Tippet, saying that I do not have a clue is one thing, it would help if you stated why I do not have a clue. I have presented a quantitative argument that tying monetary systems to gold will bring permanent inflation, or doom the world to sub par economic growth, many times. Could you please, at least once, present a cogent (hopefully, quantitative) argument why such tie will bring price stability? Don't invoke "disciplining the printing presses" arguments, it is a vacuous argument, particularly in view of the new realities of fluid and open currencies markets doing all the disciplining required. Use the simple route of determining a price of gold that can back the required monetary base in the world, and the growth rate in gold production required to maintain the growth rate of the world economies, assuming, of course, that monetary aggregates must grow at least at the same rate as the GWP. Then try and find out if that growth rate can be sustained indefinitely without having to, every so often, "repeg" currencies, since there will not be sufficient gold extractable at the old price to satisfy both the monetary as well as the other demands on gold (which themselves should grow at the same rate as GWP).
Zeev |
