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

[tsetsefly]

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

Like I said we are students of history, All Americans. Let's hope we are all well-read enough to matter when it matters.

Except Americans will have resentment towards anyone who holds gold, and don't be surprised if the gov. uses gold "hoarders" as scapegoats...

If inflation gets out of hand I am sure you will hear people in the media saying that buying gold or getting rid of the dollar is unamerican...

[metalman]

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

Hi -

Like several of your previous posts, this one made me stop and think.

But one quick question please to you or anyone else here at itulip -

When was the last time there was an independent, third-party audit of the American government's gold reserves?

Would be very interested in an answer to this.

don't fall for the conspiracy nonsense about the usa not having the gold it reports. the usa always gets it right in the end. see below for the ranking of winners and losers when gold is remonetized for international trade. usa is #1.
Officially reported gold reserves

As of 22 September 2005, the largest gold holdings in tonnes as reported by the World Gold Council can be seen in the table below.^[7] The United States' holding of gold is worth approximately US$164 billion (December 2006). A tonne or metric ton (symbol t), sometimes referred to as a metric tonne, is a measurement of mass equal to 1,000 kilograms. ... The World Gold Council, formed in 1987, is an industry association of the worlds leading gold mining companies. ... The United States dollar is the official currency of the United States. ...

1	United States of America	8,133.5
2	Germany	3,427.8
3	International Monetary Fund	3,217.3
4	France	2,892.6
5	Italy	2,451.8
6	Switzerland	1,290.1
7	Japan	765.2
8	Netherlands	722.4
9	European Central Bank	719.9
10	People's Republic of China	600.0
11	Republic of China (Taiwan)	423.3
12	Portugal	407.5
13	Russia	386.6
14	India	357.7
15	Venezuela	357.4
16	United Kingdom	311.3
17	Austria	307.5
18	Lebanon	286.8
19	Spain	283.0
20	Belgium	227.7
21	Philippines	187.9
22	Bank for International Settlements	185.3
23	Algeria	173.6
24	Sweden	155.4
25	Libya	143.8
26	Saudi Arabia	143.0
27	Singapore	127.4
28	South Africa	123.9
29	Turkey	116.1
30	Pakistan	107.9
31	Romania	104.9
32	Poland	102.9
33	Indonesia	96.5
34	Thailand	84.0
35	Australia	79.7
36	Kuwait	79.0
37	Egypt	75.6
38	Denmark	66.5
39	Pakistan	65.3
40	Kazakhstan	58.6

on the other hand, on the basis of the ratio of gold reserves versus currency outstanding, the usa ranks 7th...

[Tulpen]

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

inflating the debt away by repricing currencies against gold is like sawing off a gangrenous leg... unpleasant, but necessary.

Explain to me how supposedly the only way to increase the amount of money in the system is to use some kind of a gold standard. So far the US government has simply opted to increase their depts instead of straight monetization, but I see no reason why one needs some kind of a gold standard to back that up. Next we are going to hear that floating exchange rates are a bad thing.

[metalman]

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

Explain to me how supposedly the only way to increase the amount of money in the system is to use some kind of a gold standard. We have inflation for a long time, and guess what, it was without a gold standard.

we have inflation by devaluing one currency over another as the usa did 2002 - 2008 but now we gave the first global debt deflation since the 1930s... liquidity traps developing everywhere. currency devaluation by countries each on their own in this new world of global depression... that's another 'circular firing squad' ej refers to. or... we can each go the zimbabwe route of monetizing debt, also a loser. a global devaluation of currencies vs gold is the only way out. if all nations do it together, debt deflation, competitive devaluation and the hyperinflation are avoided. get it?

[Tulpen]

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

we can each go the zimbabwe route of monetizing debt, also a loser. a global devaluation of currencies vs gold is the only way out. if all nations do it together, debt deflation, competitive devaluation and the hyperinflation are avoided. get it?

I get it but I do not think you get it.

I suspect you simply wish that to be the case as you are long on gold.

Look at the effect of the claim of a rumor about gold being discussed at the G20, gold is down today while oil is up.

[c1ue]

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

My view is this EJ article is pointing towards a medium to long term trend.

As the inflationary 'beggar thy neighbor' policies wreak havoc in international trade and finance, eventually there will be economic exhaustion.

At that point the various nations of the world will have more to gain by offering a new stable international regime of currency exchange rather than the past unregulated, neo-classical economics laissez faire.

The question is still going to be when and how.

Obviously the creditor nations will want it sooner - to preserve as much of the debt owed to them as possible - while the debtor nations will want to opposite.

The interesting wrinkle this time is that the US as the reserve currency owner both has the most to lose from a Bretton Woods-like arrangement and has the most debt to destroy (absolute value).

So there will be considerable perturbation as even within the US there will be conflicting interests - as I very much doubt ROW wants both a debt destruction AND a retention of the US$ currency reserve.

Viewing the unfolding events through this prism will help make it all much more understandable.

[jtabeb]

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

Except Americans will have resentment towards anyone who holds gold, and don't be surprised if the gov. uses gold "hoarders" as scapegoats...

If inflation gets out of hand I am sure you will hear people in the media saying that buying gold or getting rid of the dollar is unamerican...

Those old dirty tricks didn't work during this election, thank god. Let's hope the country does as well when this situation comes up.

[metalman]

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

I get it but I do not think you get it.

I suspect you simply wish that to be the case as you are long on gold.

Look at the effect of the claim of a rumor about gold being discussed at the G20, gold is down today while oil is up.

spoken like a man who neglected to buy gold at $270, $370, $470, $570, $670... bet you've been bashing it all way up.

doesn't pay to talk your un-book any more than your book. monetization by process of elimination. what's your forecast then? terminal deflation? competitive devaluation? everything magically gets better?

and the article poses a serious question... maybe it won't help to own gold.

[jk]

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

we have inflation by devaluing one currency over another as the usa did 2002 - 2008 but now we gave the first global debt deflation since the 1930s... liquidity traps developing everywhere. currency devaluation by countries each on their own in this new world of global depression... that's another 'circular firing squad' ej refers to. or... we can each go the zimbabwe route of monetizing debt, also a loser. a global devaluation of currencies vs gold is the only way out. if all nations do it together, debt deflation, competitive devaluation and the hyperinflation are avoided. get it?

Another year or two must pass before the collapse of global economies motivates bold policy moves to address the root of the problem, how to deflate all of the excessive debt. Even then the question remains: without dominant economic and political leadership, who can herd the cats–the US, the EU, Japan, China–who may be fighting like cats in a sack, to a mutually beneficial accommodation when the costs and benefits are unequal? Yet the alternatives are either a new circular firing squad of competitive currency devaluation or ongoing destruction of economies around the world by debt deflation.

what happened to ka-poom theory here? let's go back to the model of poom: the u.s. appears headed towards monetization and foreign cb tbond holders start to sell their holdings. there is a rush of foreign held dollar denominated debt assets towards other, less ethereal, dollar-based assets such as commodities, u.s. based enterprises and real estate, and u.s. held overseas assets.

the big holders of treasuries are japan and china, first and foremost, followed by london and the carribean which are both likely petrodollar fronts. the asians are the ones who start to sell. the petrodollar owners already own an alternative, real asset: oil. if they don't want more dollars they can just reduce sales, or uncouple oil and the dollar. so the dollar is, in poom, devalued against asian currencies which have heretofore been pegged. note that the dollar, prior to poom, has already dropped against european currencies.

for the u.s., it looks like a nominal bull market in equities and possibly real estate. if this pumps up nominal economic growth and feeds over to wages we will have achieved our goal. without any special role for gold.

so it seems to me that kapoom theory obviates the need for remonetization of gold. someone please explain to me where i've got this wrong.

[Tulpen]

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

doesn't pay to talk your un-book any more than your book. monetization by process of elimination. what's your forecast then? terminal deflation? competitive devaluation? everything magically gets better?

My forecasts? Socialists coming with all kind of "solutions", including world governments trying to regulate currencies, that will make things far worse. Eventually the public's foolish trust in the government being able to solve the economic slump will fire back hard. The dollar (and to a lesser extent the Euro) is doomed, just a matter of time before it will collapse.

And by the way I am long gold today, at this moment at least.

[Tulpen]

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

And by the way I am long gold today, at this moment at least.

Just closed that position.

[DemonD]

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

Is there some other asset we should own either in addition or instead?

In addition: silver.

Potentially instead: Oil.

[c1ue]

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

JK,

You've left out a large part of the economic world in your summary: Europe.

From my view - the Europeans, at least the 'northern' EU - are looking for ways to prevent their again getting screwed by the US.

It seems very clear now that while Japan, China, and ex-Asia were busy buying US debt in the form of Treasuries, that Europe was also buying US debt in the form of crap MBS's and CDOs.

Besides the brutal effect the resultant chaos has had on trade, I think most of the rest of the world desires greater stability in future international trade and financial relations.

One way would be a monetization of gold a la Bretton Woods.

The Asian nations also would gain from this: a monetization of gold would mean a 'hardening' of their presently very soft dollar assets.

Of course the nation fighting all of this is the US: both from hardening of its debt burden and the effective sidelining of the US$ as a world reserve currency.

The question in my mind: What is the likely outcome of this struggle?

My personal view is that the US will get one of its goals: either deflation of its debt burden or the loss of the dollar's reserve currency free ride, but not both. Which is the more acceptable gain? Or less painful loss?

This doesn't actually have to conflict with Ka-Poom theory.

A loss of the US$ as reserve currency would actually ease the spending of foreign dollars into rebuilding US infrastructure/industry. The dollar in this case would not necessarily have to lose that much value due to depreciation, but would lose the ROW central bank cushion and 'premium'.

Similarly a deflation of the debt burden must needs mean inflation in internal US prices but could still have the dollar as a reserve currency if the deflation is towards acceptable levels (i.e. enough for the US to continue debt service, but not enough to make out like a bandit).

Obviously this is almost certainly too much of a simplication but still possibly actionable.

[chrisk]

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

silver makes a smaller target but i can see how the gov't might tax it for non-industrial use. same with platinum.

what's that leave as a hard asset, rocks?

If silver is the poor person's gold, then TIPS are the conservative person's gold, IMO. If you can hold them in a tax-free account, anyway.

Last I checked, you can get up to 20 years duration in U.S. bonds that pay 3% over CPI inflation. Granted, the feds have an interest in manipulating CPI downwards. But with anything short of true hyperinflation (say, over 20%), I doubt if they'll manipulate it much more than 3%. If so, TIPS are "good as gold" in that they'll preserve your real purchasing power, with very high safety.

Many stocks are also safe inflation-resistant investments at today's prices, I'd argue. Berkshire Hathaway, for one, which Warren Buffett has designed to be inflation resistant for many many years. Or for a more direct inflation hedge, there's Conoco Phillips, which Buffett has been buying lately.

Whether you like these particular picks or not, it might pay to consider inflation-protected investments other than precious metals (of which I own a bunch, but I'm just sayin'...).

[Rajiv]

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

Statement From G-20 Summit: In English

From Catherine Austin Fitts

The Editor of Expresso in Portugal wanted my take on the recent G-20 communique. Here is my “translation” of the official statement:

1. Now that the growth of debt and derivatives bubbles has stalled, we are committed to use governmental-central bank mechanisms to cover the positions of any of the large private financial institutions whose profits are at risk in the management of these bubbles and who can use this opportunity to squeeze and acquire smaller rivals at low cost.

2. Our commitment to use derivatives and market interventions to shift investment from the real economy and commodities into a paper economy is firm and we will continue to use centralized governmental mechanisms to subsidize and manage this process.

3. All of the organizations and players who reaped a fortune engineering the debt and derivatives bubbles will be allowed to keep their winnings.

4. We will use this period of consolidation to further centralize the global financial system by enforcing greater centralization of the standards, practices and control of enforcement and regulatory bureaucracies. This, increased governmental centralization will be presented as the “fix.”

5. We will continue the move toward one world government and one world currency.

6. We are prepared to use coordinated inflation of global money supplies and fiscal stimulus to protect our control and positions.

7. We are committed to the Slow Burn (see my blog post on this subject).

8. This process will continue to be managed to protect large insurance and risk positions.

9. The net result will be to continue to exercise growing control over the real economy by a handful of private families and institutions designed to protect and grow intergenerational wealth.

G-20 are silent on the military and covert action that will be required to make this stick. They are also silent on how they are going to manage this much inflation. For example, the most recent figures from the St. Louis Fed indicate that the aggregate monetary base is growing at an annualized rate of almost 800%.

Watch for a new focus on “green investing” as the trick in all of this will be how to create new productivity when the absence of real prices and financial incentives mean there is no market to provide the necessary signals.