The Best of the Week
Last week provided little in the way of new or interesting information or events. Well, the long bond finally had a more significant drop in price at the end of the week, putting it close to a price that might entice additional buying. And gold's price appeared to be ready to rest or slip a bit after a hefty rise since January. Even precious metals mining shares appeared to be settling into a leveling of their dramatic rise so far this year - although I wouldn't say they're quite "attractive" yet.
But when all was said and done, nothing really significant bubbled up to the surface that might indicate what the Fed and the government were up to after those announced-but-secret meetings we noted last week. However, in the midst of this hum-drum, Lewis Lehrman and John Mueller posted a most interesting commentary on Monday worthy of our consideration. Addressing a subject much deserving of attention, but rarely entertained, these two gents remind us that our monetary system needs reforming.
OK, so that's not news, but if you take the trouble to read the whole thing, you'll find an important connection between right monetary reform and free trade. Why this needs to be recognized becomes clear when we consider how much traction Trump's campaign has garnered by pointing out how America has suffered from our current version of "free trade." The claim is that free trade has caused the loss of good jobs and the deterioration of quality of life that ignites the passions of many Trump supporters. Lehrman and Mueller, on the other hand dispute this. They attempt to demonstrate that what is called "free trade" is no such thing. Acknowledging that the practice of "neo-mercantilism" puts American workers at a distinct disadvantage, they nevertheless disagree that the answer is imposing the kinds of tariffs on imported goods proposed by Trump. So what's the solution? It will be found in stabilizing the current system of "floating" exchange rates.
But when all was said and done, nothing really significant bubbled up to the surface that might indicate what the Fed and the government were up to after those announced-but-secret meetings we noted last week. However, in the midst of this hum-drum, Lewis Lehrman and John Mueller posted a most interesting commentary on Monday worthy of our consideration. Addressing a subject much deserving of attention, but rarely entertained, these two gents remind us that our monetary system needs reforming.
OK, so that's not news, but if you take the trouble to read the whole thing, you'll find an important connection between right monetary reform and free trade. Why this needs to be recognized becomes clear when we consider how much traction Trump's campaign has garnered by pointing out how America has suffered from our current version of "free trade." The claim is that free trade has caused the loss of good jobs and the deterioration of quality of life that ignites the passions of many Trump supporters. Lehrman and Mueller, on the other hand dispute this. They attempt to demonstrate that what is called "free trade" is no such thing. Acknowledging that the practice of "neo-mercantilism" puts American workers at a distinct disadvantage, they nevertheless disagree that the answer is imposing the kinds of tariffs on imported goods proposed by Trump. So what's the solution? It will be found in stabilizing the current system of "floating" exchange rates.
The solution is to establish a level trade playing field with a system of stable exchange rates among the nations of the G-20, or at least the G-7, to which emerging countries will conform. Such a solution would require the next president to bring together the major world leaders to establish stable exchange rates to avoid trade and currency wars that inevitably lead to protectionism and sometimes to real wars. This international monetary solution of stable exchange rates would eliminate the burden and privilege of the dollar’s reserve-currency role.So the question then become, just how do you stabilize exchange rates?
...the history of the past three centuries suggests that stable exchange rates, resulting from adoption of currencies mutually convertible to gold at statutory fixed parities, are the least imperfect solution to avoid currency and trade wars.I highly recommend the article. I also highly recommend you become more familiar with our monetary system, how it impacts trade, and the use of gold in those older systems where gold was a stable measure to compare the value of various national currencies. Such systems fostered the greatest increase and expansion of wealth, most recently in the 19th and early 20th centuries. Contrast this with today's increasing polarization between haves and have-nots. We likely won't see a rectification of that unbalanced trend without some role for gold in the international monetary system.
Comments