Dear CIGAs,
Yesterday, Nov 8, 2010, was a day I've awaited for 40years, since President Nixon shut down the last vestiges of the gold standard. Yesterday, at last, a respected member of the ruling classes called for a discussion to readopt a modified global gold standard as a lynchpin for the monetary system. Robert Zoellick, World Bank President and a former US Treasury official, says a new system is needed (as called for in HSL for 20 years), using 5 main currencies, with gold as the international reference point for future currency values. He wondrously said "Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." I couldn't have put it better and in fact I have put it in those exact words, as has Jim Sinclair and a number of free market analysts.
RZ said "The development of a monetary system to succeed Bretton Wood II launched in 1971, will take time. But we need to begin." Amen, Mr Z and thank you! Also, thanks to the Financial Times for making this the leading page one headline story, despite their traditional aversion to gold. Ethics won! This story broke in the early AM Nov 8th and halted a correction that began in the gold price, after which gold rose to a new high. The story freaked out ruling politicians around the world who despise gold because it acts as a governor on government spending. After Nixon closed the gold window, government spending and deficits rocketed, as the data charts prove, from that exact moment. Germany, the US Fed, and Trichet of ECB all patted Mr. Z on the head, but said it's not practical.
What would you expect them to say dear reader? They will fight a gold-linked system, but in the end they will give in, because the system is dying, fast, as the gold price reflects. How good a new system will be, whether it will have only a symbolic link or a strong one, can't be guessed today, nor how soon. The gold price will tell us. My prediction on Bloomberg TV in Paris a few years ago was that "Gold will force a system change when gold hits $1,650, but that it might need $2,000 to bring a change." That may still come true, because, as you see in the press today, most political leaders tried to discount Mr Z's brave, but wise recommendation.
I shall frame this FT front page and hang it on a wall. It was a watershed day.
Harry Schultz
http://economix.blogs.nytimes.com/2010/11/08/world-bank-president-advocates-the-gold-standard/?scp=3&sq=robert%20zoellick&st=cse
http://www.nytimes.com/roomfordebate/2010/11/09/back-to-a-gold-standard?scp=2&sq=robert%20zoellick&st=cse
Setting a standard for currency, paper value on a "real" commodity seems like a sound idea but I can only imagine the consequences to governments, their budgets and world wide withdrawal and austerity.
ReplyDeleteThen again look at where we are now.
Interesting Budget commission report just released, have heard a few points made like the US annual budget for Military complex is about 700 billion, more then all other world governments combined, and the elephant in the room that Ironically the Republican's are the strongest patriots and any thought of reduction is un-American and make it political suiside to consider.
perhaps Obama can gradually extract us from 2 wars and in the current climate of reevaluating priorities gain public support.
he said he would, but he has made no progress in stopping these outrageous wars...
ReplyDelete...i also wrote that the other day - 700 billion USD military budget - ripe for cutting
...and, how about this one - eliminate tax exempt status for Churches (some 2000 different "religions" in this country) - that ought to raise some revenue...