China to pull the plug on the USD, switch to gold

[Squire Allworthy]

In China, I'm told, government regulations prevent moves. China doesn't have a single internal market. Provinces control their own trade and tarrifs, and so it can be easier to move goods into some provinces from abroad, than from the neighbouring province. In Russia poor infrastructure and regional corruption gives a similar effect, but its improving.

That is interesting, never really thought about inter state trade. I was given to understand that the central government were trying to concentrate various types of industry in various locations. A hang over from the mentality of state controlled development plans?

I was thinking that in many of these countries that not enough emphasis was placed on basic infra structure developments and that that impeded movement out from the centres and allows a perpetuation of the high costs. In say Mambai an apartment there can cost say 10,000 dollars a square metre and given the average income in India it makes Ireland's property bubble look modest. Not sure if some of the cost is due to, or despite, the restrictive government control on rentals which may have caused lack of investment in some areas.

ON gold, I keep repeating that in India private ownership of gold is common among the middle class. Collectively I believe they own 3 times the US national reserve! There are similar investment tendencies in parts of the Arab world.

I still don't see why the Chinese would make such a statement, I doubt that it was by accident and I doubt if it was aimed at informing.

[Fr. Hank Tree]

20000 miles what is with your obsession with the gold-standard?

Re-introducing the gold standard would amount to a charter for neo-feudalism. The total wealth in the world would be linked to a finite commodity, just like land in the middle ages. As the population grows and trade expands, the money supply remains stagnant, causing huge deflation. The wealthy become wealthier, hoarding their inherited mountains of cash, giving them huge buying power,which would eventually lead to them living off the wealth alone, whilst the poor become poorer and poorer as they sub-divide their gold amongst their off-spring into smaller and smaller portions. The world would become a cold-house for entrepreneurs and innovation as credit becomes more and more expensive due to the constant deflation.

[20000miles]

Have a think about it.

Nope. Nothing.

What does the price of this:



in terms of this:


have to do with *anything*.

[droghedasouth]

Official gold reserves - Wikipedia, the free encyclopedia

There is something amiss with that information linked DS

The web page quotes the CIA World Factbook 2008 as its source but it could be just some crazy web page.

M basic point is that it would be hard for the Chinese to convert 2 trillion dollars of reserves into gold given the value of all gold ever mined is only about 3 trillion.

[Squire Allworthy]

The relationship is that a lot of people will make money if gold like any other commodity rises in value.

There is a big difference between wishing for a bit of good fortune and taking a blind leap of faith. Consider the possible consequences of a gold standard for currencies.

[seabhcan]

Nope. Nothing.

What does the price of this:



in terms of this:


have to do with *anything*.

The question is, what is money for? How much money should there be? And what value should money have?

Find answers to those questions and you'll see that the gold standard doesn't solve any of our problems, it just moves the power over these questions from government to wealthy individuals.

[20000miles]

20000 miles what is with your obsession with the gold-standard?

Re-introducing the gold standard would amount to a charter for neo-feudalism. The total wealth in the world would be linked to a finite commodity, just like land in the middle ages. As the population grows and trade expands, the money supply remains stagnant, causing huge deflation. The wealthy become wealthier, hoarding their inherited mountains of cash, giving them huge buying power,which would eventually lead to them living off the wealth alone, whilst the poor become poorer and poorer as they sub-divide their gold amongst their off-spring into smaller and smaller portions. The world would become a cold-house for entrepreneurs and innovation as credit becomes more and more expensive due to the constant deflation.

As I may have mentioned before, gold is mined at a rate of 1-2% p.a., which is perfectly acceptable for a growing economy. Plus there's also silver, platinum, copper standards available etc.

I've noticed that you yourself are somewhat opposed to the fiat money regime we have now, however the others here are happy with the system as is. I've heard you advocate for a money that can be infinitely reproduced, but as the past 100 years have shown us, that anyone with a printing press in their shed is going to exploit it no matter what.

That being said the current monetary system facilitates the transfer of wealth from poor to rich. The favoured groups (builders, bankers) who get newly printed money directly from the government are free to spend it when prices are low. When the money reaches those at the bottom, prices have adjusted to account for the new money. So today, the poor get poorer due to the corrupt nature of the regime.

The fact of the matter is, the USA between 1865 and 1913 under a gold standard had some of the most robust growth ever - hardly an entrepreneurial 'cold-house'. All of this was coupled with falling prices.

Also, as I have pointed out elsewhere, there is absolutely nothing wrong with deflation (falling prices, that is), however there is a problem with deflation (contraction of money supply).

[20000miles]

The question is, what is money for? How much money should there be? And what value should money have?

Find answers to those questions and you'll see that the gold standard doesn't solve any of our problems, it just moves the power over these questions from government to wealthy individuals.

One doesn't have to be an economist to see that the 20th century was filled with the biggest monetary follies of all time - hyperinflations, world war I, constant positive inflation since 1971, etc.

I'm sorry for you if you think we should stick with 'the system we have now'. It can only lead to misery.

The question is, what is money for?

Good question. A more simple question we have to answer first is: what is money? Money is simply a fancy name for a commodity that emerges from barter that has the ideal characteristics of a money (durability, homogenity, etc). Soon enough all other goods are traded against this commodity.

Money solves the problem of non-coincidence of wants (if I have a pizza to sell and I want a hamburger, I would have to find someone who has a hamburger and wants a pizza, right?).

Gold and fiat money satisfy this criteria then.

The problem which afflicts us at the moment is that money is not used in this manner today. Imagine this scenario: I am a baker, you are a brewer. I trade my bread for your beer. All's good. Now enter money. I sell my bread for some money. I then go and sell my money for beer.

So both exchanges were something for something.

Now I could stop producing bread and start producing money. I could hand a 20000mile note over to the brewer and he could give me some beer.

This exchange however is a something for nothing exchange.

This is what happens today. Governments and banks create money out of thin air, without producing anything themselves. Sadly the money often goes towards funding wars and special interests.

The answer to the other questions is straightforward:

How much money should there be? And what value should money have

Whatever the free market says it should be.

[youngdan]

This question of a gold backed currency causing an instant deflation is a good example of a ridiculous idea being repeated often enough to give it credibility. The assumption is that the price of gold in present day dollars would stay at say 750 dollars an ounce. Why would anyone think this. Were just dollars backed by gold it would mean a gold price of many thousands of dollars an ounce.

Why this is a mystery is beyond me as Roosevelt almost doubled the price of gold overnight.

DS. Those figures must represent gold held in private hands and bank reserves in these countries. Then roughly the total comes to the estimated gold in existance of 145000 tonnes. The US puts a figure of 42 dollars an ounce for the gold it holds so if this figure was used then the totals would be skewed as well. Were the Chinese to try to buy gold with even 200 billion it would drive the price to the moon.