threadbear wrote:Micki wrote:dorlomin wrote:This is not really the time for fixing the exchange rates, the economies are in so much flux that there needs to be a market to price them. Today economies are far more volatile than they were when Bretton Woods I failed or the ERM was attacked and destroyed. Also the US dollar was able to act as a global reserve currency, replacing the pound in that role in the long term. Now no currency is able to do that.
The exchange rate and "no currency is able to do that" is resolved with the re-introduction of a gold standard.
Each nation adopting this standard just needs to divide their monetary base with the gold reserves and you already have a measure that works. USD became global reserve currency as it was considered "as good as gold" (i.e. backed by gold and redeemable by foreign nations in gold therefore as good as gold).
In the new system, any currency linked to the gold standard would do and Gold would defacto be the global reserve currency.
For this to work a longer time, gold really needs to be redeemable or you get another Nixon/closing of gold window event.
How much per oz do you figure, Micki? I'd like to spend the day ruminating on the very tiny chance I might strike it rich. Sort of like "what I'd do if I won the lottery". Sometimes I think that virtual exercise is more fun than the actual.
HAHA Don't get too caught up in the greedy dreams.
Have to admit I play with the thought a bit as well but there are just too many parameters to plug in to figure out what the end result is likely to be. For instance, if they link currency to gold and that amount is huge, that would put the breaks on inflation, but would other things jump up first, to catch up with what they saw happening with gold?
And would that be a static or dynamic relation? i.e. they can't print more money until they have more gold or they can continue printing and just adjust POG according to M3 or something (it would defeat much of the purpose of a gold standard but I am thinking there will be some middle ground to allow for flecible leverage.)
Jim Sinclair who has been talking about a quasi-gold standard for a few years now has been saying it will be introduced at $1650. It would still fluctuate after introduction a hundred or two with M3 figures etc. He has expressed several times though that this is a minimum figure. He seems to think it will be higher and has once or twice said possibly significantly higher.
The issue I have with this is that if global oil production is in decline, price of oil will go up even if total money supply remains fixed.
Mining cost will therefore go up. So if gold price is fixed, it will lead to 1) mines shutting down as their product can't keep up with increaing costs (faster than just because of oil supply issues) 2) a drain of reserves as those who can will redeem the gold knowing there is less and less new gold hitting the market and/or 3) a decoupling again between reserve prices and real market prices (if common people can't redeem gold for their currency and there is less availability of physical, this will make the physical more attractive than an irredeemable paper promise).
On the higher end we can look at backing up all currency with gold.
Say US for instance has 8,000 tonnes (officially) of gold which should be roughly 256Million ounces and M3 might be say around $15Trillion. So dividing M3 with 256M gives you about $58,000 per oz.
Just some lose thoughts around the subject and perhaps someone here cares to comment as I haven't thought these through thoroughly.
1) If the government(s) come to the conclusion that a gold standard needs to be reintroduced. Why not go for the big gun?
It would help wipe out debts. If the standard is introduced overnight, there would be no mainstream exodus of money from paper to gold as many would wake up to $50K-$100K gold prices.
Such a move of course requires outmost secrecy as ALL players otherwise would move money into gold. Is it possible such outcome is only known by a few power men who already positioned themselves in gold (see
US Mint sales graph) and they can force the government and fed reserve to make such move with short notice?
Rather than brushing off %50K+ POG because you can't imagine this appreciation or think the CB's will resist, I would like some fair comments on why this isn't practically possible. A better place to continue this particular discussion may be this thread
2) Introduction of a gold standard may not be beneficial to Silver.
i.e. if money is backed up only by gold, silver would revert back to being just an industrial metal. With good fundamentals, but not benefitting from overnight revaluation as gold would if the new standard is introduced. If gold is somehow locked in at $1650, I think silver will outdo gold percentage wise juust based on supply deficits. If Gold is locked in at $58,000 silver might still be struggling towards it's $50-500 range. I guess diversification is still the prudent thing.
