Doug, I actually think that because of the freedom to move from one currency to another by most people in the world (well the developed world), a discipline in already in place. Any country engaging in overprinting gets the holders of its currency to flee to other more disciplined currencies, that is one reason that gold may not be required. Of course, the CB may one day face such a calamity that they will chose a coordinated effort of reflation through the printing press, but frankly, to prevent an economical disaster including 30% contraction in the world economies, I think they should have that freedom. Being tied to specific standards, while a good discipline, theoretically, removes from the monetary authorities the tools necessary to either counteract politically motivated "bad" fiscal policy, on one hand, and the freedom to use the press to avoid economic calamities on the other hand.
Zeev
PS, I noted in perusing the thread earlier today that I should make a disclosure statement, here it is: I am not employed by any entity that has any interest to see the price of gold low or for that matter high. Furthermore, I am not short nor long the metals, the futures or stocks of gold producers, but I reserve the right to take personal positions if and when extremes of one kind or another are reached. (VBG). |
