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« Beware Greeks Baring Gilts | Main | A Quick Scan of Commentary on the GDP Number »

Friday, January 29, 2010

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Mamma Boom Boom

BANDAIDS! It's too late. Debts are so high, and productivity so low, that repudiation is all that's left. It's only a matter of timing. Once we allowed Congress to sell out to Banksters, it was all over but the shout'in. Weeehaaaa!

CrisisMaven

There's no such thing as a global currency if it were not for gold as such, the "barbarous relic" (Keynes). As monetary theory suggests, in a paper currency system (as of now) you need at least two currencies floating freely against each other to make economic calculation possible, even with all the inflation paper causes (so I'm not saying it's a good idea). But ONE currency is impossible, it's exactly the exchange rates that are needed, they're costs, all right, but so is the appraiser for your home befiore you buy! Do we see a gold bubble?

yelnick

Maven, fair point but what I am thinking is to have the USD float against an independent currency of substance that is not tied to any one country. This currency may develop out of the IMF SDRs as China wants, or some other mechanism.  It most likely will have gold as part of the package, with gold coins and bricks being exchangeable for that currency. The rest of the currencies would float against that currency. This is much more like the classic gold standard than the gold exchange standard of 1925-1933 or the Bretton Woods exchange standard of 1947-71. The new currency would likely have to be backed by gold, Dollars, Yen, Euros and maybe Yuan somewhat relative tot heir global trade levels. 

KRG

Y:

If all central banks diversify their reserves (including Gold/Yuan/INR/TWD/AUD etc) i.e., diversify much more than what they hold today, would it not have the same effect as you are mentioning?

Cheers

yelnick

KRG, the central banks already do that, to match trade flows. The problem remains that the USD exports US domestic policies onto the rest of the world. If the USD could fall against a reserve currency (or rise) it could stabilize the other countries amongst themselves. It also gets the US off the hook from running persistent deficits to provide enough currency for the world. The new reserve currency would have to be more than a mathematical construct. If it were used to clear the oil trade, it would in effect be backed by oil and have enormous economic substance.

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