Zeev, I appreciate your patience with me here, but I'm still struggling with what you say.
...a balance between money available and goods available. If that money is "tied" (via a legal exchange rate as it used to be in the "good old days") to gold, you would have to have the growth rate of gold match that of the required money in circulation, that is "a straight jacket" that the world economy does not need...
Ok, so instead of being tied to a fixed exchange rate of gold (or other limited asset), currencies are now fixed to a floating exchange rate of other currencies. Your example therefore requires that the total of the 'foreign' currencies must grow equal to the 'home' currency, or else the 'home' currency will become relatively stronger, right?
Wouldn't the same thing work with some sort of standardized revaluation of a "hard" currency? Thus, the relative value (inflation or deflation) of a currency would be set and predictable, not subject to whim or crisis. For example, if Greenspan were to have a stroke, I'd bet that the US$ would take a huge hit; but why? Is it suddenly worth less? Some may think its future value would be less, but that wouldn't happen if there were some sort of peg to mark the dollar to. Instead, our dollar IS the peg, and a crisis could destabilize things worldwide.
Again, I apologize for being hardheaded, but I really am trying to understand the different positions on this subject. Thanks again,
jim |
