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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Donald E. Aken who wrote (82)	5/10/1998 12:45:00 PM
From: N	Respond to of 3536

Don, Yours is an interesting question. Some recent academic work on commdity money specifies a commodity money system must have these three elements: 1. the metal, e.g. gold 2. 'free' minting, meaning when you bring in your jewelry, they must coin it for you 3. there must be legal laws of tender present that specify what you can do with the coins if you discharge a debt. Rereading the BIS statement to see how/if these elements are present, I would guess the following line indicates no gold standard e.g. effective commodity money system exists at present for the member countries: "The BIS employs the gold franc solely as a unit of account for balance-sheet purposes." I too second others: this is a great thread. Nancy Hammond

To: Donald E. Aken who wrote (82)	5/11/1998 8:47:00 AM
From: Chip McVickar	Respond to of 3536

Hello Donald In the most simplistic answer to the question...one might say there is far to much paper floating around to ever be redeamed for a hard currency. Also....in fact an agreement exists amongest these countries to not demand hard currency exchanges. So having gold reserves, is I asume a little like window dressing for a sale that will never take place. The European and Britain's currency crisis of Sept 92 would be a perfect example - they all attempted to salvage currencies through interest rate increases and market purchases of there own currencies. But no one expected silver to leave the Bank of Englands vaults or the lira to tap the vatican for reserves of gold. These attemps were followed/caused(?) very quickly by speculation on the currencies of Italy, Sweden and others. Eventually only Germany and Netherlands escaped with their currencies intact. Everyone else succombed to devaluation. The premise exists that everyone has a fundamental right and has the willingness to permit all participants to take advantage of an open global trading system. Governments would remove trade barriers and refrain from erecting new ones. The guiding principle was to provide opportunity and a reinforcing message was that competence counts.....universal rules of compliance was the language of international business and global commerce. By not being tied to a hard asset more countries can particpate on the basis of the strength of their economies. Not on the gold wealth of central banks and national 'elite'. What happened was that currencies became a sort-of weapon of self-seeking countries and individual speculators. The resolution began when England started to fine tune it's economy by fiscal restraints, divesting public progams and industries and breaking down trade-blocks. Other countries had to follow through and comply with the arrangements established under international free trade. So in fact the market place self-aligned its' percieved imbalances in currency valuations. This has become the great cry of free market enthusiasts. There are many who believe the system is unstable and open to further misuse and will produce chaos again....from self-seeking war like interests not yet noticable. Governing boards and regulators are suppose to bring resolution to these threats....but these work as long as everyone agrees. Derivatives and electronic money and any breakdown of these systems from year 2000 problems or other 'gliches' are most often brought up in this regard. Much is at stake....and the ECU is the farthest extension of this very political process. Greece is another big question here. Remember that europe has been dealing with itself for centuries under close quarters....Asia is a fairly new arrangement of economic powerhouses and they do not get along. The latest round of nepotism and "Kleptocarcy" is going to test the resolve of international cooperation. I believe that Japan's financial problems are just emerging...even after 8 years of unwinding and they have yet to stem the red ink or break the negitive psychological forces prevading their society. We should see a deep-recession emerage and perhaps some countries like Indonessia will actually break-up. Henry has more first hand knowledge of these issues and you should seek his thoughts. Judy Shelton's book "Money Meltdown" is an excellant historical and relatively current book. Hope this adds to the conversation. Chip