To: Crimson Ghost who wrote (63955 ) 2/18/2001 11:39:48 AM From: Zeev Hed Respond to George, in that analysis I gave few years back and repeated on the MDD thread few months back, I stated that tying the world's monetary system to gold can either put the economy in a Sodom bed (stunt its growth), or doom the world to permanent inflation. It is really very simple, gold production would have to grow at twice the worldwide GDP equivalent growth (GWP?), half of that to account for matching gold consumption increases to real economic growth, the second half to put gold away as a monetary reserve that must grow (optimally) at the same rate as GWP. That will not be feasible unless you constantly pay more for gold (exploitable reserves are finite and they can grow mostly as the cost of extraction is allowed to grow). There are many other factors that would cause destabilization when you tie the world economy to a commodity which yearly production (at $250/ounce, about 20 Billions right now) is barely .1% of GWP (more than $20 trillions, but that is a wild guess), particularly in view of the fact that a lot of this production (plus scrap) is being used right now in non monetary applications (hoarding and new coinage are the only monetary applications currently, I believe). Any variation in that miniscule part of the GWP will cause either contraction of economies, or drastically increase the price of the yellow, and thus inflation.
