Post by jim <""sjedgingN0Sp\"@"> Post by firstname.lastname@example.org
The 2014 currency turmoil in emerging countries is
just the latest in a succession of needless crises that have
occurred over the past several decades as a consequence of
What about the much greater turmoil and
succession of needless crises that occurred
under the gold standard? Your snake oil sales
pitch counts on the fact that nobody remembers those
breakdowns in the monetary system that were far worse
than anything in the modern times.
In a 2000 study, researchers from Rutgers, UC Berkeley, & the
World Bank analyzed data spanning 120 years of financial history
& found that the "crisis frequency since 1973 has been double that
of the Bretton Woods & classical gold standard periods & is rivaled
only by the crisis-ridden 1920s & 30s."
The turmoil of the post-Bretton Woods era is what sent European
nations scurrying for the shelter of a stable currency, setting
the stage for the euro. The explosion of currency trading it
has wrought has become a huge source of fees for banks. It has
helped produce the market swings & giant windfalls so decried
by Occupy Wall Street & others. In this dangerous world,
monetary policy is deployed as a frequent weapon, nearly always
with destructive consequences.
Post by jim <""sjedgingN0Sp\"@">
If you think going to a gold standard will help
emerging countries then why aren't you trying to
peddle your snake oil to emerging countries?
Be warned that the emerging nations that don't
have significant gold producing mines are going to
laugh at you when you try to sell the idea of basing
their money on unobtanium. .
It's already happening (until the Euro collapses):
Dozens of Countries Have Already Kicked the Fiat Currency Habit
by Nathan Lewis, 10/02/2014, 2,600 views
It might seem that today we are deeply devoted to the Mercantilist
paradigm in monetary affairs: the notion of a floating fiat currency
managed by a panel of bureaucrats, to address an ever-changing menu of
issues including unemployment, exchange rates, financial markets,
government funding, and the interests of one group or another. Some
people call this the Soft Money paradigm, characterized by the Rule
But, I think it is important that quite a few governments have
actually abandoned this paradigm. They do not attempt to manage their
economies by jiggering their currencies. Rather, they adopt a simple
fixed-value system: the value of the currency shall be X. There is no
domestic discretionary element. This is the Classical paradigm, the
Hard Money paradigm, in which the Rule of Law is primary.
But what is X? In the past, it was gold. A gold standard system is
a system in which gold is the standard of value, i.e., X. A
dollar was once worth 23.2 troy grains of gold.
Today, lots of countries have the same sort of arrangement, but they
use the euro as X instead of gold. This includes the eighteen
members of the eurozone, all of which have given up any avenue of
It is true that the euro itself is a floating fiat currency, and that
the ECB does take into consideration the concerns of eurozone member
states during its funny-money decision-making process. However, we
also know that the ECB doesnt really take orders from any one state,
not even Germany, which is a little miffed at the central banks
latest money-printing scheme.
We also know that there are many Mercantilist economists who declare
loudly that any state that gets itself into trouble should have its
own independent currency, which can supposedly be jiggered by its own
independent board of incompetents to make all the boo-boos better,
really we promise.
Thus, I would argue that the euro is basically serving as an external
monetary benchmark for these states, much as gold did in the past.
In addition, there are another ten small states and territories that
use the euro but are not officially part of the eurozone. Also, there
are twenty-eight countries, mostly in Africa, that have some sort of
euro link, mostly via a currency board system.
In total, there are fifty-five states and territories that have a
Classical fixed-value system based on the euro. The only difference
between these euro standard systems and a gold standard system is
the choice of the standard of value.
The Classical ideal in money is very common today.
But why use the euro as a standard of value instead of gold? The
most basic reason is stability of exchange rates, or what I call the
terms of trade. The smaller countries of Europe have always had a
high degree of trade with each other. This does not only include
imports and exports, but also financing and investment. Whatever the
potential benefits of using gold as the standard of value, the fact
is that to do so would introduce a lot of chaos into exchange rates
with other euro-using states, and other countries as well, which would
be completely intolerable to businesspeople.
One of the primary attractions of a Classical fixed-value arrangement,
rather than an independent floating fiat currency, is to gain all the
advantages of stable trade relationships. Thats why Europe gave up
their independent currencies and created the euro in the first place.
This problem did not exist in the past. Before 1971, the major
international currencies, and most minor currencies, were fixed to
gold. Thus, a country that adopted gold as a standard of value, or
X in a fixed-value system the role the euro plays today would
also have stable exchange rates with most major trading partners.
There was no conflict.
At some point, the euro may be so debauched as to render it completely
unacceptable as a benchmark of value in a Classical fixed-value
system. At that point, a government might either adopt another major
international currency as its monetary standard of value, or it
might use gold.
If the euro reaches such a state ECB chief Mario Draghi recently
said he intends to make another trillion euros appear out of thin air,
I kid you not then other major currencies would also likely be close
behind, except for the Japanese yen, which would be far ahead.
Thus, other major currencies would not likely satisfy those fifty-five
former euro enthusiasts either.
Then they might turn to gold which actually has a rather lovely
track record, and which actually was the monetary benchmark for most
of those countries for a very long time already.
But when might that happen? History suggests that such a changeover
does not happen until the former benchmark currency has been abused
beyond all hope of renewal.
Disaster. Catastrophe. I admit it holds a certain appeal.
However, there is an alternative: to introduce gold-based currencies
today, but to make them optional instead of mandatory. Thus, the
present euro-based and other fiat currencies would continue, but there
would also be a gold-based alternative.
At first, this gold-based alternative might not be very popular. It
would have a lot of exchange-rate volatility with the fiat euro,
dollar, yen and pound. Lets be a bit Germanic and call it the
goldmark, and give it the traditional value of 2790 goldmarks per
kilogram of gold.
As todays fiat currencies gradually lost their viability, people
might decide, incrementally, that they want to keep at least part of
their savings in terms of goldmarks, not euros or dollars. Borrowers
find that they cannot issue debt or borrow money unless denominated in
goldmarks; suppliers want to be paid in goldmarks; workers demand
wages in goldmarks; and producers demand goldmarks in payment for
their goods and services.
As more and more people use goldmarks (and other similar currencies
that emerge), for their own personal interests, they find that they
can also engage in trade with all the other people that use goldmarks,
without the issue of unstable exchange rates. Thus, the issue of
chaotic trade relationships gradually melts away.
But what if everything is fine? What if there is no disaster? People
can still use goldmarks as they see fit perhaps as an investment
product much like the gold ETFs popular worldwide but perhaps they
would continue to use fiat euros for most commercial situations. It
works both ways. There is no downside.
The only problem, it seems, is that people are not aware that such a
thing is possible, and in fact rather easy to do. Also, they dont
know how to do it. But, these are minor issues, really.