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

To: Step1 who wrote (445)	8/21/1998 10:16:00 AM
From: Mike McFarland	Read Replies (1) \| Respond to of 3536

re "anchoring" a currency to make it more stable... What kind of commodities are people talking about here? Maybe the ones that tend not to deflate, so I guess gold, oil, grains and computer chips are out. How about value added manufactured goods--autos and aircraft? Nah, that leaves some countries priced out. Real estate--what does an acre of cotton go for in Pakistan...in Texas, bet that doesn't work. Well how about something that most countries have quite a lot of, debt, tie the currencies to the ability to service that debt? Or is that the problem? It is interesting that this topic is so bewildering to the average spectator like myself. But it is not surprising: A person can go through school without ever having taken an economics course. Why, to me, good economics means spending no more than you take in. Sigh, hope this post wasn't completely insipid. It is certainly entertaining to watch these threads lately tho. eom

To: Step1 who wrote (445)	8/21/1998 11:42:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

There is often a reference made to "anchoring" a currency to make it more stable. WHile i think i understand how it works with gold, what would it be in the case of " a basket of commodities"? What kind of commodities are people talking about here? Metals? I am probably not the best person to ask this to. I think these types of proposals are horribly ignorant. Am I being too harsh? As I understand it, if you were to come up with a basket of commodities to tie your currency to it would work differently than the old gold standard where you could exchange a dollar for a fixed quantity of gold. In this instance if the basket of commodities denominated in your currency started to rise the central bank would step in restrict the supply of money in order to combat price inflation. If the basket of commodities fell in price then the central bank would conduct stimulative monetary policy. What a terrible way to conduct monetary policy! The goal is to have stable prices and a stable currency. The result is to put your monetary policy at the whims of the weather, deposit discoveries and a host of unrelated factors. -Robert