John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (4206)	6/28/2001 8:58:52 PM
From: Hawkmoon	Read Replies (1) of 33421

And that's what really galls me about Kemp and the love of gold that he and others seem to have. The strength of a currency should reflect the economic policies and economic strength of the nation issuing it. It should reflect the confidence that all investors have in the fairness and transparency of its financial system and that nation's political stability. Using gold as a crutch to back one's currency creates an ability to avoid dealing with those issues that are impacting your economic health. Having more gold to back up one's currency might lead to economic and fiscal arrogance. Whether it's Fiat currency, or instant wealth mined out of Mother Earth, money is "printed". Think of how much inflation (but economic expansion as well) resulted from the California gold rush? Some guy finds gold and suddenly we see the monetary able to expand solely based upon that discovery in an undisciplined manner. The Conquistadors conquered the Inca and ship their gold and silver back home and suddenly all of Europe is awash in the metals and under heavy inflationary pressures (and Spain is left an economic backwater for several hundred years). Fiat currency management requires discipline and the ability to preserve the confidence of international investors. Lose their confidence and they capital will fly out of your currency into one that represents the values they desire. Fail to reward capital investment, or over-regulate corporations to the point where they are uncompetitive and your currency suffers. A gold standard is just plain silly,imo. It's like saying everytime a nation wins the global gold lottery, they can expand their economy. Failing that, they can steal it from their neighbors. And those without natural deposits of the metal have to expend substantial economic resources obtaining and maintaining a hoard of gold to back up their currencies. Hawk

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