New Gold Standard Coming?

By Patrick A. Heller, Numismatic News November 09, 2010

In an essay appearing in the Nov. 7, 2010, issue of London’s Financial Times, World Bank president Robert Zoellick advocated a new global monetary system that might include gold.

Zoellick urged support for a system that “is likely to need to involve the dollar, the euro, the yen, the pound, and the renminbi (yuan) that moves toward internationalization and then an open capital account. The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

Zoellick’s essay appeared in advance of the upcoming G-20 meeting coming up later this week in South Korea. I’m sure the timing is not a coincidence.

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He went on to write, “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”

The U.S. has presented its posture for the upcoming G-20 meeting. It wants countries to commit to current account targets, where trade surpluses and deficits will be limited to a specific percentage (4 percent has been suggested) of each country’s Gross Domestic Product. If such a policy were now in effect, China would be forced to either sharply increase the value of the yuan or curb exports.

German finance minister Wolfgang Schauble has described the current U.S. economic model as being in a “deep crisis.” He criticized last week’s decision for the Federal Reserve to buy Treasury debt to increase the U.S. money supply by $600 billion when he said, “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their (central bank’s) printing press.”

The U.S. government’s position was further attacked Monday when Chinese Vice Finance Minister Zhu Guangyao said, “As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets.”

Also on Monday, a leading Chinese newspaper warned that the U.S. government’s actions last week were a form of indirect currency manipulation that could lead to a new round of currency wars and even global economic collapse.

On a different front, one result of the Republicans winning control of the House of Representatives last week is that hard money advocate Rep. Ron Paul, R-Texas, the ranking Republican on the House Subcommittee for Domestic Monetary Policy and Technology, is likely to become the chairman of the subcommittee. In anticipation, Paul stated in an interview last Thursday, “I will approach that committee like no one has ever approached it because we are living in times like no one has ever seen.” He then said that his first priority will be to open up the books of the Federal Reserve to public scrutiny. “We need to create transparency there – to see what it is they are buying and lending, and who it is they are dealing with,” he said.

Taken together, it is becoming obvious that foreigners and Americans alike can see that the U.S. dollar will continue a major decline in value, if not outright failure of the currency. The dollar is not alone in this predicament. The price of gold has come back to set new record highs in several other currencies and is near the record high as measured in euros.

To me, it is obvious that all currencies are due to fall significantly in value, whether from the actions of a currency’s own government to knock it down or from a desire by the public and central banks to avoid holding currencies because of the potential risk of loss in the future. It is no longer a joke to suggest that many currencies will fail.

On the other hand, gold is not a currency, it is money. It will not fail.

Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at CoinUpdate (http://www.coinupdate.com). His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

Viewpoint: Economy Sets Monetary Value

By Tom Altvater, Numismatic News July 09, 2010

This article was originally printed in Numismatic News.
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Folks, let it rest. Gold is no longer money.

It is no longer the basis for money, except in the minds of a few. There is not enough gold in the world to go back to the gold standard. Let’s also drop the reference to fiat money, money that is backed by decree. Fiat should be on the hood of a car, but not in reference to the dollar.

The strength of the economy determines the value of the monetary system. That system is tightly controlled in the United States by the Federal Reserve system using regional banks to provide the stability. The ability to quickly infuse funds into the economy when called for is a strength of the Federal Reserve to control deflation or inflation.

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A gold backed monetary system would not be able to handle the major swings of money supply that we have recently witnessed as the gold supply simply cannot be controlled since it is a commodity dependent on availability and the technology to produce it.

Let’s assume gold becomes more readily available because of some future mining technology. It would make it as common as aluminum is today, which was also extremely rare a little over a 100 years ago. This would create an oversupply and its value would drop. This would also create hyperinflation resulting in increases in costs of all goods and services as happened in the Carter years.

Another downside is that most of the gold in the world is owned by foreigners. Let’s assume we are on the gold standard and China one day wanted to cash in all the debt the U.S. owes in gold. We could empty all our bullion deposits and have very little left over (if any). I’m old enough to remember that prior to ending the gold standard France was demanding to be paid in gold. We have very few friends in the world that would maintain a stable gold supply just to keep the dollar on an even keel.

Do I own gold? Sure do; I have a gold Frank Robinson coin that I treasure and a couple of other commemoratives. It’s a great investment if I had the foresight to purchase lots of it several years ago. It’s a good investment only when its price increases, but not as good as stocks that pay regular dividends.

Here are my $2 of opinion and now I will take my fiat money and go spend it on a new coin set to help out the U.S. economy.

Tom Altvater is a numismatist. Viewpoint is a forum for the expression of opinion on a variety of numismatic subjects. The opinions expressed here are not necessarily those of Numismatic News. To have your opinion considered for Viewpoint, write to David C. Harper, Editor, Numismatic News, 700 E. State St., Iola, WI 54990. Send e-mail to david.harper@fwmedia.com.

By Jim Sinclair

Thoughts For The Day:

Even our school of economics and investors have become habituated to the social, political and financial calamity at hand. The outlaw financial leadership of the entire Western world has sold out our heritage on both sides of the pond.

Governments, states, municipalities, towns and hamlets are broke. Insurance companies, banks and major investment houses are valuing their assets from worth-less to worth-full.

The stampede to the bonus stock holder’s asset give away is clearly because this is the last dip at the well for a decade.

All paper money in the West is the common shares of the bankrupts.

Asia and Africa are rising and their ascension cannot be stopped. They have long term business plans and are working those plans to protect themselves from the multitudinous sins of the West and control world commerce.

Stand back for a moment, without emotion, and look at where we are.

Protect yourselves because no one else is going to do it.

Cling to money that has no liability attached to it, the only honest money, Gold.