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World Bank President Robert Zoellick Calls For Return To "Old Money" Gold Standard
One of the most serious condemnations of the race to the currency bottom to date comes not come from some peripheral media, but from the head of the World Bank itself, who in a just released Op-Ed in the Financial Times says that since the system of floating currencies established by the 1971 Bretton Woods II system, has broken down, it is time to look to a new international system of commerce, one which "should also consider employing gold as an international reference point
of market expectations about inflation, deflation and future currency
values." In other words, welcome back gold standard 2. Of course, this proposal will never attain more than a casual academic reference, as even a partial gold standard will immediately establish a lower bound on how much any given monetary authority can debase its (and, by retaliation, others') currencies. What, however, if very curious, is why this proposal is being floated precisely 3 short days after the Fed has launched its most ambitious attempt to reflate global asset prices and devalue fiat paper. And as is well-known, the IMF has also been quietly proposing a return to an ven more powerful version of the SDR.... Just what will take for the scales to tip, and for the dollar to remain a reserve currency just in retrospect.
From the FT:
Writing in the Financial Times, Robert Zoellick, the bank's president since 2007, says a successor is needed to what he calls the "Bretton Woods II" system of floating currencies that has held since the Bretton Woods fixed exchange rate regime broke down in 1971.
Mr Zoellick, a former US Treasury official, calls for a system that "is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account". He adds: "The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values."
His views reflect disquiet with the international system, where persistent Chinese intervention to hold down the renminbi is blamed by the US and others for contributing to global current account imbalances and creating capital markets distortions.
Of course, with a market primed to discount every inflationary possibility, it would not be surprising to see precious metals to continue their near parabolic move higher over the past few days. Silver is already flirting with the $27 in the spot market tonight.
Full comments by Zoellick:
With talk of currency wars and disagreements over the US Federal Reserve’s policy of quantitative easing, the summit of the Group of 20 leading economies in Seoul this week is shaping up as the latest test of international co-operation. So we should ask: co-operation to what end?
When the G7 experimented with economic co-ordination in the 1980s, the Plaza and Louvre Accords focused attention on exchange rates. Yet the policy underpinnings ran deeper. The Reagan administration, guided by James Baker, the then Treasury secretary, wanted to resist a protectionist upsurge from Congress, like the one we see today. It therefore combined currency co-ordination with the launch of the Uruguay Round that created the World Trade Organisation and a push for free trade that led to agreements with Canada and Mexico. International leadership worked with domestic policies to boost competitiveness.
As part of this “package approach”, G7 countries were supposed to address the fundamentals of growth – today’s structural reform agenda. For example, the 1986 Tax Reform Act broadened the revenue base while slashing marginal income tax rates. Mr Baker worked with his G7 colleagues and central bankers to orchestrate international co-operation to build private-sector confidence.
History moved on after the huge changes of 1989 and the experience of the 1980s is still being debated, but this package approach was significant for its combination of pro-growth reforms, open trade and exchange rate co-ordination.
What might such an approach look like today? First, to focus on fundamentals, a key group of G20 countries should agree on parallel agendas of structural reforms, not just to rebalance demand but to spur growth. For example, China’s next five-year plan is supposed to transfer attention from export industries to new domestic businesses, and the service sector, provide more social services and shift financing from oligopolistic state-owned enterprises to ventures that will boost productivity and domestic demand.
With a new Congress, the US will need to address structural spending and ballooning debt that will tax future growth. President Barack Obama has also spoken of plans to boost competitiveness and revive free-trade agreements.
The US and China could agree on specific, mutually reinforcing steps to boost growth. Based on this, the two might also agree on a course for renminbi appreciation, or a move to wide bands for exchange rates. The US, in turn, could commit to resist tit-for-tat trade actions; or better, to advance agreements to open markets.
Second, other major economies, starting with the G7, should agree to forego currency intervention, except in rare circumstances agreed to by others. Other G7 countries may wish to boost confidence by committing to structural growth plans as well.
Third, these steps would assist emerging economies to adjust to asymmetries in recoveries by relying on flexible exchange rates and independent monetary policies. Some may need tools to cope with short-term hot money flows. The G20 could develop norms to guide these measures.
Fourth, the G20 should support growth by focusing on supply-side bottlenecks in developing countries. These economies are already contributing to half of global growth, and their import demand is rising twice as fast as that of advanced economies. The G20 should give special support to infrastructure, agriculture and developing healthy, skilled labour forces. The World Bank Group and the regional development banks could be the instruments of building multiple poles of future growth based on private sector development.
Fifth, the G20 should complement this growth recovery programme with a plan to build a co-operative monetary system that reflects emerging economic conditions. This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account.
The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.
The development of a monetary system to succeed “Bretton Woods II”, launched in 1971, will take time. But we need to begin. The scope of the changes since 1971 certainly matches those between 1945 and 1971 that prompted the shift from Bretton Woods I to II. Serious work should include possible changes in International Monetary Fund rules to review capital as well as current account policies, and connect IMF monetary assessments with WTO obligations not to use currency policies to remove trade concessions.
This package approach to economic co-operation reaches beyond the recent G20 dialogue, but the ideas are practical and feasible, not radical. And it has clear advantages. It supplies a growth and monetary agenda that parallels the G20 financial sector reforms. It could be built upon prompt incremental actions, combined with credible steps to be pursued over time, allowing for political dialogue at home. And it could help rebuild public and market confidence, which will remain under stress in 2011. Perhaps most importantly, this package could get governments ahead of problems instead of reacting to economic, political and social storms.
Drive or drift? How the G20 decides could determine whether multilateral co-operation can achieve a strong economic recovery.
Little can be added here except for one recent popular quote, which explains why we eagerly welcome more and more high level individuals condemning the fiat system, and petitioning to a reversion the system that actually worked without creating quadrillions in imaginary debt-money (and the inevitable fiat devaluation that always follows): "What is the most resilient parasite? Bacteria? A virus? An intestinal
worm? An idea. Resilient... highly contagious. Once an idea has taken
hold of the brain it's almost impossible to eradicate. An idea that is
fully formed - fully understood - that sticks; right in there somewhere."
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Gordon? Chumba?
I saw Gordon reply not long ago (a week?).
There are just rumors about Chumba. I for one would really like to have him back. A real shoot first ask questions later kind of guy. I hope he is OK.
I have it on fairly reliable authority that Chumba is okay. Would love to tell you more, but I would betray a back channel confidence to do it, unless that person, while cruising the threads, were to speak up on the topic?
Oh yeah, Gold you female dogz in heat. Ow Ow Owooooooooo!
Way too funny! Female dog! :-)
Don't say a thing! Glad to hear that he may be OK.
yeah, be nice to see gordo back here. what is he supposed to be ok from?
And the Buck's (GG & Chumba included) are goin' into rut for all that doe .. Good thing since some of that tree bark needs to get rubbed in a way only they can
Meanwhile, the echo "I Will Not Obey (but I will represent)" still rings from the digital landscape ..
HONESTY BITCHEZ!!!!!!!
Jim eh? So how's your buddy Krugman?
SDRs, bitchez.
(that's not really Jim, is it?)
screw the gold standard. just go to gold!!!!!!!!!
Yeah, um, I am becoming more "fofoa like", in that a gold standard is probably not workable. And that gold should be viewed as the best wealth protector.
fofoa.blogspot.com
Zoellick is describing Freegold, not the old pre-1933 gold standard. It's coming. A/FOA were right about this more than 10 years ago.
I missed that in Zoellick's commentary, I'll have to back and re-read it (zzzz...).
At his blog, I have seen some commentators say that since A/FOA wrote a rather long time ago that things may have unfolded differently than they foresaw.
But, Bearings don't have brains, just a hole there in the middle. I certainly do not KNOW what is going to happen, but FOFOA's gold to $55,000 argument is persuasive. When I first went to his site (2008), I looked at that number and thought WTF? It does take a lot of time and thinking (for me anyway) to grasp his arguments, but he may be the most on the money guy on the 'Net.
"...but he may be the most on the GOLD guy on the 'Net"
I know it's not the common phrase, but that seems more accurate.
fofoa, ' gold may be priced at $1000 but try to get some '.
Et tu Brutus?
Why? Good Cop / Bad Cop.
Divide and Conquer.
Polarize, raise ire, stir the chaos.
Ordo ab chao!
SOP.
(Just barter with your new local friends and minimize the use of any money. Just cut Big Brother's margins and he dies.)
I could not agree more.
Good luck with that, Bob.
I was laughing when I saw this, and silver briefly touched $27.
One of those GATA types I believe called for silver to go to $30 in 18 days. That was last week some time. Making good time so far.
And now the dollar is SOARING! reversal exactly at 8pm, amazing.
james turk said it and the 14th will be the 18th day.
The 14th is a Sunday. We're talking business days. 18 business days.
Turning to a Gold Standard now to lock all this crisis debt? Yes, let's just lock it all in place now, so we can never get it paid off--or worked out.
The Gold standard would be just perfect for those who own Gold mines.
Governments would nationalize or heavily tax all commodity mining operations.
IRS guy would be following every old prospector and his donkey around the wilderness, watching for a little color in the pan. lol
snidley
I take your point with good humor BUT. I am in the bussiness and have the legs. I routinely kill junior geo's and techs who dare follow me. I would say that many in the bussiness would welome the oportunity to be shadowed just for the laughs. Time to go prospecting in the Brooks Range Ak.
Wait a minute. You routinely kill people who follow you around? Or was that not to be taken literally?
LOL. meat a four. They are generally toast, dead legs with major cramps and to bed early without supper.
Whew. Okay then!
Taxation of miners will drive the gold price even higher.
Remember, is not about locking the gold standard to any price. It is letting it float freely. To be fair, we could start the standard at $100k/oz. That wouldn't be that bad!
$100,000 / oz. I'm good with that. Great idea. C'mon Fed, make my day!
Look out there, DCRB. Those golden woodies can be dangerous.
$100,000 USD might only be worth 10 or so IMF SDR's, in comparison to an oz of gold.
Don't forget unlimited BennieBux equals hyperinflation.
Can someone tell me who moves to a gold standard when the world's best customer only deals in dollars?
Anyone?
Anyone?
Bueller?
Also, if it not too much to ask, what fills the hole left by the sudden elimination of 1/4 of the world market demand?
I am not sure people are thinking this through. They want a durable store of dead value, but they are not thinking about the actual living circuit of production and consumption...
What are you going to do if the saudis settle for oil in euros, stop importing oil? That will teach them who is boss...
Ask Saddam what Washington is going to do...
Use a Ouija board...
Arab response to your drivel:
Fool, we will burn the oil rather allow its theft. Try protecting the far flung pipelines and vulnerable infrastructure required for its shipment to an ever more energy hungry world.
Besides, the Saudis have an intimate relationship with central bankster mafia.
Who is going to pay for the social programs in the Middle East if you burn your own oil? It's said that the Saudis need close to $70 per barrel to support the domestic pork barrel.
... I know that you don't see any of that largess, but what about your parents?
Actually sir, the production cost for a barrel of oil is considerably less than the market price. It is another market which is manipulated by the same people who literally own the fake fed.
In respect to some Arab social program I've never heard of, I would like to remind you that the man said the Saudis would be invaded which means that there is already death and destruction on the streets so who's talking about some social program?
Lastly, I'm not Arabic!
lol
May I suggest Geritol?
FOFOA had a good gold/oil manipulation set up article. Shows how both are manipulated using each other. Both down in price.
Hey,
Don't get angry with me. But, he did try to price Iraqi oil in euros before we suddenly became so outraged about his use of the chemical weapons that we sold him...
I'm just sayin...
Yes, that's true. And I believe Iran takes euros now (http://en.wikipedia.org/wiki/Iranian_oil_bourse) which might partly explain TPTB's expressions of impatience to bomb them.
The Saudis would need to get security guarantees from Russia and China for this to be feasible. Uncle Sam would NOT be pleased if they started taking currencies other than the US $
Gold/silver are already acting as stores of value.
Is the dollar?
It is not impossible to have a store of value and a transaction currency circulating in the same economy.
As long as the store of value (gold) is left floating against the transaction currency whats the problem?
Too much printing of the transaction currency would drive up the store of value (gold).
It is happening as we sit here typing.
The dollar is a worthless piece of fictional money ... it cannot be a store anything, much less value
But, in the circuit of production and consumption, the money function is only token anyway. I agree with those who oppose QE and the like; but it is just not going to happen. Banks like being able to create money at will...
" Banks like being able to create money at will..."
...and hasn't that worked out well. lol
Gold floats beside the Euro and is 'offically' revalued every quarter. So, in Euroland gold is a store of value and the Euro currency is a transaction currency. Is this difficult to understand?
When the euro-zone can run unlimited trade and public deficits to consume everything Germany, Japan and China can throw on the world market, the euro will replace the dollar.
Until then, Europe is basically doing what they did in 1971: NOTHING. Please, I am not agreeing with these assholes in Washington, I just can read the tea leaves, and those booty-punks in Europe will dance to whatever tune Washington puts on the turntable...
They have spent the last 70 years on their knees, and now is not the time for them to learn a new profession
Well, I certainly cannot have a logical discussion with someone that can read tea leaves and incorporates the outcome into a macro economic forecast.
I respect your right to your opinion and wish you well with your investments.
Look at history, man. The US defaulted on its obligations under Bretton Woods -- outright default. Who in Europe and Asia sent boats to collect their gold? Can't you see that macro is not all about equations? There also conflicts which cannot be quantified.
Please, do not fall for the elegant math of neoclassical economics -- it didn't prediuct any of the last three years...
No one can predict with 100% accuracy the actions of the elite. This does not change the fact that GOLD BITCHEZ!
There ARE other countries in the world besides the US, and I'm not so sure they'd be in favor of your so called "dollarization" when our central bank has proven its willingness to debase said paper. No I think what the entire REST OF THE WORLD desires is a stable unit of account. But maybe you're right, 70% of the worlds weapons can convince them otherwise...
Charley, your point is fair, in my opinion, as we are defaulting on China as we speak (monetization) and they have not sent over any slave ships to pick up the only 'asset' backing the $USD (our slave labor).
the global oigarchy will be whatever they need to be to consolidate more power and wealth in their hands. gold commie dollar capitalist does not matter
... it cannot be a store anything,
Sure it can. it can be a "store of debt".
best customer...largh
The CHinese would still be picking potatoes in reeducation camps if it weren't for debt driven American demand -- and they know it. You won't see them upsetting this dollar thingy.
Right, I mean, trading useful goods for pieces of paper improves their standard of living so much. Right? Right?
God knows they couldn't just use those things they produced themselves. Instead, they stir crumbled up treasuries into their potato stew, turning it into delicious porterhouse steak.
Yes, it makes about as much sense as selling bank assets to the Fed for dancing electrons puched in a computer.
Unless those assets were worthless as well. Not to mention all that shoddy manufactured crap exiting Chinese factories which would pile up worthlessly on the piers of Shanghai if WalMart wasn't there.
What is the value of a pier full of unsold Chinese made crap?
As much as the Chinese are willing to pay for it.
Why do you think only white people can consume? If you produce and save, you can consume, so long as the policies of your nation aren't keeping you artificially poor by shipping the goods you produce abroad in exchange for little pieces of paper that Westerners are printing like there is no tomorrow. The Chinese would not be particularly hurt by a total secession of trade with the US, because the US doesn't produce anything that they need or want.
Also, look at your monitor. Is it a shoddy piece of crap? It was made in China (I can say that with 90+% accuracy). Look at your computer. Same thing. Look at your TV, you DVD player. Look at the silverware in your drawers. Look at your pots and pans. Are they all shoddy crap? Chances are, it was all made in China.
You really should cut down on the collectivism. China isn't one big hivemind. It is a nation with well over a billion individual, and millions of different companies. Some are well run, others do shoddy work. The ones that do shoddy work don't last very long. Those that do good work do. As time goes on, the market forces them to get better. We have seen this, to the extent that they have gone from making cheap fall apart toys to making high-end, well built electronics. The US went through the same process, as did every other country that ever industrialized.
I did not intend to provoke a feeling of jingoism aimed at the Chinese -- the crap is made there because American manufacturers offshored it to China. China doesn't own a single WalMart store in the US, but WalMart has 700 factories in China...
No, but WalMart owns stores in China. In China, they sell "high-end" products, not the shit they sell here.
What does it matter if China doesn't own a single walmart? Or if Nike was originally an American Company. Same goes with other companies such as Budweiser (who is now owned by inbev).
American Companies have ZERO allegiance to America. This was proven in the 1980's when these said companies shipped out jobs to the lowest bidder.
As soon as taxes rise for said companies here in the U.S. they won't even be located here anymore but will ship their headquarters to the most convenient place possible.
don't misinterpret the actions of the chinese..they will sell you the rope which you hang yourself with..patience is of the utmost priority
Why does it matter if demand changes due to less less money because of less credit extended to people who cannot repay the loans anyway?I think most ZH readers would like an honest unit of account. If we need a state at least they can provide honest weights and measures and not some arbitrary value changed as quick as you can say 600 thousand million.Is the US really the worls best customer or just the one with the biggest guns?
Listen, I see what QE is doing and will do -- the euro is toast and probably the yen and yuan as well. The dollar is headed in a cess pool of depreciation. But, these guys will go down the drain with the dollar -- kicking and squawking the entire way -- because they have no alternative.
Even if they went to gold standard, the US control about 80 percent of the existing stock!!!!!!!!!!!!!!!!!!!!!!!!!!!
(And, 70 percent of global military power)
"Even if they went to gold standard, the US control about 80 percent of the existing stock!!!!!!!!!!!!!!!!!!!!!!!!!!!"
I suppose you have a credible link for that one?
Yes -- Hold on I will find it ... Jim Rickards interview
Here: http://tinyurl.com/35foyqb
I don't vouch for his figures, but if they are correct, the world will never return to the gold standard...
World gold holdings (2008) (Source: World Gold Council[18]) Holding Percentage Jewelry 52% Central banks 18% Investment (bars, coins) 16% Industrial 12% Unaccounted 2%
http://en.wikipedia.org/wiki/Gold_reserve
Looks like Indian brides are holding the gold.
No shit...check out the South Indian brides...
http://www.indiamarks.com/guide/Gold-Mines-of-Kerala-Just-Kidding/17646/
That's kind of old school, but they never sell the stuff, it just gets passed down. Now they are heavy into diamonds..here is an ad with my niece as the potential bride...OK, I know, but she's a doll.
http://www.youtube.com/watch?v=_SjIs8nqXDs
BTW: Diamonds are no longer considered precious stones (in investment parlance)
Round trip buy/sell as high as 45%. It is not divisible and its quality and properties vary widely. Not an investment unless inherited, stolen or found.
Gives a whole new meaning to the term "Gold Digger"!
Many beautiful women in those pictures. Your niece is stunning.
meh, never mind..xie xie ni charley..night crew..in the morning.
unum mountaineer,
"meh, never mind..xie xie ni charley..night crew..in the morning."
Pick it up a couple notches or don't bother.
Charley,
Its called a paradigm-shift. When you are devaluing the reserve currency at a fast(er) rate than anyone else, countries and business will opt to transact in a more stable currency. Preferred currency of all times... You thought right! It has happened and it will happen again. Time is the only uncertain.
I agree that there will be a paradigm shift, but it is likely to go in the direction of a global dollarization movement rather than the gold standard. It hurts me to say that, but I just do not see any alternative. Without QE, European austerity woud push the global economy right into the grave.
But, just because I see it this way doesn't mean I like it or agree... My preferences are quite defferent.
The global "dollarization" (or fiatization) you mentioned will fail again, if that fiat currency is not backed by some sort of asset (oil, PM, commodities). Remember, the problem lies in the control of the money supply. This backing of fiat currencies by a physical asset would bring the indispensable check and balances needed for the market and authorities.
What will your reaction be if yoy have unlimited power to create money and suddenly someone says you cannot do this anymore becasue of a gold / pm standard?
You will tell them to fuck off.
This is what you can expect from all the guys with shiny shoes in big buildings staring at 19" screens.
My take: the deeper the crisis, the better the chance of a gold standard.
Isn't the dollar based on oil already? Isn't that the beauty of it? The value of a dollar is based on a consumable. You pull it "for free" out of the ground and you "create" dollars. It expands the economy and then more are made.
If the people who sell the black stuff that makes everything go say they want gold and only gold because Allah commands it, you'll either go broke trying to kill them or pay fucking gold, capiche?
WTF just happened to the dollar?? Some really fat finger just manifested...
Nixon just rolled in his grave.
indeed! (hilarious)
I would like to have been there in '71. I am sure if we could look back there were people who warned what would happen with a fiat currency. Just like there were people who warned what would happen with Social Security back in 1939...just like our founders warned what would happen if we let the power of government grow, even if was pitched as being good for us.
The very best thing about a gold standard is that no one can get defrauded in the exchange. Payment is in the currency.
Money under a gold standard becomes more scarce.
Capital can still be misallocated but it is a bit more difficult to misallocate $60 Trillion.
Money doesn't become scarce, the units just get smaller. This means your savings buys more. This is a good thing, contrary to what the witch doctors tell you.
Fewer claims on underlying assets, to me, is scarce money....call it hard money if you prefer.
Hypothetical question: Do you believe that the enormous booms of DotCom and housing could have happened under a gold standard?
...and, yes I am well aware of the boom bust cycles under previous gold standards. But, I am talking bubble SIZE here, as well as the enormous leverage that was allowed under a strictly fiat regime.
Too many dollar claims on assets that were way over priced. Hell, now there are so many claims that no one knows who owns what and any glich will bring down the cards.
I see what you mean. I thought you were referring to scarcity the way the Keynesians do, saying that gold standards don't offer "flexibility", which is asinine. They only want "flexibility" in money so they can steal real capital from all holders of dollars through debasement.
Booms driven by new technologies could easily occur, but they would be highly unlikely to get out of control, as (presumably) we would have interest rates set by the market, which would have put a hard cap on speculation.
Okay, I can't get one gold price site to work right. Is it just me?
No...Kitco is down... This site is working...
http://www.goldprice.org/spot-gold.html
Gold down $8...
goldprice.org has the best uptime, in my experience.
MC no problem on my end-KC-
We r currently trading over the big rock known as Aussieland.
Aussie 1 penny over par v the sawbuck
Loonie still at par
Euro down 100 pips at 13935
Au down 5 sawbucks at 1389
Siber down .21
Sushi buck hangin round 81 give or take a few pips
This site has decent content and commentary
http://www.24hgold.com/english/home.aspx
Thanks to everyone. I had Kitco [flat line], Goldprice [repeating the same words and no price], and fastmarkets [stuck on an old price] each doing odd things. My tin hat got, well, snug for a second.
I quite like the live charts at Bullionvault, as long as you don't mind Java running on your machine. They were up just now when Kitco was flat. You can switch to spot silver, change date ranges, and also (important for me) switch currencies (to AUD). The "realtime" option shows trade by trade changes, but that mode only runs for a few minutes (before you have to enable it again).
'Tis the monetary season of giving, and all is getting off to an early start. Zoellick just gift wrapped gold $1400+.
http://www.polycapitalist.com/2010/11/world-bank-president-zoellick-gift...
Op-Ed in the Financial Times says that since the system of floating currencies established by the 1971 Bretton Woods II system, has broken down, it is time to look to a new international system of commerce, one which "should also consider employing gold as an international reference point
Big problem/scam as I see it (well maybe I dont)--the worlds banks gold reserve's have never been AUDITED--is it live or is it memorex ???
I think we miss the point. It's not what we value, it's how we value it and with "it" being the dollar and the fed "valuing" is the problem.
I think the reference to building developing counry infrastructure and training labor to be more problematic. Are they going to ask developed countries to subsidize worker training so we can off shore more jobs? Sounds like it to me. Rat bastards.
Who benefits from free trade? If these fuckers want a partially gold backed SDR, or any form of pm standard, I'm out. Globalism (in any form, carbon tax or private war), is coporatism and we are it's fodder...
God help us.
Globalism, corporatism, oligarchy, world government, are all the antithesis of freedom, the pursuit of happiness, we the people, or anything remotely awesome.
Yes and just try to stop them. We've been living in the new world order for well over 40 years. Freedom isn't coming back, Amerika has been socialist since 1933. Nukes are weapons of collectivism, not individuality.
We've ALWAYS been fodder to someone. The tribal chief, the lord, the king, the pope, the government...
The problem is ensuring a smooth transition from the old-system to the 'new' system, whatever that might be. Moreover someone needs to decide (or a rough consensus formed) as to who should sit at the table to decide the new rules, on what terms etc. Certainly Zoellick's FT oped is 'timely' given the start of this week's G20 meeting in Seoul.
However, even when faced with a 'clear and present' risk of USD purchasing power-erosion/collapse, I very much doubt that policy makers will unilaterally and proactively ensure a smooth transition to GS2. Why?
1) Although China is a now a top gold-producer, it ain't got shit compared to Europe or the US. Therefore the motivation to move to GS2 is not an equalizer or even a game changer from a SCO perspective. Those who have the gold - rule and China, Russia and middle-East ain't got shit. GS2 is just a repeat of furthering traditional US-European interests or fuel the conspiracy theorists/NWO-types.
2) It has to hurt a lot more before the sheeple provide ass-cover to the politicians.
So its more likely that any transition would be rough (for everyone) and non-linear. Especially if, within any given society, there exist non-alternative means of exchange (above basic barter) to be used as a 'plan b' alternative should chaos emerge. Certainly ZH-readers will be ok is they hold gold, however how does that scale. It doesn't.
Hence I would call on those programming-types to develop and encourage community-currencies, with exchanges, that exploit the current trend in social networking and self-issued credit. Gold could anchor such a GS3 standard that might complement existing 'legal-tender' fiat systems by providing insurance should they fail.
'Legal tender' is what the Government accepts but it doesn't not mean that it must be the only 'currency' businesses or you should accept.
All the technology exists today to do this, but the trust does not. So, if you believe that there is value and strength in diversity... go forth and multiply.
the software already exists amigo:
http://drupal.org/project/mutual_credit
the key to the success of these endeavors is to clearly understand and communicate the functions of money and be able to separate out the medium of exchange & store of value elements.
also what will be challenging is to tweak an appropriate algorithm for credit extended/accumulated, either through a time mechanism to devalue the credits or credit limits, etc. it will be interesting to see what works and what doesn't.
currency decentralization is where it's at though methinx. why should da boyz have all the fun right?
Robert Zoellick! seriously! PNAC, Bush Baker bot, World bank, Goldmanite, ENRON advising, Robert Zoelick?
What's next? Extra Extra, read all about it - Gollum backs gold too!
Gollum just wants his gold back. And maybe a fish.
You've missed off his Trilateral Commission and CFR membership.
So what would be the consequences of a gold standard global economy if there were entities that had unimaginable stores of Au?
They would either have to stop spending recklessly, or they would lose thier gold.
Sounds good to me.
I worded poorly. Yesterday, I think, someone posted transcripts from the House of Lords to the efect that a great deal of gold was being offered to the British government. I didn't follow it too closely. My point is: there's a known amount of gold in exixtance. If the Au standard was adopted and there was an entity with a enormous hidden reserve (i.e. the Catholic Church or the Rothchilds or whoever, what would the results be.
It just seems that Au standard, even under above board conditions just exposes economies to manipulation. Perhaps a basket of Au, Ag. Ni, Cu, etc. might be a more prudent store of value.
How about Yamashita gold?
Never heard about it?
Many years ago I read something like 'MacArthur's Gold'. It dealt with a huge stash of Asian plunder.
http://www.geoffmetcalf.com/bixman_20010615.html
Let the Bixster melt those pesky neurons into oblivion...
All the gold in the world could fit in a 20 meter cube which is quite easily imaginable.
Yes, perhaps. But by whom?
Check back around 2 AM...That's when Ben has his alarm clock set, just before the Europe opens.
Big money dumping Euro buying dollars tonight... 167 pip daily range established on EURUSD in just a couple hours of Asia... What cooks? If mark to myth blows up -- perhaps in some super nova court "discovery" moment -- it can pull every dollar of QE2 out of existence like a CERN experiment gone very bad... Always love the main stream hype at inflection points. More retail carnage for sure.
Go for the gold! It's about time!
Zoellick's piece is confused and confusing. There is absolutely NO political will to solve the world's financial crises. Absolutely ain't gonna happen. Sooner or later the Black Swan will appear and a series of cascading failures will ensue. There is absolutely no world leader stepping up to produce a different result. The banksters have no idea what will work.
Make my day.... I'm inclined to agree. They are too entrenched and ossified to make any real attempt at "repairs" to the current regime. There will be cascading currency defaults before they come to their senses. As someone put it, they are grabbing the silver on the Titanic. Trade for the next week, save the current political dogma, support the existing military madness -- damn the torpedoes so to speak.
From Mauldin's latest issue:
The emphasis is mine. Commodity hoarding is the same as buying gold in my book.
Zoellick is simply sending up trial balloons. He needs to be more inclusive if he expects any movement forward on this initiative. First there was the G7 conversation, then the G20 conversation.
Once the powers that be have the G69 conversation, Zoellick's proposition may well move forward.
Exactly what would happen to the price of gold if this were to pass? Manipulated downward by govts?
There would be an initial explosion as the price of gold would have to be reset to reflect that ACTUAL amounts of gold in the vaults.
If you can't exchange your dollars for the treasuries gold, you can be assured that it is a scam, just like Bretton Woods.
And yes, after the initial explosion, if gold isn't allowed to float, then you would have a situation where the governments want to print money in secret without affecting the exchange rate with gold, so yes, it likely would be manipulated down.
I think everyone is lying about how much gold they have. It might be in the vault, but is it leased out to anyone, or even, multiple people? This is similar to Arabs and oil reserves. Who knows.
... which is why when the USD defaults... we're looking at hyperbolic movements in gold and silver.
According to the RBA, only a small fraction of their gold reserves are currently on loan.
That's down from 100% only a few years ago.
They possibly know something we don't.
Or they're full of shit
Don't forget that almost every investment bank and hedge fund in the world speculates on the price of gold...trying to drive it one way or the other.
ahem, and shall it be a paper gold LBMA standard or a real gold standard? well played Mr. Zoellick
As long as a closed combine sets the standards & books does it matter?
Gold has long passed its ability to be standard behind money. Think of it this way, a fiat currency is based on the value (and currency machinations) of the country in which it is based. Gold, now, is based on who owns the most, and the global speculators who drive the price. If you own the bulk of the gold, and your country's un-mined gold resources are large, you might consider it...otherwise, you loose control of the value of your currency. I am sorry, but gold has no intrinsic value...it is only worth what people are willing to pay for it, like paintings, stamps and other things. Right now, people are paying large for it, because it is going up, and it is considered a hedge against currencies...but that, as always will change...then where the hell are you?
What does have any intrinsic value other than a can of beanie-weenies?
No sophisticated economy can evolve without a money with certain characteristics, all of which are inherent in gold. That, by definition, means that gold has intrinsic value.
QED
Direct and to the point.
+1391
Anyone following Bill Still @ The Secret of OZ lately?
Excellent short write up! I'll bet my few gold ounces on this:
http://www.secretofoz.com/index.php?option=com_content&view=article&id=1...
there was no more a call for a gold standard from zoellick than there was truth in hitler speech...
the only successful exchange and trade system was the gold standard under real bills. anything without real bills is a fraud. once the banksters stepped into the picture everything was polluted hopelessly.
rubbish...RBD had been functioning for centuries. Fractional lending is what did the banks in.
READ it, Trav. There is agreement in the sense that the RBD was violated!
Lots of Op-Ed action by "big boys" of late. Bernanke on Friday in WaPo, Board guy in WSJ, now Zoellick in FT. I'm waiting for them to post to ZH next!
We will NEVER see a call for a real "gold standard" from ANYONE in the banking or financial system - period. Why? Because every single one of them would have no job the instant a real gold standard was established.
People seem to forget that a real gold standard, with no fractional reserve fraud permitted, puts EVERY money manipulator and regulator out of business - instantly.
On a real gold standard, people only exchange real, physical goods for other real physical goods (gold being one of those goods). No more need for fractional-reserve fraudsters at any level. In fact, no more need for banks, since anyone can hold or loan their gold directly from the owner.
Sure, a small banking and financial system would remain, but not much. Some would warehouse gold, silver, platinum, palladium, gemstones and other valuables (savings). And some might even loan out the real, physical gold their clients had on deposit (but only as explicitly authorized by each client).
But 99% of the entire banking system would vanish, which it should and must if the world is to return to anything remotely resembling a world of honesty, ethics, justice, production, individualism and simply, "the good life".
If the world ever manages to return to a gold standard, people must demand only physical gold coins and bars. All forms of "gold backed paper" is inherently pure fraud, as has been proven over and over and over again. To carry around gold coins is no burden, but prevents the predator class from stealing the wealth everyone else produces.
And again - NO fractional reserve practices can be allowed, otherwise a supposed "gold standard" is no better than a "fiat paper standard".
In gold we trust.
In fiat, fake, fraud, fiction, fantasy we despise.
I'm with you all the way... except that it will not be feasible for people to carry around enough coins to make major purchases, nor are even small gold coins small enough to easily be used for small purchases. Thus, we will need warehouse services that will store gold and issue exchangeable receipts (whether paper or metal) for it in small quantities (e.g., milligrams and multiples thereof). These might look a lot like "coins" but would again be receipts for gold rather than gold itself.
Of course, "fractional reserve" means "fraud", so that is unacceptable. But the warehousing service is a valuable one.
I think you need to compute how much gold is required for people to make "major purchases". If we return to a "gold standard", one ounce of gold would likely equate to about $25,000. But just for sake of argument, let's consider your statement with $1400 gold (current price).
To outright buy a $200,000 home, you need to bring about 9 pounds of gold to the transaction. That's less than the weight of a bowling ball, which some people carry to the lanes every weekend. Thus, you can even buy a million dollar home with gold you can carry in two bowling bags (albeit with some effort required). Even today you can buy a brand new car with only 10~20 one-ounce gold coins, which you can carry around quite easily in one jacket pocket.
On the other end of the scale, if we consider a pure "gold only standard" (no silver, nickel, copper coins), we would indeed need to make some very lightweight gold coins. The best ones I have seen for this purpose are acrylic coin-like discs the size of dime, nickel and quarter with the small discs of gold visible in the center. Something like this would surely develop quickly, as many other forms are possible too. The acrylic discs I saw can be opened, so the tiny gold discs inside can easily be tested for fraud.
But today, in the days of computer cash registers, there is nothing wrong with palladium, silver, nickel, copper and zinc coins. They could either have permanent or yearly-adjusted standard fixed values (relative to gold).
Personally I prefer a pure gold standard for 2 primary reasons. First, it is simpler for everyone, and nobody ever need worry that their non-gold coins lose value relative to gold. Second, the other metals have more commercial and industrial applications than gold (because they exist in much larger quantities, and are much more affordable), so a pure gold standard will never cause supply issues in those other markets.
Yes, it's true that few transactions that individuals undertake are too large to use physical gold, so far as weight is concerned. However, I for one would be concerned about the possibility of robbery if I were to carry around pounds of gold.
As an alternative, storing your gold with a trusted warehouse ("bank") and transferring it via an order to pay ("draft") rather than physically has significant security advantages.
And as for the tiny coins you mention, a purchasing power of $10k/oz in current money would be about $320/gram. A one-gram coin is pretty small, but would be too large for day-to-day most purchases. And how would one make change? Using different metals or commodities for smaller amounts reduces the advantage of using money in the first place. With a fixed exchange rate between those different "moneys", you get arbitrage problems that drive some of them out of circulation. These issues are what doomed "bimetallism" in the 19th century US. Therefore, you need floating exchange rates, which are another needless complication.
Why not issue your own digital tokens backed by your total gold holdings, used for regularly clearing purposes to settle final debts.
Some concepts are outline here
http://www.digitalcoin.info/
Why not issue your own digital tokens backed by your total gold holdings, used for regularly clearing purposes to settle final debts.
Some concepts are outline here
http://www.digitalcoin.info/