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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Maurice Winn who wrote (74138)	11/8/2010 2:29:16 PM
From: Maurice Winn	1 Recommendation of 74559

A return of the Gold Standard has now been brought into polite conversation but sensible people criticize the idea: <A German government official, speaking on condition of anonymity, said Zoellick was correct in worrying that currency values were becoming too vulnerable to the whims of governments, but added that the idea of a new gold standard was impractical. "The diagnosis that Zoellick is making is correct: that monetary policy is becoming overly politicized," the official said. "The system, as it is, is not functioning well." But he added that it would not be practical to use modern monetary policy tools in a system that was "based on a commodity whose availability is dictated by natural conditions." Analysts said it would be very difficult to introduce any new gold standard partly because the global supply of gold was limited and might not be able to keep pace with the expansion of global trade and money supply. > Of course a gold standard can be used instead of government-run fiat currencies. Gold would need to go to $15,000 per ounce [in today's US$ - I estimated US$10,000 an ounce about 6 years ago when we were discussing it 'we' being TJ and me]. That's because 7 billion people would each need a little stash of the stuff so that they could go shopping and there isn't much gold around when shared among 7 billion people. A gold standard would turn the economic system into an Easter Island type quarrying culture in which people put huge effort into digging holes in the ground to erect Moai. With gold at $15,000 an ounce, it would make more sense to dig for gold in Angola than to dig holes to lay silica fibres. The world's production of actually useful things would plunge as hordes hunted gold in them thar hills and filtered it out of the oceans and sucked sediment off the ocean floor. Nuclear physicists would spend their days figuring out how to move protons out of mercury and lead. If they mistakenly took out two, they'd get platinum which is no bad thing. Maybe firing single proton anti-matter into lead would do the trick. The super expensive super collider in Switzerland is probably really intended to go into gold production. Let's face it, spending that much money to watch patterns of particles sent flying when a hadron crashes into something isn't all that much fun, even if the God particle makes an appearance. Producing gold would be more profitable. Mqurice

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