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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (178626)	7/10/2002 12:22:42 AM
From: B.REVERE	Read Replies (1) \| Respond to of 436258

Give me monnnnnnnnney! That's what I want. JUST CUT-UP A NEWSPAPER AND CALL IT MONEY Several weeks ago the Argentine Government floated the idea of keeping the Peso pegged to the US$ while introducing a second local currency, to be called the Argentino, that would not be pegged to anything and would therefore have no objective limitations on its supply. The Argentine people were understandably not impressed with the potential introduction of this new free-floating currency (a currency that could be inflated ad infinitum). An Argentine housewife neatly encapsulated the prevailing sentiment towards the proposed new currency when she was quoted at the time as saying something along the lines of "they may as well just cut a newspaper into pieces and call it money". She was, of course, correct in this assessment, but what she and the vast majority of people didn't understand was that the "Argentino" would have been no different, in most respects, to the US$ or any other fiat currency. The pieces of paper spewing out of the US Federal Reserve's printing presses have no more intrinsic value than pieces of old newspaper. The only difference between the Federal Reserve's paper and the Argentino would have been that the Federal Reserve has far more credibility than the Argentine central bank. Any paper money, or electronic money, is fine until people start to lose confidence in the money. It is not really money, after all, but it functions as such because governments tell us that we must accept it in exchange for our goods and services. What governments can't tell us, at least not without severely distorting the supply of goods and services, is how much money should be exchanged during each transaction. Rising prices are always one of the first signs that confidence in the currency-of-the-realm is beginning to wane and the gold price is typically one of the first prices to rise. The gold price, in terms of every major currency except the US$, has been trending higher for more than 2 years. In terms of the US$ it has been trending higher for almost 1 year. Is the performance of the gold price over the past few years an early warning sign that confidence in the fiat currencies of the world has peaked and reversed lower? It sure looks that way to us.