Tough choice eh…..well not for jewelry lovers. The gold bugs have been enjoying the ride up in the price of gold as well as making fun of Gordon Brown who unloaded a huge brick of the UK gold reserves back in 2001 much to the chagrin of UK taxpayers.
But with the $ swift decline into obscurity the fans of something more solid than the US Treasurer’s signature on a piece of paper are clamoring fro the return of the Gold Standard as a way of preserving the value of paper and controlling the impulse of bankers to keep printing the stuff.
Well yes that does seem to be a problem. I’ve touched on this before when looking at how the Bank of England experienced several runs just after it was formed. Why? Because they printed way more paper than they had in reserves of gold. So gold or no gold, there is nothing to stop authorities or private banks printing paper or more accurately filling up spreadsheets with lots of numbers.
I’m ambivalent on this gold business. Storage issues, never mind the horrendous process of digging the stuff out of the ground, present problems as do the ability to carry it safely but really its a confidence thing.
Readers of this blog should hopefully know by now that money is an artificial construct. We can make it anyway we like. It’s created into existence in some form in order that we can exchange goods, services and labour in an efficient manner.
It is subject to the laws of supply and demand like any other product or service.
William Rees-Mogg makes some interesting points about it here but the reality is still the same gold or no gold. We must control the supply of money. 1:1 exchange for gold is a way to do that but its so last century. Surely we can come up with a smarter way of doing it.
My favoured approach is for a central monetary authority to issue interest free new money into the system directly. that supply of money (the only supply) could be controlled on an annual basis responding to set limits, constraints and changes in demand, population etc.
Goodbye interest, goodbye inflation and goodbye financial markets as we know them.
Gold bugs or not, we have to do something about the current system before it blows up and makes the 1930s depression look like an afternoon tea party.