Hi Ron,
A country's "money" doesn't have to be fully convertible. A partial, though meaningful, conversion would put a floor under, and instill confidence in, your typical currency. A country could also announce full convertibility without owning a single ounce of gold, as long as it was willing and able to acquire sufficient amounts of gold, if and when demanded. And, yes, as you observe, any move to even a partial, convertible, semi-global gold standard would likely have a profound, positive effect on the POG.
However, any statement of convertibility requires the well-earned faith of the system's participants that, even under times of stress, the convertibility will indeed hold. So, announcing convertibility, while being the first good step, additionally requires, over time, a series of tests and probes to install the necessary confidence in the monetary system such that, if one so desired, one could, in fact, exchange one's wealth, freely, and without limit, into an agreed (albeit somewhat inconvenient) store of value.
You see, it's not that much different than the confidence required in the fiat currency system, but with the critical difference that there is a "golden light" at the end of the tunnel, if and when needed -- and it's that discipline that would make all the difference, vis-a-vis today's monetary circus.
It's not so much that any one country would have to mine more gold to expand its money supply (more gold is being mined all the time), it's that a country must be in a position -- economically, fiscally, and politically -- to honor its convertibility, on demand. Which, unfortunately, is a skill and duty long lost on the central bankers and governments of the world today. Add the fact that current economic underpinnings are laughable, and, indeed, it will be a long, hard (though eventually rewarding and stabilizing) journey from the here and now to any kind of gold standard.
Many central banks still (strangely enough!) hold gold -- maybe 30% or the world's total above ground supply. They KNOW the piper will be paid, someday, and some fallback position is required. Will we simply have "noises" about a gold standard, which quickly pass on the heels of the next cyclic upturn, a partial, long-term gold standard, or even full convertibility? Who knows.
And gold, itself, is no big deal -- it is simply a man-made tool, not unlike so many other man-made tools. It serves as an objective, undisputed reference point. If we are to safely set upon a any course of future growth, we need a reliable, dependable "north star". Gold has already been selected for this purpose, through trial and error, over many years, civilizations, and human experiences, from among all other candidates.
We have been in an extended period of much monetary experimentation, and experimentation, to a point, is a very good thing, for much is learned -- both what works and what, ultimately, does not. However, the experiment has now gotten quite out of hand. It's time we went back to the drawing board!
Will that drawing board be made, yet again, of cardboard and paper? Or will it sit on silver legs with a golden top? I'm thinking it probably doesn't really matter, as the governments and banks will screw us all anyway, but they'd have a somewhat harder time doing it... |
