Will Currency Wars End With A Return To The Gold Standard?

Tyler Durden's picture

From GoldCore

End Currency Wars With Gold Standard? –Bloomberg Interview and FT Op-ed

Gold continues to flow from the west to east. Reuters reports that U.S. Commerce Department data showed U.S. exports of nonmonetary gold, which excludes central bank transactions, climbed by 43% to $4 billion in December from the prior month. 

That's the highest total and the largest month-on-month jump in U.S. private gold exports since September 2011, when gold rallied to a record nominal high over $1,920/oz. Hong Kong accounted for nearly half of the $4 billion.

The Group of Seven nations have reiterated their commitment to market-determined exchange rates and said fiscal and monetary policies must not be directed at devaluing currencies.

Actions speak louder than the words of the communiqué and the reality is that the fiscal and monetary policies of many members of the G7, and especially the U.S., are directed at devaluing currencies through competitive currency devaluations.

Concerns about the devaluations and the growing risk of a severe bout of inflation have led to calls for a return to fixed exchange rates and a gold standard.

Bloomberg’s Trish Regan and Adam Johnson interviewed TCW Group’s Komal Sri-Kumar and Bank of New York Mellon's Michael Woolfolk about the risks from currency wars on Bloomberg Television's "Street Smart."

Trish Regan asks whether there is a danger that “we have massive inflation worldwide for years to come?”

The answer is yes and both agree that inflation is a real risk as is a loss of credibility by central banks.

Komal Sri-Kumar is asked what the solution is and is asked about his Op-Ed in The Financial Times in which he calls for a return to a gold standard.

He replies that a gold standard today would be no different to “how good it was from 1945 to 1971.”

“It worked, the world was in prosperity, there was economic growth and there was clearly certainty in terms of what exchange rates were.”

He warns that “even in the short term there is nothing to be gained by devaluing. We have tried that in the United States. We have been devaluing through QE1, QE2 and QE Infinity, the most recent one ... we don’t have sustained economic growth.”

In his Op-Ed in The Financial Times, Sri-Kumar called for gold to be fixed just above today’s levels at $1,675/oz:

“A first step would be to fix the price of gold in dollar terms at near its current level of $1,675, with assured convertibility. To ensure that currencies are neither over- nor undervalued, the consumption basket (or the hypothetical loaf of bread) should be valued at roughly similar levels in different currencies at fixed rates against the dollar.”

Bank of New York Mellon's Michael Woolfolk says that you could back the dollar with gold as “the value of gold would have to be astronomically high to back the money supply”.

“At the time of the 1960’s a dollar was a unit of currency and $35 bought an ounce of gold, but the velocity of money is so much greater now the price would need to be higher”, Columbia University educated Kumar said.

The benefit of the gold standard was that there was a fixed exchange rate. 

“If we went back to the gold standard you would be looking at a global recession,” says Michael Woolfolk. “We don’t have enough gold and it’s not growing fast enough”. 

Kumar disagrees that by using a gold standard and that having it fixed exchange rates, the certainty would increase global trade and overall global production.

“The price of gold would have to be astronomically high, plus you couldn’t guarantee that all countries have different interest rates set”?

“Michael, I don’t think the inflation would be much higher if the country submits itself to a fixed exchange rate” said Kumar.

Sri-Kumar  concluded the following:

During the Bretton Woods period the The Vietnam War pushed the inflation up as the U.S. had to print dollars to finance a war. Then Nixon abolished the gold link in August of 1971 was death net. After that, money supply increased by 10% in one year and this was not consistent with the fixed exchange rate. If you had not done that we would have avoided the push up in inflation in 1973-1975 and the subsequent increase in oil prices in 1979.

This debate shows how gold is being seen as money and as a safe haven asset again, and shows the silly nature of the ongoing suggestions that gold is a ‘bubble’.


U.S. gold bars and coins find new home overseas on Asian demand - Reuters

Gold Rallies From Lowest in a Month on North Korean Nuclear Test - Bloomberg

Gold Declines to Lowest in More Than a Month; ETP Assets Drop - Reuters

Gold now oils the wheels of Iran’s economy – The Times


Video: Would Returning to Gold Standard End Currency Wars? – Bloomberg

Fix Gold and Exchange Rates To Revive Growth – Financial Times

Video: World's Most Gold-Hungry Country? Not the U.S. - Bloomberg

A Brief 2000-Year History Of Silver Prices – Commodity HQ

Year of the Snake is a Year to Buy Gold – SCMP.com

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blindman's picture

[KR405] Keiser Report: Debt Junkie Nation
Posted on February 12, 2013 by stacyherbert
“We’ll know our disinformation program is complete when everything the US public believes is false”
= William J. Casey, 1981
Tom Waits – Mr. Siegal

gold-is-not-dead's picture

Nope, the market said it will be BTC standard, gold isn't sterile and transferable as btcs...

BaBaBouy's picture

Barbarism Revisited ...

GOLD $50K ...

Thats The Only Way Out Of This Keysenian Karnaige ...

true brain's picture

"the gold stock will have to be astronomical to have a gold standard."

I am so sick of hearing this. You must adjust fiat currency to fit the amount of gold. POint of gold standard is to make impossible money printing and avoid all ill consequences thereof; not the other way around. Dumb ass economists.

So what if the gold price is 50K. It would be like before when you can buy a slave or bribe Obama with a gold coin. no difference.

LawsofPhysics's picture

"So what if the gold price is 50K. It would be like before when you can buy a slave or bribe Obama with a gold coin. no difference."


Not quite, unless you know of some new technology that allows you to call a refined ounce of gold or coin into existance with the "click of a button".

Wake the fuck up, the real issues are about trust, power and control and the failure to prosecute fraud and insure REAL CONSEQUENCES for bad behavior.  NOTHING will change so long as a select few can simply create money out of thin air with little to no fucking effort.

Truly free markets insure that compensation is proportional to the true value of one's labor.  Remind me, what's the real value of adding zeros to an account with a fucking computer?  Time to eat the fucking paper pushers and destroy this bullshit faux financialization of everything bullshit eCONomy.

Long anything of physcial value and the means to protect it...

economics9698's picture

“If we went back to the gold standard you would be looking at a global recession,” says Michael Woolfolk. “We don’t have enough gold and it’s not growing fast enough”. 

This guy is a ignorant man.  It does not matter how much goal there is prices will adjust.  Companies do not care about prices they care about profits.

Also if gold is monetized then DO NOT fix exchange rates.

If country A gets a trade advantage and gold flows into the country the price of gold will fall and imports become cheaper, the opposite in the country with a trade deficit.

Also when the price of gold goes up more will be mined, and when the price goes down less.  Just like any commodity.

Murray Rothbard destroyed this myth decades ago that there was not enough gold.  It does not matter how much gold there is, prices will reflect the supply.

They throw this shit out there I tell my students to say “okay let’s use silver.” This shuts them up.  Plenty of silver out there.

When the USA went back to a gold standard in 1879 and off the fiat the economy grew 84% in the next 10 years.

These guys are ignorant or tied into the Federal Reserve criminal organization.  They might even be economists paid to disseminate propaganda.

Ignore them.

We know Tyler use to make his living on the Ponzi, some of them old feeling bubbling to the surface?




fourchan's picture

no the central bankers wont allow an honest money system, one they cant devalue to zero, neither will the free for all spending govenment.


we will get a one world currency or a 3 zone currency controlled by the same people who created the system of theft we have in place now.

blindman's picture

that is their plan and the sign by which you will know them.
mark on the head and all that.....

LawsofPhysics's picture

So the world ends up with a single "official" currency and multiple markets and currencies in reality.  Sweet, I see numerous opportunities in such a "Bangkok" or "New Deli" world.

LawsofPhysics's picture

That or WWIII.  Human societies have been here before.  Just remember, when fraud is the status quo, possession is the law.

Thisson's picture

It's moronic to push a digital currency where: (1) there are no barriers to entry from competing digital currencies; (2) there is a complete digital record of every transaction chain.  You think you have privacy using bitcoins?  Think again!!

blindman's picture

"what is this mysterious "market" to which you refer?"
he asked. see ...
"We'll know our disinformation program is complete when everything the US public
believes is false"
= William J. Casey, 1981

Renewable Life's picture

No, it will end in a REAL WAR! A real BIG one!

blindman's picture

what if they gave a war and nobody came?" ...
the vietnam (conflict overseas) war, that has been studied for
what it was, mostly a "war", attempt at occupation to steal
resources and money from every available source in sight including,
perhaps primarily, the treasury of the usa. people don't think anymore,
they act and play like they are thinking and that is close enough for
t.v. and most audiences.
"Though repeated or rephrased in the 1960s to protest the Vietnam War, the original phrase came a poem by Bertolt Brecht, written in the 1930s.

The entire poem is:

"What if they gave a war and nobody came?
Why, then, the war would come to you!
He who stays home when the fight begins
And lets another fight for his cause
Should take care:
He who does not take part
In the battle will share in the defeat.
Even avoiding battle will not avoid battle.
Since not to fight for your own cause
Really means
Fighting on behalf of your enemy's cause."

If you read the entire poem, it has the opposite meaning from what most people get from the first line."
but further consideration must lead on to think concerning the
objectives, or are we to fight the biggest global war in the history
of men and women with no objective or coherency? oh my, we are so close.
Think ft. John Trudell
there is nothing new, it is all known and has been
said. is always said but ignored for the objectives
and agenda of the top psychopaths, your leaders. get that
the president, on tuesdays, has his psychopathic expression
sessions with close friends and allies and there, they
decide who they will execute. no courts, legal defense
and no charges. just extermination. that is what we know
to be psychopathic. no? so, who will line up and join the
ranks and be the fodder for the way of life based on
psychopathy? sad truth? ,,, the majority of desperate
young men, or at least a significant minority.
the war has come to YOU !
John Trudell: Introducing Coherency Into The Reality of Energy

walküre's picture

+1 for your efforts to educate the people on Brecht

I'd argue Brecht on his convictions here though. You can stay away from war, get away with it and see the light of day when those engaging in war are done fighting. Refuse to fight and perhaps get killed in your home by the goons or die on the battlefield. What's the fucking difference in the end? But just like religion, the thought provokes "honor" and "decency" in every man and therefore the man will probably chose to fight. That's how sheep think.

blindman's picture

the war to which i refer is in the mind and
the battle field is the heart, the ground to be
won. victory is always in the silence of things,
the unknown, unstated spaces between the words and
the senses.
a poem.
Sam Stone - John Prine
this song , in the end, should make one think
after the feeling has done its thing.

seek's picture

While I am a proponent of bitcoin, that's a pretty unsupportable statement. However, given that BTC itself can be exchanged for gold, it's not a stretch to think we could have a nation-independent gold standard with BTC as the mechanism of exchange. To assert that BTC is superior to gold is a huge stretch at a bare minimum.

Canadian Dirtlump's picture

Any concept that this would somehow be done by mongoloid western governments in any way other than kicking and screaming well after there was blood in the streets in my mind, is unthinkable.


They've abandoned many easier smart / responsible things to do. Besides, you need gold for that to work.

Skateboarder's picture

I think the current nation-state gold hoarding we are seeing is pretty classic. Fiat dies, governing bodies scramble for hard asset. It doesn't matter if Au comes out the winning hard asset - it's at least something physical that can be used to reset the beast with some realistic inputs.

Global overlords behind the curtain are the only surefire winners in this game - everyone else is playing hot potato.

walküre's picture

Look at the blood lines. They've been winning since Christ was an infant.

FeralSerf's picture

No -- they're a different group.  They're from eastern Europe.  Jesus of Nazareth was dead for the better part of a thousand years before this tribe started becoming the goldsmiths and jew-elers.

Go Tribe's picture

The end game here is NO standard. Not US fiat, not gold, not rubles. Standards are counter to the control of the global 1% who do not want to be told what to do by a skank America.  They will like it better when they can pay with whatever the other party wants at the time. Dollars, sure. Derivatives, sure. Gold and silver, sure. The transactional diversity from HFTransaction computers will be dizzying. It will mark the end of representative government as well.

Unprepared's picture

If central banks are engaging in full scale conventional currency wars, are gold-bugs militia?

blindman's picture

" ...
These extremists, sometimes known as "sovereign citizens," believe they can live outside any type of government authority, FBI agents said at a news conference.

The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

Routine encounters with police can turn violent "at the drop of a hat," said Stuart McArthur, deputy assistant director in the FBI's counterterrorism division.

"We thought it was important to increase the visibility of the threat with state and local law enforcement," he said.
( this describes the profile of the banking industry quite accurately.
except for the gold standard part as they believe money creation in the form
of fiat is their gift, from god to them, and by tinkle down theory, as in urine
on your leg, your problem or poopportunity should you be forced into the
arena or coliseum as an entertaining lion snack.).
"... from link above
comment: boy oh jeezuz am i glad that i am all for heavy taxes
on anything that shows any sign of life and think there should be
many more regulations, in fact so many regulations that no matter what
your environmental crime might be, there is a suitable regulation
to extract monetary value from the victim. i also do not believe that
individuals have any rights worth respecting unless they are high officials
in a corporate setting, true person. what else? ... uhhh ...
and i'm a pacifist who believes in the afterlife where, when turning the
other cheek proves to be fatal, rewards are received. lastly, i didn't
do it officer and i don't even own a vehicle that can carry more than
485 pounds of cargo.

blindman's picture

here is what the fbi should be making local law
enforcement aware of.
“We’ll know our disinformation program is complete when everything the US public believes is false”
= William J. Casey, 1981
Wall Street Takes Over Its Regulator
Monday, February 11, 2013 at 8:40PM
"..“Former employees of the SEC routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law,” laments the author of “Dangerous Liaisons: Revolving Door at SEC Creates Risk of Regulatory Capture,” a report by the Project on Government Oversight (POGO).

At fault: the revolving door at the Securities and Exchange Commission. In September 2012, hedge fund group Alternative Investment Management Association picked a new Chairman: Kathleen Casey, who’d been a commissioner at the SEC from 2006 to 2011. AIMA said in its press release that she’d be involved in “regulatory dialogues,” including “so-called ‘shadow banking.’”
" ......t.p.

Quinvarius's picture

People keep insisting that it won't, but it will end up in a gold standard.  You need a stable unit of exchange for global trade or you get no trade.

Thisson's picture

Perhaps more importantly, gold is a mechanism that brings global trade into balance.  Using gold you can't have countries like China and Germany continually running surpluses to infinity.

ATM's picture

I actually think it prevents countries like the USA from running deficits to infinity. Eventually they run out of gold!

LawsofPhysics's picture

No, it goes both ways.  Are you talking about a "financial" deficit or a energy/materials deficit.  As a farmer, what if I no longer want to purchase your plastic crap and insist on gold for my produce?  What if there is gas, oil, or minerals on my land and I no longer want fiat in exchange for your access.  You won't manufacture shit without resources.

In the end, finance decides nothing, physics does.

walküre's picture

I'm with you on that. It's all about FAITH in paper promises to pay. The Japanese are inflating their debts away. Crash the currency against other paper and convert that paper at favorable prices to settle debt and liabilities. Japanese are holding US debt and have "earned" a 20% increase on that holding in 6 months. That's huge for them. Nevermind the fact that their own paper is getting worthless. They can live with that. But can the US live with a Japanese government that is going KAMIKAZE when they start selling US debt paper?

XitSam's picture

Yes, but.  They will never willingly let the debt/fiat system be replaced by gold. "Anything but a stable unit! Give us a basket of currencies, SDRs." they will say.

Global trade will need to stop during the Chaos Time, while the current financial system collapses, debt is cleared, companies will crash and sadly, people will die. War is almost certain. Prepare accordingly.

ATM's picture

War is not "almost certain", it is absolutely certain.

Temporalist's picture

Fiat guarantees war and is the sole reason why there is no gold standard.  Making war is the only out for politicians and banksters so they favor fiat.

Freegold's picture

“A first step would be to fix the price of gold in dollar terms at near its current level of $1,675, with assured convertibility." Yup, what a great idea! With assured convertibility from the USA stash that gold would be all gone whitin a week. China keeping all those Treasuries or exchange them for gold? Hahahaaaaaahaaaaaa!

History has shown us that a fixed goldstandard will never work. The rules WILL be broken at some point. The only and coming solution is a free-floating "goldstandard" The calassic goldstandard might be tried but I doubt it. But it doesn´t matter, it failed before and will fail much faster in this interconnected world. Freegold is coming by evolution of the money concept whatever polticians or centralbankers decide.

CrashisOptimistic's picture


Will currency wars return the world to a gold standard?  Of course not.  Gold has no significance to society.

The standard will be the lifeblood of civilization -- oil.  Gold would obviously have its transactions taxed to oblivion were it ever to become a systemic threat to society.  Oil is immune to that because it's a necessity, like air.  Without it, cities die.

The Brent Vigilantes, as coined by Tyler yesterday, are going to decide everything.  They are immune to decree.

Finance decides nothing.  Physics decides everything.

francis_sawyer's picture

The golden rule... He who has the gold makes the rules... [aka: 'The LEAD rule']...

Sudden Debt's picture

Well... India has a shitload...



If somebody OWNS AND HOLDS all the gold... but has a army that carries bamboo sticks....





francis_sawyer's picture

I don't see anybody INVADING India...

Sisyphus's picture

... but has a army that carries bamboo sticks....





francis_sawyer's picture

they have their nukes attached to the end of bamboo poles... you didn't know that? 


All joking aside, that wasn't even my point in the first place... Just as with guns... There is a BIG DIFFERENCE between 'centralized' & 'de-centralized' ownership...

INDIAN(S) have gold... Just as AMERICAN(S) still have guns... Play 'keep-away' from your government for as long as you can...

DosZap's picture

Sudden Debt

Don't forget RUSSIA and CHINA.........................Russia in now the worlds largest oil producer, and they are selling their crude and buying GOLD, tons of it,(since Putin came on the scene they have been buying ALL they can get) as is/has been China.

China IMHO is going to pull a fast one and back the Yuan with Au, and will become the defacto Reserve Currency.

Add ALL the East Asian countries and you can see where the WEST's leftover supplies are going, never to return.

The 22,000+ tons of gold held by India is in the hands of their citizens,NOT their Banks,or Government.(official stats show they hold more than all other countries combined(at least that is reported).

You would play hell taking it away from over a billion individual families.

tahoebumsmith's picture

All you have to do is look at who is stacking the most to find your answer? Here is a hint...Who is stacking the most BRICS of gold?

Bastiat's picture

When the stockpiles are pissed away, suppressing price, and the demand rubber finds the supply road, the price will in nominal fiat will indeed be astronomical whether the wise economists like it or not.

cluelessminion's picture

I know this is a bit off topic but I need some advice.  I have a small amount of savings to invest and I was thinking about getting this:



It's a 500 ounce box of silver american eagles.  Like I said I don't have much money to invest, but I'd like to have some exposure to PM's.  I was thinking this would be better than gold because small amts of silver would be more "tradeable" than say a gold coin.  Is this a sound idea?  Maybe I should wait and see if silver prices drop a bit more?

Dr. Engali's picture

First of all you have to ask yourself why you are buying precious metals. If you are buying them because you don't trust the fiat currency then don't try to be cute and time the market. If you have money to "invest" in precious metals then put it to work, stash them away in your canoe and forget about it. If you are worried about buying at the bottom then buy some now and hold onto some cash to buy on a dip. Personally I buy regularly regardless of where the price is.

francis_sawyer's picture

Why don't you just buy a few rounds from a local coin shop [as a starter] to see if you like the idea... Do whatever you want...

achmachat's picture

only do this is you can afford to put it away and not look at it or the silver spot price for at least a year.
If you qualify for this, go ahead, get the mint box and be happy.

GrinandBearit's picture

90% US junk is better, especially for a first time Ag purchase.

... or maybe you work for JMbullion and are simply spamming (?)