A New Gold Standard?
Ambrose Evans-Pritchard believes a new gold standard has been established. It's not an official thing; it's simple de facto.
Evans-Pritchard stands as one of the few intelligent and thoughtful financial journalists in the world. While I don't always agree with him, I respect his abilities. He seems serious and honest - virtually unknown characteristics of most journalists today, never mind the complete lack of intelligence and understanding in much of financial journalism.
You should read this article, as it outlines the how and why gold has now steadily taken its place as a monetary metal. You should also note the following: 1) For the first time in half a century, central banks are buying gold; 2) The most active of the buyers are those of Asia and the commodity bloc. Notice the absence of the U.S., Europe - the two areas of the world whose currencies many believe (maybe believed?) are the strongest and most desirable to hold. While it's still true that these two currencies still comprise the largest holdings of foreign reserves held by central banks, the trend has changed. Evans-Pritchard explains why:
And so gold begins to take its place as a desirable form of money once again, a place it has held throughout monetary history, with the exception of the previous century, one marked by a dangerous experiment in currencies created without limit by governments and their central banks - what are commonly referred to as "fiat" currencies.
So with the "big two" currencies suspect, what would Evans-Pritchard like to see happen?
I do question the author's statements about the inherent inflationary and deflationary dangers presented by a gold standard. However, since his reference is to the period between WWI and WWII, he does have a point, as this period saw a failed attempt to return to the gold standard of the 19th century. I don't think, however, that gold itself was the cause of the problems to which he refers; rather, it was the policies of the governments and central banks at the time.
But let's not split hairs for the moment. Do yourself a favor and read the whole article by clicking HERE.
Evans-Pritchard stands as one of the few intelligent and thoughtful financial journalists in the world. While I don't always agree with him, I respect his abilities. He seems serious and honest - virtually unknown characteristics of most journalists today, never mind the complete lack of intelligence and understanding in much of financial journalism.
You should read this article, as it outlines the how and why gold has now steadily taken its place as a monetary metal. You should also note the following: 1) For the first time in half a century, central banks are buying gold; 2) The most active of the buyers are those of Asia and the commodity bloc. Notice the absence of the U.S., Europe - the two areas of the world whose currencies many believe (maybe believed?) are the strongest and most desirable to hold. While it's still true that these two currencies still comprise the largest holdings of foreign reserves held by central banks, the trend has changed. Evans-Pritchard explains why:
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.
And so gold begins to take its place as a desirable form of money once again, a place it has held throughout monetary history, with the exception of the previous century, one marked by a dangerous experiment in currencies created without limit by governments and their central banks - what are commonly referred to as "fiat" currencies.
So with the "big two" currencies suspect, what would Evans-Pritchard like to see happen?
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.
I do question the author's statements about the inherent inflationary and deflationary dangers presented by a gold standard. However, since his reference is to the period between WWI and WWII, he does have a point, as this period saw a failed attempt to return to the gold standard of the 19th century. I don't think, however, that gold itself was the cause of the problems to which he refers; rather, it was the policies of the governments and central banks at the time.
But let's not split hairs for the moment. Do yourself a favor and read the whole article by clicking HERE.
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