Mundell on gold today...............
<<Amidst all the silly talk about the euro making gold obsolete for European central banks, with predictions they will sell it and send its price plummeting, Mundell introduces a note of caution (a stick) and a word of promise (a carrot). Now we see him sneaking gold into the euro. "It would be a mistake to think that Europe?s interest would lie in dumping large stocks of gold in a sell-off. None of the big holders have any interest in depressing the price of an important reserve asset. But Europe may find that its gold holdings have a hitherto unnoticed use in building confidence in the euro." Yes, the euro eventually will be a great currency, taking its place alongside the Roman denarius, the pound sterling of the British empire, etc., as Mundell gushes forth praise. Alas, "It is also necessary to note, however, that the euro will have two unique weaknesses compared to its great predecessors. First, the euro starts out as a pure fiat currency not linked to gold. Second, the euro is not produced by a strong central state. These weaknesses would be potentially lethal were it not for two mitigating factors: Europe?s large gold reserves will help to overcome the first weakness. The second weakness will be overcome in the short run by the military alliance of NATO and in the long run -- perhaps -- by European political integration.">>
polyconomics.com |
