How to debunk the whole 'We should return to the gold standard' meme

Time Magazine · 03-11-2010 02:33AM

pablo_escobar wrote: »

Many people in the western world (EU/US) don't seem to realise that for the best part of 100 years or more, they've been living off the fat of developing countries like those in asia, south america and africa, exchanging valuable raw materials for "pieces of paper"

http://tinyurl.com/24wqqay

pablo_escobar · 03-11-2010 11:36AM

Here's a decent article by Professor Michael Hudson which actually has some relevance in the real world.

U.S. “Quantitative Easing” is Fracturing the Global Economy

On the one hand you have hard working, productive countries with large sources of raw materials, running trade surpluses...and then you have countries living on borrowed money.

Hasschu · 03-11-2010 06:07PM

Empires decline slowly, it took the British Empire almost fifty years from WW1 when the rot set in to the late 1960s. America has been in relative decline since 1945, some would say early 1950s. The military cost of maintaining empire over long periods of time is what leads to failure. Empires become obsessed with military might and will never willingly reduce military costs. This leaves either a domestic major crisis or a foreign disaster as precipitating events to enable a turn around. America can continue on its present course for at least another twenty years. My guess is that it will break up in much the same way that the USSR did in 1989. Hopefully they will do this without replaying the civil war. The next super power will be China with Brazil becoming the major power in the Americas. Will Germany or Russia be the major power in Europe or will the EU become the dominant player, Germany or Russia alone will be no match for China which leads me to believe that the EU will be the tent that shelters Europe.

Time Magazine · 09-11-2010 04:09AM

Hasschu wrote: »

America has been in relative decline since 1945

I stopped reading here.

More on topic, the president of the World Bank (who, btw, is a political appointee) has suggested the world's leading nations adopt a gold standard.

Brad DeLong calls him The Stupidest Man Alive. Lol.

andrew · 09-11-2010 03:47PM

Time Magazine wrote: »

I stopped reading here.

More on topic, the president of the World Bank (who, btw, is a political appointee) has suggested the world's leading nations adopt a gold standard.

Brad DeLong calls him The Stupidest Man Alive. Lol.

I thought he just said that gold should be taken into account when looking at the expectations people have. Surely someone at his level would be actually so silly to suggest a return to the gold standard proper.

pablo_escobar · 10-11-2010 03:27AM

andrew wrote:

I thought he just said that gold should be taken into account when looking at the expectations people have. Surely someone at his level would be actually so silly to suggest a return to the gold standard proper.

And it will be taken into account.

The US dollar is worth about as much as toilet paper in the long term, why would it continue being the reserve currency any longer?

The debt incurred by US with their imperialistic ambitions will never be paid back!

China is the world's largest creditor nation.
US is the biggest debtor nation.

China runs a trade surplus.
US runs a trade, military and account deficit.

US dollar is just a ponzi scheme..

Time Magazine · 10-11-2010 04:29AM

andrew wrote: »

I thought he just said that gold should be taken into account when looking at the expectations people have. Surely someone at his level would be actually so silly to suggest a return to the gold standard proper.

I was talking about this with two of my lunch buddies today. I'm fortunate enough (or unfortunate, depending on how you see it) that these people used to work in the Federal Reserve and the World Bank. Neither of them seemed surprised that Zoellick would say something stupid.

(PS: my postcount is BooB.)

graw · 10-11-2010 05:04AM

Time Magazine wrote: »

Zoellick would say something stupid.

I guess bookstores will be putting in more orders for Atlas Shrugged

http://www.cato-at-liberty.org/what-caused-atlas-shrugged-sales-to-soar/

silverharp · 10-11-2010 08:46AM

graw wrote: »

I guess bookstores will be putting in more orders for Atlas Shrugged

http://www.cato-at-liberty.org/what-caused-atlas-shrugged-sales-to-soar/

very good

, its an interesting public poll that more people are really unhappy with what the central banks are doing. Are you disapointed that the public are uneasy?

you've got to love central bankers, they couldnt get rid of their gold fast enough in the early 2000's and now they want it considered as part of a new monetary regime. bless!

Anonymous1987 · 10-11-2010 11:24AM

Zoellick tried to clarify his comments today, he claimed that international monetary system is moving away from the dollar as as the primary reserve currency to one where the euro, yen and renminbi would be reserve currencies with flexible exchange rates. He described gold as a reference point (by this I think he means a hedge against uncertainty) for these currencies since growth prospects are poor in most of the reserve currency economies excluding the renminbi which does not float freely. He suggests that the G20 should note the price of gold as a need for pro growth policies, structural reform and free trade.

http://www.ft.com/cms/s/0/54a44c3e-ec7c-11df-ac70-00144feab49a.html#axzz14s5e2bno

If you read the Zoellick FT article carefully then you got the idea but almost immediately afterwards the FT released an article titled "Zoellick seeks gold standard debate" while he didn't even mention the gold standard in his original article.

Économiste Monétaire · 10-11-2010 01:36PM

pablo_escobar wrote: »

And it will be taken into account.

The US dollar is worth about as much as toilet paper in the long term, why would it continue being the reserve currency any longer?

The debt incurred by US with their imperialistic ambitions will never be paid back!

China is the world's largest creditor nation.
US is the biggest debtor nation.

China runs a trade surplus.
US runs a trade, military and account deficit.

US dollar is just a ponzi scheme..

Less of the histrionics, it adds nothing to the discussion.

Slippers 2 · 10-11-2010 04:51PM

Bill Mitchell on Zoellick, a gold standard and fixed exchange rate systems in general:

The World Bank boss Robert Zoellick claims that we should all return to the Gold Standard to restore economic stability in the World economy. He is crazy. Sorry! The G-20 meeting in Seoul this week will obviously be concentrating on side issues such as the impact of the latest US quantitative easing plans on world inflation and the international currency system which many commentators are now claiming is in turmoil. Zoellick’s proposal will be added to the agenda which will reinforce what a waste of time these meetings are turning out to be. Zoellick’s call for a gold standard is just another one of these conservative smokescreens that attempt to solve the problem by denying it. They are all just expressions of obsessive and moribund fear of fiscal policy and the erroneous allegation that budget deficits cause inflation. So we will get a G-20 communiqué in a few days calling for more international cooperation in trade and currency settings and more fiscal consolidation and the need for on-going discussions about the creation of a new international reserve currency (perhaps a gold standard). But all these words will be in spite of the real policy agenda that is required – more public spending. What will they come up with next?

In a recent Op-ed (November 8, 2010) – The G20 must look beyond Bretton Woods – Zoellick said among other things that:

… the G20 should … 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.

Why would a return to the Gold Standard be crazy?

Remember as you read on to keep reminding yourself of the obvious – a sovereign nation with a flexible exchange rate can also use fiscal policy to maximise domestic outcomes if they desire notwithstanding external constraints (and domestic constraints like lack of food!).

Zoellick’s proposal is just one of a long line of proposals that get oxygen because governments are scared to use the tools that they already have and which work best when there is an floating exchange rate.

Continued: http://bilbo.economicoutlook.net/blog/?p=12262

Anonymous1987 · 10-11-2010 06:13PM

Slippers 2 wrote: »

Bill Mitchell on Zoellick, a gold standard and fixed exchange rate systems in general:

I still maintain that he did not make the argument for a gold standard rather he argues against a currency war and describes a move away from the dollar to multiple reserve currencies.

Since gold is used by investors as a hedging instrument against uncertainty Zoellick argues the G20 should keep an eye on the price of gold as a yardstick of the heath of the global economy. This is not the same as a return to the gold standard.

Slippers 2 · 10-11-2010 07:43PM

If Mitchell misinterpreted Zoellick his post remains handy for debunking the gold standard suggestion.

Anonymous1987 · 10-11-2010 09:57PM

Slippers 2 wrote: »

If Mitchell misinterpreted Zoellick his post remains handy for debunking the gold standard suggestion.

Fair enough

FISMA · 19-11-2010 04:19AM

Hasschu wrote: »

Gold fluctuates too much to be a good investment.

Looks fine to me.

andrew · 19-11-2010 04:25AM

FISMA wrote: »

Looks fine to me.

A longer term inflation adjusted chart looks like this:

Not very stable if you're going to base a currency on it.

silverharp · 19-11-2010 12:59PM

andrew wrote: »

A longer term inflation adjusted chart looks like this:

Not very stable if you're going to base a currency on it.

hmmmm , that is also an inverse chart of the $ , think about it

How to debunk the whole 'We should return to the gold standard' meme

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