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To: Zeev Hed who wrote (75165)	3/4/2001 9:53:02 AM
From: brightness00	Read Replies (2) \| Respond to of 436258

The very cyclical nature of the cost of gold extraction allows the cyclical change in interest rate to accommodate cyclical technology growth. Technology advancement comes in waves, affecting all sectors of the economy. Technology advancement is deflationary (duh! it's another way of saying productivity increase after all); not just deflationary to gold production, but also to the entire economy. During periods of rapid technology advancement, there will be a downward price pressure on gold, that's precisely when relatively easy money policy can be adopted to accommodate technology growth and simultaneously be free of inflation fear because of the deflationary effect of technology growth. One may think that a basket of commodities would theoretically work even better than gold alone to serve as benchmark for controlling monetary growth. However, such baskets will invariably depend on periodic subjective re-balancing to account for the substitutional effect, lest there be undue monetary contraction thanks to overstated inflation (like we do with CPI and PPI in the past few decades). Gold is a good benchmark because it almost has no practical use; therefore there is little fear of substitutional effect. Just my couple cents, well, couple milligrams of gold ;-) Jim

To: Zeev Hed who wrote (75165)	3/4/2001 11:09:50 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 436258

Zeev - ...What you are therefore suggesting is a declining rate of backing of currencies with gold in time... Not at all. My suggestions are based on NO government- backed currencies whatsoever, although there would be nothing to prevent my next door neighbor from creating his own private currency and trying to compete. ...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". I suspect that most non-government officials would prefer to choose the 'suffering' of a commodity gold standard to that of the political fiat standard. What has to be realized that the idea of a constant store of value is a complete myth, impossible to achieve or even to measure. The rate of exchange between any two economic goods or services, including all possible forms of money, is entirely due to the variable subjective valuations of all individuals and is determined on an ever-changing margin. Regards, Don