gold cover, not gold convertible (that is difference)
suppose 10% cover enforced
the USGovt must then maintain a balance of $1 trillion in gold reserves in order to offset $10 trillion in money supply
as the money supply rises by X amount, the gold treasure must compensate with 10% times X in new additions
this makes the USGovt a steady buyer of gold
as the trade gap shows Y amount in a given year, our foreign creditors thus obtain a claim of 10% in gold
but this addresses the same demand side issue
you address the demand, which might not apply
I believe the concept addresses collateral supply
that is my understand, but I am a babe in the woods here
it is all about restoring confidence via collateral in hard asset reserves
I also am unsure about the demand side, which is far more relevant to large exporters like China and Japan
they are free to bypass the entire issue by converting surpluses into gold
or to use a portion for building capex, with rest set in gold
which would still encourage the USGovt to act responsibly, since the cost of gold would rise for new required additions
as long as the USGovt insisted on a Keynesian Monetarist insane policy, we would see endless gold purchases
this is what I expect to see
Gold Cover Clause, continued USGovt insanity, and a resultant endless rise in gold in order to promote stability in the world financial system
without the anchor of a gold cover clause, no stability, a run on the dollar, economic chaos
free release in gold is the necessity here
/ jim |
