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To: Don Lloyd who wrote (75162)	3/4/2001 7:02:06 AM
From: KyrosL	Read Replies (1) \| Respond to of 436258

What happens when somebody decides to convert his gold backed currency to physical gold? France did that with the dollar and it brought about the demise of the gold standard.

To: Don Lloyd who wrote (75162)	3/4/2001 8:48:26 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 436258

What you are therefore suggesting is a declining rate of backing of currencies with gold in time, the market will sniff this ahead of time and increase the prices of gold to match that shortage. You cannot get away from it, if you tie currencies to a single physical part of economic activity, that economic activity growth will dictate the growth of the rest of the economy, and if this physical entity (gold) has economic uses outside of its monetary use, its growth will have to be twice that of the GWP to have an inflationless and growing GWP. And what is worst, you are assuming that new gold can be found and extracted at a constant price at the just right amount to promote stability, but the fact is that we go through cycles. In the last twenty years the technology of extracting gold has actually gone down reducing the cost of extracting gold (maybe that is why POG is so low, it is relatively abundant, and if the POG goes above $300/ounce, many other reserves become exploitable). By tying the world money to a single commodity, you will bring on that money the same instabilities that that specific commodity "enjoys" or "suffer from".