that Zoellick really wants a return to the 19th century international macro-economic structure. Instead, he merely seems to have namechecked gold as a possible mechanism to help us wean ourselves off our reliance on the dollar as the world’s reserve currency.
But let’s pretend for a moment that he is being serious about a return to the Gold Standard. What would that mean? The easiest way to understand the consequences is by considering what economists catchily call the “International Macroeconomic Policy Trilemma”. It goes as follows: you can have any two of the following at any one time: fixed exchange rates, capital mobility and independent monetary policy. You can’t have all three.
As the chart below (courtesy of Dani Rodrik) shows, for the last few decades (since 1971 and the final nail in Bretton Woods’ coffin) we have sat on the right hand side of the triangle, with floating currencies and untrammelled capital markets (in most of the Western world at least). The Gold Standard era involved the free movement of capital and fixed exchange rates, but in exchange for this the members had to abandon any pretence of being able to control their own domestic monetary policies.
[snip]
(Excerpt) Read more at blogs.telegraph.co.uk ...
Those acts were in response to the deflation in the post-Civil War era caused by the gold standard. Basically, the worldwide stock of gold stagnated during that when the California and Australian gold mines ran out. In response, with continue economic growth the price level was decreasing, ie deflation. The problem was farmers were debtors so that saw the price of their crops drop so the real burden of their debt was increasing. They and the Populist movement responded by demanding the US adopt a bi-metallic standard. It is a 19th century version of what Helicopter Ben Bernanke is doing. Also, when the US started minting silver dollars they artifically set the price of silver too high relative to gold. This was a “bailout” for the Westwern silver interests. One affect was if owed Uncle Sam money you paid in silver dollars and if Uncle Sam owed you money you demanded payment in gold. So the effect was you had silver flowing into the Treasurt and gold flowing outward until the US had to go back to a pure Gold Standard.
The problem is the debt not the currency, which means it’s the governments that always devalue their own currency over time due to over spending causing loss of confidence in their banking system....this is history, repeated over and over again, almost unavoidable due to human nature.
What you guys are talking about is controlled growth or capping expansion. Citizens could live with a 1% or 2% growth rate or GDP a year. Banks, Corporation, power hungry elitists can’t and always try to hoard the available currency or currencies.
Precious Metals are used as a limiting factor in currency creation as they are finite compared to the capacity of a printing press.
Precious Metals used in a civilized world and food stuffs used in an uncivilized world as backing for or as a currency begets hoarding over time no matter what.
Leaving countries with there own monetary systems is the better option as money will flow from one area of the world to the next in cycles as in free markets there are booms and busts, you can’t change cycles in free markets. There are always free markets in progress using there own form of currency whatever that might be and is acceptable at the time. Most governments hate that part ‘free markets’ because trying to control a market just sends it to a black market which is another form of a free market.
Above all, whatever currency is decided upon, you need the rule of law to back a currency for confidence. Without the rule of law people will flee a currency due to the obvious uncertainties.
The real problem would seem to be global trade issues. who would and who wouldn't want to cooperate
I can’t imagine how that happened. I can’t imagine how that happened.
The person who loaned you the $100 million doesn't agree to the adjustment.
but technically it would work
LOL!
What's the growth rate of Social Security and Medicare payments?
The US Mint produces coins (some are even gold, silver, and platinum). The Bureau of Engraving prints the paper currency.
the price of gold does not determine the value of the gold, but the strength of the currency exchanged for it...
Listen, "all things being equal" is the part you seem to be ignoring. I'm not here to argue with you. One more time: All things being equal, all monies adjusted at the same point in time. Get it ? I'm guessing not likely...
If I loaned you 20 bucks yesterday and adjustments were calculated tonight, tomorrow I would accept 10 bucks in re-payment because those 10 dollars are worth an EQUAL AMOUNT to the 20 I gave you yesterday. I think I'm the one who should be laughing at this point
Already established as idiotic on the subject of currency. Don’t waste your time.
The price of gold is set by traders that take into account things other than exchange rates.
Half the gold mined is jewelry and people buying wedding rings don't check exchange rate trends. A third of the world's gold is investment/reserves, and while exchange rates are important most will dump it during a selloff regardless of exchange rates. Supply affects the price too. The total quantity of gold that's been mined in the world doubles in less than 50 years, and we've so far only dug up about less than 200,000 tons of the 600 billion tons in the earth's surface.
LOL, sounds like a buddy of mine that was buying real estate four years ago.
Your take on the post 74?
Some traders in my experience know what prices are going to be in the future. Others like me only know what we can see and that we can't see everything. For decades I've made good money trading, but that first type usually seem to be the new guys.
sophistry or stupidity. The poster is clueless
That's what's called a conversation ender.
Cheers.
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