Thursday, January 17, 2013

Three world currencies

The dollar, the Euro, and gold.

"The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project.
Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed.
My guess is that any new Gold Standard will be sui generis, and better for it. Let gold take its place as a third reserve currency, one that cannot be devalued, and one that holds the others to account, but not so dominant that it hitches our collective destinies to the inflationary ups (yes, gold was highly inflationary after the Conquista) and the deflationary downs of global mine supply. That would indeed be a return to a barbarous relic.
A partial Gold Standard – created by the global market, and beholden to nobody – is the best of all worlds. It offers a store of value (though no yield). It acts a balancing force. It is not dominant enough to smother the system.
Let us have three world currencies, a tripod with a golden leg. It might even be stable."
--http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022332/a-new-gold-standard-is-being-born/

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