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

[rj1]

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

The mistake is assuming the round hole the dollar occupies must be replaced by another round peg.

The reason the dollar is the reserve currency is not entirely due to military, historical, or being the largest market reasons. A significant part of it is that the dollar has been the most relatively stable of all currencies for a long time.

The present gyrations - which have no evidence of easing - will remove that stability factor. After all, if trade with the US slows due to US consumers being 'all spent out', then the internal needs of each nation become more important - as does then the internal currency.

I can see the various trade blocs squaring off their own little territories should this present situation continue.

And the fallacy of your argument, which I keep kind of hinting at in various posts but keeps getting ignored, is that if the U.S. dollar currently is not stable and that will lead to other countries dropping it, that implies that there is something more stable that other countries will go to? What is it? There's not been anything in the past year that has been any more stable to justify changing to it.

I pointed out on this board perhaps 6-9 months ago a question I had that if every currency deflates, is there really deflation? All I was really given was some fable by Fred and my question was sidestepped as he focused on the national level instead of the interaction between multiple governments (see link below). This is like a financial application of Einstein's Theory of Relativity. Every currency can go down, but if they're all going down, that gives the impression that some are moving up relative to some of the others. You're not sitting still right now, you're travelling through space at thousands of miles per hour, but that's irrelevant, and thereby you can relatively be considered to sit still ignoring the fact Earth is travelling through space.

http://www.itulip.com/forums/showthr...9843#post19843

[marvenger]

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

well different blocs might help stabilise. Not one currency to rule them all, but a few rings of influence that still trade with eachother. But the world isn't really structured like that anymore, so I see your point.

[FRED]

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

And the fallacy of your argument, which I keep kind of hinting at in various posts but keeps getting ignored, is that if the U.S. dollar currently is not stable and that will lead to other countries dropping it, that implies that there is something more stable that other countries will go to? What is it? There's not been anything in the past year that has been any more stable to justify changing to it.

I pointed out on this board perhaps 6-9 months ago a question I had that if every currency deflates, is there really deflation? All I was really given was some fable by Fred and my question was sidestepped as he focused on the national level instead of the interaction between multiple governments (see link below). This is like a financial application of Einstein's Theory of Relativity. Every currency can go down, but if they're all going down, that gives the impression that some are moving up relative to some of the others. You're not sitting still right now, you're travelling through space at thousands of miles per hour, but that's irrelevant, and thereby you can relatively be considered to sit still ignoring the fact Earth is travelling through space.

http://www.itulip.com/forums/showthr...9843#post19843

That's the equivalent of asking, If all national governments go bankrupt, is any one of them really bankrupt? Isn't bankruptcy just a state of mind? Why not lend to another nation that lacks the income to meet the interest payments based on standard metrics? Why not change the rules? If a nation needed to have enough economic surplus to cover all expenses over interest payments plus 10% to earn a borrowing rate of 3%, why not change the rules so that only a surplus of 5% is needed to earn a rate of 3%?

Currency values are determined long term by a combination of expectations of relative future economic growth and creditworthiness among nations, medium term by capital inflows, short term by speculation.

In a global recession, if every nation's future economic growth prospects are equally bad, currencies don't move. But a global recession impacts different countries differently and at varying rates not only with respect to economic growth but also factors that bear upon creditworthiness, such as political stability.

The US has never, ever defaulted on its debt. Nor has Japan. Big surprise that the winners in the currency beauty contest so far in this crisis have been the US and Japan. The euro is holding up relatively well because the biggest economy in the EU, Germany, has an even more hawkish anti-inflation and no-default reputation than the US; Germany is holding up the euro.

What will drive currency values over the next few years?

If the global recession turns to depression, who will blink first as the people pour into the streets demanding jobs, money, food, shelter? The Japanese? The Americans? The Europeans? The Chinese?

Can't we all just get along? :eek:

[vinoveri]

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

That's the equivalent of asking, If all national governments go bankrupt, is any one of them really bankrupt? Isn't bankruptcy just a state of mind? Why not lend to another nation that lacks the income to meet the interest payments based on standard metrics? Why not change the rules? If a nation needed to have enough economic surplus to cover all expenses over interest payments plus 10% to earn a borrowing rate of 3%, why not change the rules so that only a surplus of 5% is needed to earn a rate of 3%?

As absurd as all this sounds, I fear there may be elements of reality in the parody you describe above. After all, individual countries operate under different political regimes and relative levels of ignorance and an easily led public. What's to prevent countries from cutting deals or "agreeing" to what you describe.
Like a feudal system, the ruling elite, whether it's 0.01% or 10% will and can do what's in their best interest which probably (almost always) is not the same thing as in the countries best interest. Look at the wealth transfer that's occuring in the U.S. right now and the power lock wall street has on our politicians. Hey in the long run, we're all dead right as Keynes said ( this to politicians is the most attractive part of Keynsian economics, e.g., deficits don't matter, and when the SHTF, I'll be dead, so wtf) ... sorry, a bit too cynical I know.

The US has never, ever defaulted on its debt. Nor has Japan. Big surprise that the winners in the currency beauty contest so far in this crisis have been the US and Japan. The euro is holding up relatively well because the biggest economy in the EU, Germany, has an even more hawkish anti-inflation and no-default reputation than the US; Germany is holding up the euro.

I think closing the gold window by the US in 1971 should be counted as a default. And paying back debt with devalued dollars would to me constitute a default, but granted the US is probably as crediworthy as any country (and can crack the whip on its 300M citizenry if it needs to).

Can't we all just get along? :eek:

You got it!

[marvenger]

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

[quote=vinoveri;61561]


I think closing the gold window by the US in 1971 should be counted as a default. And paying back debt with devalued dollars would to me constitute a default, but granted the US is probably as crediworthy as any country (and can crack the whip on its 300M citizenry if it needs to).
quote]

I think what Fred is saying is that the US has never officially defaulted as in saying 'tough titties, you're not getting anymore money' and he's saying therefore the only way out is to pay it back with devalued currency.

Records were meant to be broken though. The rest of the world might prefer official default to reboot the system rather than chaos of high inflation.

[LargoWinch]

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

EJ's article on silverbearcafe.com (hope EJ is aware of this)

http://silverbearcafe.com/private/11...dstandard.html

[FRED]

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

EJ's article on silverbearcafe.com (hope EJ is aware of this)

http://silverbearcafe.com/private/11...dstandard.html

A great paradox of the Internet: if we took the time to chase down every poach of iTulip content and ideas, we'd have no time to develop new ideas and content for others to poach.

[sn1p3r]

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

I bet you could setup a google alert with a few key words and get 80-90% of it

[FRED]

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

I bet you could setup a google alert with a few key words and get 80-90% of it

Catching it is the easy part.

Google:

economic mutually assured destruction

[metalman]

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

Catching it is the easy part.

Google:

economic mutually assured destruction

takes me to...
Economic Chicken vs. Mutually Assured Destruction

and... ???

[DaveBrown42]

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

A
Americans' strength by and large comes from not depending on or expecting anything from a government or organization to help them.

I'd call that perception a weakness rather than a strength. The only people who can honestly say they are not dependent on governments or other organizations are those who live completely off-the-grid (and I expect they represent maybe 0.001% of the US population). Everyone else who says this is completely deluded.

[c1ue]

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

And the fallacy of your argument, which I keep kind of hinting at in various posts but keeps getting ignored, is that if the U.S. dollar currently is not stable and that will lead to other countries dropping it, that implies that there is something more stable that other countries will go to? What is it?

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.

The reason for these trading bloc islands of relative stability is the trade within the blocs. For the above, Russia trades much more with Europe than the US.

Of course the US is the largest trading bloc of all - both at present and historically - and it may be one of the largest reasons why the US$ has been more stable.

But clearly this trade is at risk.

1) Consumer spending is down significantly impacting both commodities and goods.

2) US debt levels are unsustainable and also rising.

3) A strong dollar is negatively impacting US exports, while US imports of finished goods are largely negating even the relative trade deficit reductions due to energy price falls.

So, as the rest of the world learns to live with much less US trade, will the removal of the US$ trade volume anchor itself be a factor?

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.

In the real world, currency stability has as one of its drivers the effects of national policy - as Japan and China have demonstrated for years with their virtual pegs against the dollar.

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.

Those arguing that this currency isn't a good choice (euro) or that currency isn't a good choice (dinar) rarely address this issue.

[metalman]

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

a more significant early adopter than iran...

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report
Wed, Nov 19 2008, 01:51 GMT

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

BEIJING (Dow Jones)--China's central bank is considering raising its gold reserve by 4,000 metric tons from 600 tons to diversify risks brought by the country's huge foreign exchange reserves, the Guangzhou Daily reported, citing unnamed industry people in Hong Kong.

Yuan for you and me

A former China central bank deputy governor said the Chinese yuan should be made fully convertible so that it can become an international reserve currency, state media reported on Wednesday. The government should gradually promote using the yuan for international settlement once it meets the conditions to be an international reserve currency, Wu Xiaoling said, according to the Shanghai Securities News.

"China should speed up making the yuan an international reserve currency," the newspaper, a mouthpiece for China's securities regulator, reported. Wu, who often spoke publicly on behalf of the central bank's leadership during her term as vice governor from 2001 to January this year, is currently vice-chairperson of a parliamentary committee on financial and economic affairs.

[mikedev10]

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

doesn't an international gold standard for settlement kind of put us on a currency board type gold standard domestically? if the price of gold is set to fluctuate within 1% of some range, and we are using the same currency domestically and internationally, doesn't that put us into a currency board situation? or under a new bretton woods type system is gold not allowed to be traded in the currency and the government just sets the price and it is what it is?

is this a case for silver?

[riadi]

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

a more significant early adopter than iran...

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report
Wed, Nov 19 2008, 01:51 GMT

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

BEIJING (Dow Jones)--China's central bank is considering raising its gold reserve by 4,000 metric tons from 600 tons to diversify risks brought by the country's huge foreign exchange reserves, the Guangzhou Daily reported, citing unnamed industry people in Hong Kong.

Yuan for you and me

A former China central bank deputy governor said the Chinese yuan should be made fully convertible so that it can become an international reserve currency, state media reported on Wednesday. The government should gradually promote using the yuan for international settlement once it meets the conditions to be an international reserve currency, Wu Xiaoling said, according to the Shanghai Securities News.

"China should speed up making the yuan an international reserve currency," the newspaper, a mouthpiece for China's securities regulator, reported. Wu, who often spoke publicly on behalf of the central bank's leadership during her term as vice governor from 2001 to January this year, is currently vice-chairperson of a parliamentary committee on financial and economic affairs.

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?