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

To: Jerry in Omaha who wrote (323)	7/2/1998 9:53:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 3536

Jerard, My first response is laughter. I read through that press release and my second response was even more laughter. Very impressive that they have gotten the support of the Government of Kelantan (A state in the NE of Malaysia). This appears to be a quasi religous, xenophobic group who is associated their economies difficulties with Western speculators. I would suggest they look instead towards the mismanagement of their own political leaders. But I'll put aside my tremendous cynicism regarding this for a moment and make a few comments. This group appears to not be related to a specific government. How are they going to gain Islamic governments acceptance and use of this alternative currency? In order to create a pan-national currency the nations involved will have to cede a tremendous about of political and economic authority to a central authority (something Europe is about to learn). Are Pakistan and Iraq going to cede economic and political authority to Iranians? Are the gulf states going to cede power to Iraq? I do not believe any but a very limited number of Islamic states will be willing to give up political and economic power to such an entity. Part of the news release reads as if the idea will be to establish this as an alternative currency and not actually replace existing currencies thereby avoiding the difficulties above. Well that is not going to happen. Many of the Islamic nations are tightly controlled economies with currency restrictions. They are unlikely to allow their own citizens to use a competing currency that would limit their own political power. Also if the Islamic Mint does not become associated with a specific government or group of governments then it will be little more than a private bank issuing paper reportedly backed by gold deposits. Some people may be interested in holding these but I seriously doubt it would find wide spread acceptance as a medium of exchange. Also for what it is worth I do not believe a gold standard makes any sense. I'll post a longer response on the my reasons for distrusting a gold standard at some future point. Henry