A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

[algerwetmore]

Re: early adopter... iran

After looking at each countries' gold reserves, and knowing Iran's trading partners, one can draw some interesting conclusions:
China and Russia would like to lend Iran gold, to increase their geo-political might in that area, but China and Russia do not have enough gold backing of their own currency.
Saudi Arabia would like more stability in the area, but I don't think they would give gold to their Shia brethren, and they, like China and Russia need as much gold as they can get.
This leaves the Europeans. The U.K., under the misguidance of Gordon Brown, sold a lot of gold very cheaply, so politically it is very unlikely for the U.K. to sell gold, which they do not have much anyways.
By process of elimination, this leaves Italy, France, Germany and Switzerland. My guess is that France, with its ambivalent military and politcal stances, would see this as a way to stabilize the Iranian currency,
stabilize trade between France (and Europe) with Iran. And maybe France, in a less calculating way, sees an important role for France as negotiating middleman on the world stage. This would be a reversal of 60
years of diminishing French political influence.

[metalman]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

If I'm doing the math right, the additional 3,400 tons amount to approx. $80 billion. Only a very small % of China's foreign reserves of $1.9 trillion (Sept 08), but a signal nonetheless. Thoughts?

the us has 8000 tons but a lot more currency outstanding. that's the issue here. no one's talking about a 100% gold reserve ratio.

[riadi]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

the us has 8000 tons but a lot more currency outstanding. that's the issue here. no one's talking about a 100% gold reserve ratio.

Makes sense... but then what is the implication if not for a reduced status for the $ as reserve currency, even if only a bit?

[DrYB/C]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Excellent, related reading:

1.
Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s
March 1, 1992
Robert Higgs
The Journal of Economic History
http://www.independent.org/newsroom/article.asp?id=138

2.
CRISIS AND LEVIATHAN
Critical Episodes in the Growth of American Government
http://www.independent.org/store/boo....asp?bookID=15

3.
DEPRESSION, WAR, AND COLD WAR
Studies in Political Economy
http://www.independent.org/store/boo....asp?bookID=65

[*T*]

Re: A return to the Bretton Woods international gold standard is inevitable

Ah, Metalman, you forgot the Desi peasantry!

[rj1]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

RJ,

If you look at the crosses other nation's currencies vs. each other, you'll notice that there are pairs which show much more stability vs. each other than vs. the US$.

The ruble, for example, has been very stable vs. the Euro despite the euro's meteoric rise from under parity to around 1.5, then back down to 1.25.

So if you were a European banker, your call would be to convert all your dollars to rubles because you think the ruble is a more stable currency going forward?

2) US debt levels are unsustainable and also rising.

Which means Americans will be forced to spend less, which means less goods will be imported here for us to buy (go see the stories on the Long Beach Port), which means other countries will be selling less to us, which means they'll have to shift their production lower, which means they layoff workers, which means their own internal economy suffers as well.

I work in a factory, I see this myself.

Thus your assertion that the US$ will remain ascendant solely because there is no alternative is based on the assumption that currencies are chosen like bread in a Socialist grocery store: i.e. no choice.

Where is the choice? F*ck 100 years from now, I'm talking about the next few years.

The euro is an illusion in my opinion. If Italy or Spain suffering, there is little to no guarantee France or Germany will come to their aid if they are required to sacrifice anything. And as long as they are pacifists on military matters they'll never have the #1 currency.

What else is there? The yen? The yuan? The Swiss franc? The rand? The peso? What currency are you converting your dollars to right now because you think that it will outperform the dollar and that country or bloc will become the dominant economic, political, and military power in the world in the next 10, 20 years? No one will become dominant economically throughout the world unless they are also dominant militarily as well. Power comes at a price.

A shift away from the US as the major consumer of the world will itself give rise to one or more other stable currencies as the trade formerly meant for the US reorients towards other markets and other currencies.

We'll see.

The world economy nowadays is based on very cheap labor (China, Southeast Asia, Latin America) building stuff for rich people (Japan, Europe, and North America). The cheap labor were never meant to be able to buy the stuff they make. I remember reading a story of a Chinese girl that worked in a Timberland factory in China making their coats. She said that rich people must buy these because it was what she made in four months. Okay, let's say the U.S. suffers and China goes up a bit. She's still not buying that coat if it's only two months of her yearly wages.

There's going to be a couple of wars and coups and civil strife before that gets all unwinded.

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

So if you were a European banker, your call would be to convert all your dollars to rubles because you think the ruble is a more stable currency going forward?

Choosing to bet on the ruble would be a personal decision.

What I point out is that the ruble/dollar and ruble/euro crosses have been moving in the opposite direction for quite some time.

Given that Russia trades extremely little with the US, and trades a heck of a lot with Europe, this isn't surprising - and is an example of how a regional trading bloc can get set up.

Which means Americans will be forced to spend less, which means less goods will be imported here for us to buy (go see the stories on the Long Beach Port), which means other countries will be selling less to us, which means they'll have to shift their production lower, which means they layoff workers, which means their own internal economy suffers as well.

I work in a factory, I see this myself.

Of course the US no longer being the overconsumption sink for the world will affect nations and countries overly dependent on exports to said nation, however, the productivity of the overseas factories and workers doesn't automatically have to sit idle.

These overseas workers might not be buying fancy foreign cars and iPhones, but they definitely could benefit from better consumer goods at affordable levels.

Where is the choice? F*ck 100 years from now, I'm talking about the next few years.

The euro is an illusion in my opinion. If Italy or Spain suffering, there is little to no guarantee France or Germany will come to their aid if they are required to sacrifice anything. And as long as they are pacifists on military matters they'll never have the #1 currency.

What else is there? The yen? The yuan? The Swiss franc? The rand? The peso? What currency are you converting your dollars to right now because you think that it will outperform the dollar and that country or bloc will become the dominant economic, political, and military power in the world in the next 10, 20 years? No one will become dominant economically throughout the world unless they are also dominant militarily as well. Power comes at a price.

For me, I've made my choice: the ruble. I base this on several factors:

1) Russia has the least to fear from the US militarily (M.A.D.)
2) Russia has an economy that is growing quickly and has strong sources of national income (energy, minerals), as well as a highly educated population (if shrinking)
3) Russia has one of the best national fiscal situations: low debt and high foreign reserves.

Of course there is lots of short term currency risk - hence my hedging by buying into small cash generating businesses.

Other choices? Depends on your goals.

The Yen and real estate in Japan is still very interesting simply from the yen upside combined with high rent/mortgage ratios. Not as good as 3 years ago, but still nothing to sneeze at.

Gold is another option - a way to hedge against global currency devaluation as 'beggar thy neighbor' escalates.

As for military power and economic power - are you saying that China isn't the dominant economic force in the world now? That China's actions haven't fundamentally changed the dynamics of trade flow? That China's continued economic resurgence won't give it the capital to create a strong military?

It is not clear to me at all that military dominance must precede economic dominance.

I remember reading a story of a Chinese girl that worked in a Timberland factory in China making their coats. She said that rich people must buy these because it was what she made in four months. Okay, let's say the U.S. suffers and China goes up a bit. She's still not buying that coat if it's only two months of her yearly wages.

For one thing - the quality and cost of the coat are a function of the target buyer. If the target buyer is a rich person, then the input materials and craftmanship should theoretically be better. If said Timberland factory could no longer sell in volume to the US, do you really think the factory owners would not have the option to switch to selling to those at the level of their own factory employees?

How then did Henry Ford sell nearly 250000 automobiles in 1913? These weren't being exported...

[kingcopper]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Choosing to bet on the ruble would be a personal decision.

What I point out is that the ruble/dollar and ruble/euro crosses have been moving in the opposite direction for quite some time.

Given that Russia trades extremely little with the US, and trades a heck of a lot with Europe, this isn't surprising - and is an example of how a regional trading bloc can get set up.



Of course the US no longer being the overconsumption sink for the world will affect nations and countries overly dependent on exports to said nation, however, the productivity of the overseas factories and workers doesn't automatically have to sit idle.

These overseas workers might not be buying fancy foreign cars and iPhones, but they definitely could benefit from better consumer goods at affordable levels.



For me, I've made my choice: the ruble. I base this on several factors:

1) Russia has the least to fear from the US militarily (M.A.D.)
2) Russia has an economy that is growing quickly and has strong sources of national income (energy, minerals), as well as a highly educated population (if shrinking)
3) Russia has one of the best national fiscal situations: low debt and high foreign reserves.

Of course there is lots of short term currency risk - hence my hedging by buying into small cash generating businesses.

Other choices? Depends on your goals.

The Yen and real estate in Japan is still very interesting simply from the yen upside combined with high rent/mortgage ratios. Not as good as 3 years ago, but still nothing to sneeze at.

Gold is another option - a way to hedge against global currency devaluation as 'beggar thy neighbor' escalates.

As for military power and economic power - are you saying that China isn't the dominant economic force in the world now? That China's actions haven't fundamentally changed the dynamics of trade flow? That China's continued economic resurgence won't give it the capital to create a strong military?

It is not clear to me at all that military dominance must precede economic dominance.



For one thing - the quality and cost of the coat are a function of the target buyer. If the target buyer is a rich person, then the input materials and craftmanship should theoretically be better. If said Timberland factory could no longer sell in volume to the US, do you really think the factory owners would not have the option to switch to selling to those at the level of their own factory employees?

How then did Henry Ford sell nearly 250000 automobiles in 1913? These weren't being exported...

Henry Ford sold 250,000 autos in 1913 because they were cheap enough to afford. The reason he was able to keep the autos cheap was that he made the factory more efficient!

Most U.S. corporations are giant and inefficient now and need to die or be broken up so they can be productive, efficient, and make shareholders money while providing a needed good or service.;)

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Average income in 1913: around $12000

Price of Model T in 1913: $550

Price of 1 oz gold in 1913 in dollars: $20.67

Ounces of gold to buy a Model T in 1913: 26.6

Value of 26.6 ounces of gold today: $21000 or so

I wouldn't call the Model T cheap. Cheaper than its competitors, yes.

[vinoveri]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Average income in 1913: around $12000

did you mean $1200?

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

did you mean $1200?

Sorry, I did not follow usual practice and post source link.

http://elsa.berkeley.edu/~saez/pikettyqje.pdf

The $12000 is in 1998 dollars equivalent. Actual 1913 average income in 1913 dollars is $733.45

Above number calculated using government's CPI calculator:

http://data.bls.gov/cgi-bin/cpicalc.pl

So the point should have been that the $550 price of a Model T was 2/3rds of average income. Quite a lot!

[jtabeb]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

Sorry, I did not follow usual practice and post source link.

http://elsa.berkeley.edu/~saez/pikettyqje.pdf

The $12000 is in 1998 dollars equivalent. Actual 1913 average income in 1913 dollars is $733.45

Above number calculated using government's CPI calculator:

http://data.bls.gov/cgi-bin/cpicalc.pl

So the point should have been that the $550 price of a Model T was 2/3rds of average income. Quite a lot!

Use finster's, err, shadow stats' CPI calc and it is much more worthy of discussion!?!?

[c1ue]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

JT,

There'd be some difference, but it wouldn't be that dramatic.

After all, we're talking about 1% or 2% deltafor the last 20 years vs. a 70+ year span.

[jtabeb]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

JT,

There'd be some difference, but it wouldn't be that dramatic.

After all, we're talking about 1% or 2% deltafor the last 20 years vs. a 70+ year span.

Finster's CPI calculator would argue otherwise.

a 1-2% difference is big when compounded over a long time frame, say 30 Years (That's where you have fund, comparing the net revision data since 1980. (and it this case we are talking about a 4-8% delta, not 1-2%. So I would view the amplification as significant.

Here is an example


Inflation Calculator

Enter a dollar amount and two dates.
The second date can be later or earlier than the first.

$ in

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 1964 1963 1962 1961 1960 1959 1958 1957 1956 1955 1954 1953 1952 1951 1950 1949 1948 1947 1946 1945 1944 1943 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930 1929 1928 1927 1926 1925 1924 1923 1922 1921 1920 1919 1918 1917 1916 1915 1914 1913 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

was worth how much in

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 1964 1963 1962 1961 1960 1959 1958 1957 1956 1955 1954 1953 1952 1951 1950 1949 1948 1947 1946 1945 1944 1943 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930 1929 1928 1927 1926 1925 1924 1923 1922 1921 1920 1919 1918 1917 1916 1915 1914 1913 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ?

Sep 1980		Sep 2008
$10000.00		$26047.62 (BLS)	* (SGS)
BLS: Bureau of Labor Statistics, CPI-U (Urban Workers, All Items). SGS: Shadow Government Statistics Alternate CPI. * ShadowStats subscribers, please login to view the actual figure

[jtabeb]

Re: A return to the Bretton Woods international gold standard is inevitable - Eric Janszen

JT,

There'd be some difference, but it wouldn't be that dramatic.

After all, we're talking about 1% or 2% deltafor the last 20 years vs. a 70+ year span.

Finster's CPI calculator would argue otherwise.

a 1-2% difference is big when compounded over a long time frame, say 30 Years (That's where you have fund, comparing the net revision data since 1980. (and it this case we are talking about a 4-8% delta, not 1-2%. So I would view the amplification as significant.

Here is an example


Go here:

http://www.shadowstats.com/inflation...&calc=Find+Out

enter sept 1980 and sept 2008 and use 10,000 for the amount. The SGS number is 3-4x larger than the CPI figure.

I don't know about you, but a 300-400% difference is significant to me.