France's Sarkozy "We Need A New Bretton Woods System"

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Wed, 01/27/2010 - 13:42 | 207826 Stevm30
Stevm30's picture

What?! Gold and silver, commodities designated money by popular consent (unlike fiat money - designated money by force), are not "barbaric relics"? 

Wed, 01/27/2010 - 13:46 | 207839 phaesed
phaesed's picture

Only way it works is if Silver is used as an asset base, otherwise it'll fail.... again.

Wed, 01/27/2010 - 14:08 | 207898 Shameful
Shameful's picture

Why silver instead of gold, or copper, or tin, or oil?

In my mind a new asset backed currency would fail anyway no matter what the backing is.  This is not a fault of the asset, it is the fault of the central banks.  They are used to a world where they are only restrained in how much money they can print by how much debt the world can generate.  We would need to first correct the system of central banks because we have any hope of a sound currency, otherwise they will just force us into a free fiat float again.

Wed, 01/27/2010 - 14:10 | 207904 phaesed
phaesed's picture

copper and tin have industrial uses, silly to save and take up that much space. Silver is still too large to corner the market in any way and the industrial demand isn't enough to be hit. Oil.... Considering the weight the middle east would have in any decision then? Hell no.

Wed, 01/27/2010 - 14:13 | 207913 Missing_Link
Missing_Link's picture

No need.  Use a weighted basket of gold, silver, platinum, palladium, and crude oil.  That makes it far less subject to fluctuations in any one commodity.

Wed, 01/27/2010 - 14:40 | 207976 phaesed
phaesed's picture

I wouldn't argue with that proposal. Interesting note though is that we already have legislation in place for silver -

http://en.wikipedia.org/wiki/Executive_Order_11110

 

For all you Fed bashers (like me), read that wiki entry. I do believe Kennedy was assassinated because of that order.

Thu, 01/28/2010 - 09:26 | 208931 Crime of the Century
Crime of the Century's picture

Now there is an organization I could get behind.

With a flamethrower...

Wed, 01/27/2010 - 15:02 | 208032 Carl Marks
Carl Marks's picture

Edward Flaherty, a professor of economics at the College of Charleston in South Carolina, wrote an essay entitled Debunking the Federal Reserve Conspiracy Theories, in which he argues that Executive Order 11110 is quite infamous among conspiracy theorists, such as Jim Marrs, who believe President Kennedy was killed by the men who have control over the Federal Reserve Board, based on arguments that, according to Flaherty's view, have been proven to be false.

Wed, 01/27/2010 - 15:07 | 208039 phaesed
phaesed's picture

*shrug* I said I believe. I also don't believe it could be proven either way, but all presidents who have taken power away from Central Banks have been assassinated except for Jackson, who actually had two pistols misfire during that attempt.

But the key here "according to Flaherty's view" and "proven" - if it's according to his view, it isn't proven.

The fact is Kennedy was assassinated and nobody knows why. The other fact is that nobody knows the true motivations of the Fed, perhaps not even those on the board.

Wed, 01/27/2010 - 16:11 | 208158 Anonymous
Anonymous's picture

Not that it would have necessarily worked on Jackson anyway - he stood still and took a bullet to the chest in a duel so that he would be able to kill his opponent. He was one tough SOB.

Wed, 01/27/2010 - 16:55 | 208230 phaesed
phaesed's picture

LOL.... I guess that's why he carried two pistols (the assassin)

That is pretty chingon

Fri, 01/29/2010 - 19:19 | 211520 Anonymous
Anonymous's picture

surely no sane person believes the US would give up manufacturing,textiles,technology,and the lead in the world without somebody getting rich and pulling the strings.The rothschilds been running the world fore ever.Throw in the rockefellers,in japan and china and you get a pretty good presciption.They took away the guns in europe and canada,i wonder why?Kill a politition today and save the world.

Thu, 01/28/2010 - 11:49 | 209129 Anonymous
Anonymous's picture

Not to mention the lincon assassination and his green back that would have made then central bank obsolete

Tue, 02/09/2010 - 12:47 | 223373 Anonymous
Anonymous's picture

AGREED!!!!!

Wed, 01/27/2010 - 14:41 | 207977 Stevm30
Stevm30's picture

The free market has chosen gold and silver throughout history.  Let it's choice stand.  No need for government interference.

Wed, 01/27/2010 - 14:53 | 208009 i.knoknot
i.knoknot's picture

+1

"No need for government interference." - exactly. Too bad they keep interfering.

we ought to support Dr. Paul's proposal to legalize competing currencies... to those of you who don't believe in an asset backed currency, what could it hurt? what are you afraid of?

allow it, and watch it fail if you like... just join us and allow it.

Wed, 01/27/2010 - 15:07 | 208038 DosZap
DosZap's picture

Yes, but won't ever happen,too much fiat currency printed v.s. physical metals available above ground, plus in our Gv't's possession. IF the stds were left the same, (as to weights).Unless the value was made commensurate, with the available metals ( imagine the price of both metals if this were to happen), and adjusted as quanities were added.

Then you have the rest of the worlds fiat currencies...................

 

Wed, 01/27/2010 - 17:58 | 208326 Al Gorerhythm
Al Gorerhythm's picture

There is only one Mona Lisa above ground and I'm sure that it attracts an insured value in fiat. The Mona Lisa probably doesn't carry much value though because if you exchanged dollars for it, you couldn't eat it, right? 

Thu, 01/28/2010 - 09:28 | 208932 Crime of the Century
Crime of the Century's picture

+1 w/ golf clap

Wed, 01/27/2010 - 14:46 | 207994 trav7777
trav7777's picture

There's really no need for any of this.

The solution is to stop creating money made of debt; that is the fundamental problem, not the fiat nature.

If a nation were to overprint, their currency would go to crap and this would be reflected in FX and general price levels.

Let the market determine the true value of currencies...having an asset backed currency can leave a nation exposed to speculative attack unless everyone is asset backed.

I would prefer Real Bills Doctrine where bills against real things of any kind trade against each other.  This would allow grain exporters with little gold to have a strong currency effectively backed by grain.  This could be true for any production, even intellectual property.

The market will sort out how much grain an oz of gold buys or how many barrels of oil equal a chunk of platinum or a TEU filled with lead-painted plastic toys

Wed, 01/27/2010 - 14:59 | 208023 Anonymous
Anonymous's picture

An excellent idea. But, pray tell, what would outfits like Goldman Sachs do, since they produce no real product, only pulled out of the backside derivatives and other financial voodoo. Geez, I think Blankfein would melt like the Wicked Witch if he had to produce a real, exchangeable product!

Wed, 01/27/2010 - 16:04 | 208150 trav7777
trav7777's picture

Goldman Sachs would fuck off and die

People who can't figure out what to do with Wall Street...well, you just do the same thing you do with ticks and leeches.

In the Real Bills Doctrine universe, bankers would be useful as holders of capital who could then discount bills against future production.  But this isn't a glorious inflation racket and their bills would compete against others' bills in the marketplace.

A banker known for kiting would see his bills reduced to worthless.  Bankers' purpose under RBD is to issue the bills themselves, against production to be delivered to market within 90 days.

Adam Smith was a very bright man, who came up with this doctrine in response to contemporary concerns with metallism and fiat.  His response was that all real things should trade as "money."  This is not a debt-based monetary system, nor was it a metals standard.

Wed, 01/27/2010 - 18:44 | 208395 Anonymous
Anonymous's picture

What will be the impact on this basket as the crude oil portion gets burned at 83MM bbls/daily? A medium of exchange that includes backing by a substance that is rapidly consumed seems a but unstable by design. The value of exotic metals like platinum / palladium depends upon continued demand for them in a high technology economy, which in turn requires crude oil. All of these baskets of things are overly complicated - in 100 years, between a warmer planet and a lot less energy, ice might be worth more than the lot of this stuff :-)

Wed, 01/27/2010 - 14:17 | 207919 DoChenRollingBearing
DoChenRollingBearing's picture

Correct.  It does not matter what they "back" any currency with.  They will just issue paper that promises "payable on demand" and use fractional reserve tricks just like they always do.

The best tricks are the oldest tricks.

Wed, 01/27/2010 - 14:58 | 208019 nonclaim
nonclaim's picture

IOY is the oldest trick...

Wed, 01/27/2010 - 13:59 | 207874 Anonymous
Anonymous's picture

I think he is really referring to the Chinese yuan and the weak dollar too !!

Wed, 01/27/2010 - 14:03 | 207886 Anonymous
Anonymous's picture

Why return to Bretton-Woods would be a nightmare for the FED?

Someone educate me please. Thanks

Thu, 01/28/2010 - 10:05 | 208967 Crime of the Century
Crime of the Century's picture

Because we have (so far) successfully avoided the repercussions of reneging on B-W in 1971, by the slamming of the gold window. The Fed doesn't want to enter negotiations in a weakened state, lest the chicken comes home to roost.

Wed, 01/27/2010 - 14:03 | 207889 PaperWillBurn
PaperWillBurn's picture

only way it works is if Gold is allowed to float against currency. Gold/paper peg won't work, the gold will always run out. Let it float and have it there as a wealth reserve, not as Money!

Wed, 01/27/2010 - 15:00 | 208026 Internet Tough Guy
Wed, 01/27/2010 - 15:17 | 208068 PaperWillBurn
PaperWillBurn's picture

Caught me

 

everybody should pay attention to the words of FOFOA  and A/FOA

Wed, 01/27/2010 - 14:04 | 207892 Anonymous
Anonymous's picture

Why return to Bretton-Woods be a nightmare for the FED?

Someone educate me please.

Wed, 01/27/2010 - 14:16 | 207920 lookma
lookma's picture

The FED likes unconstrained money creation

Wed, 01/27/2010 - 14:23 | 207934 rostholder
rostholder's picture

Historically bi-metallic standard does not work - Greshams Law. 

Historically Silver lost the free market fight vs. Gold.

Silver has other uses other than just a store of value, which makes Gold a better candidtate. 

Bretton Woods is not ideal as it still allows for fiat money within a country; gold redeemable to settle internationally.  This is just a set of pegged interest rates with a base currency redeemable in Gold which failed the first time.  We assume that USD continues to be the anchoring currency.

France is interesting here.  They demanded Gold for Sterling reserves many moons ago when Gold was redeemable in Britain AND they demanded Gold for USD causing US to close the gold window.

No conclusion here just Frances role is an interesting one.

 

Wed, 01/27/2010 - 14:30 | 207951 lookma
lookma's picture

Historically a fixed exchange bi-metallic standard does not work - Greshams Law. 

Silver didn't lose any free market fight, gold was adopted by fiat at fixed exhange rates.



Wed, 01/27/2010 - 14:41 | 207978 Hephasteus
Hephasteus's picture

Yep. You do NOT want to play relative valuation games with liars. They will win every time.

Wed, 01/27/2010 - 14:37 | 207969 trav7777
trav7777's picture

This flat isn't true.

Bimetallism was killed by the Bank of England, which had the Sterling Bill, a means by which they could flood paper gold into markets and then withdraw it.

A pure gold standard is not materially different from fiat.  The BOE offered a different silver/gold ratio than the latin union in order to suck all the gold into Britain so that they could begin fractional gold using the Sterling Bill.

This was the lynchpin of the entire British Empire.  It was a fractional reserve scam from its outset.  A bimetallism standard *cannot* be faked with unbacked bills

Wed, 01/27/2010 - 16:28 | 208189 Anonymous
Anonymous's picture

The flaw in a bi-metallic standard is if they are linked in value per weight, ie. a certain amount of either is equal to one dollar. Bi-metallism would work if products were priced independently in either gold or silver by weight. Once the relative valuation of gold vs. silver is removed there is no advantage is demanding one over the other as payment and Greshams Law does not apply.

Wed, 01/27/2010 - 16:43 | 208211 Joe Sixpack
Joe Sixpack's picture

"Historically bi-metallic standard does not work - Greshams Law. 

Historically Silver lost the free market fight vs. Gold."

 

In the 19th century there were times under bimetallism that silver was considered more valuable (and thus was sucked out of circulation) and times where gold was. Ultimately the issue was the setting of the fixed silver:gold ratio. To work we should have bi or multi-metallism based on a free market basket price of metals and/or other commodites. The market would need to be completely free and transparent to work (unlike COMEX or LBMA for instance).

Thu, 01/28/2010 - 11:45 | 209122 Anonymous
Anonymous's picture

Gold as a non-rusting conducting metal has industrial uses too, especially in the new electronics age. Even your car is now electric and resemble more and more like you cellphone and laptop computer.

Also, historically before gold there was aluminum. Before invention of electricity, there is no cheap way to turn aluminum oxide into pure aluminum, so aluminum is even more rare and precious than gold. Guess what technology do to aluminum as a store of wealth.

Nothing is eternal in the free market and there is no fool-proof store of wealth. Technology has recently given us artificial diamond. All those liquid gold in the Earth's core is just waiting for the right technology too.

Wed, 01/27/2010 - 14:29 | 207948 Anonymous
Anonymous's picture

Why would this be a nightmare? This makes no sense.

His quote is for fixed currency exchange rates - not to back every currency with gold.

"It cannot be that...we have a multipolar world and a single world currency," Mr. Sarkozy said. "We need a new Bretton Woods," he added, in a reference to the system of fixed but variable exchange rates established after the Second World War.

As well, remember the source, per WSJ:

"The French leader's comments come as the euro, whose perceived over valuation has angered most French governments in recent history, hit its lowest level in nearly a year against the dollar, as fears for the sustainability of the euro zone increased in the wake of Portugal's announcement that its budget deficit had topped 9% of gross domestic product."

Wed, 01/27/2010 - 14:34 | 207964 uformula
uformula's picture

Taking a stab you all, what implications would this have in the financial markets?

Wed, 01/27/2010 - 15:07 | 208035 Internet Tough Guy
Internet Tough Guy's picture

Bad for USD hegemony.

Wed, 01/27/2010 - 14:35 | 207966 Anonymous
Anonymous's picture

Bi-metallic standards fail only where the government fixes the ratio of silver to gold, because either silver or gold will be in higher private demand than the fixed ratio indicates.

If you allow both gold-backed money AND silver-backed money to circulate jointly without fixing the rate of exchange between them, it can work, but everyone would be required to adapt to to dealing in two sets of prices.

Wed, 01/27/2010 - 14:38 | 207971 trav7777
trav7777's picture

France probably wants to see an end to asian currency ponzi manipulation which is destroying entire industries all across the developed world.

Trade flows must be forced to normalize

Wed, 01/27/2010 - 15:04 | 208034 IBelieveInMagic
IBelieveInMagic's picture

From the point of view of the Asian countries, they are at a disadvantage as they are not considered reserve currency (commodities are denominated in USD). So, they make up by cornering jobs via outsourcing (the surplus USD generated allows to buy commodities for local consumption, etc.). As long as any country's currency is solely used as reserve currency, this situation cannot be fixed.

 

Wed, 01/27/2010 - 15:13 | 208054 Fed Supporter
Fed Supporter's picture

Exactly.

Have you had a chance to read Richard Duncan's newest book,The Corruption of Capitalism: A strategy to rebalance the global economy and restore sustainable growth?

This is one of the most comprehensive reads on the current economic crisis, which essentially started with the end of the gold standard in the 60s and early 70s.

My favorite quote (paraphrased) if there is hell for violating sound economic principles, then there will special rooms reserved for Johnson and Nixon.

Thu, 01/28/2010 - 18:19 | 210043 Anonymous
Anonymous's picture

The currency imbalance is a result of saving imbalance. The currency imbalance is not cause by direct manipulation. The financial crisis is a natural result of Asians having around 30% saving rate and Americans having around 2% saving rate. All the combined savings by the Asian countries distort the US treasury market and in turn make the risk and credit market unhealthy.

Had the Asian countries use gold/silver/copper/iron/platinum/palladium/zinc/nickel/aluminum/etc. in their currency reserves instead of the dollar, a simple economic slump won't be turned into a massive financial crisis, which is now in danger of turning into a currency crisis.

A new Bretton Woods, where currency is actually backed by basket of hard commodities would prevent future financial crisis and head off any potential currency crisis. National savings should ideally be accumulated in the form of hard tangible stuff and not phantom paper anyway.

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