Most if not all the present problems are due to the reckless borrowing of the
US Govt whose debt runs into horrendous figures. All this is based on the US
perception that the "global market" dare not let the US$ value fall, when in reality
the US$ badly needs a very large devaluatiuon.
If a new "base currency" were to be introduced, and the obvious one is the
Gold Satndard, initially abandoned by the UK before world war II but Sterling
held centre spot until after WWII when we were truely "broke" (remember that
almost everything worth owning in the USA prior to WWII was held mainly by UK and all
this had to be sold to maintain payments to the USA for supplies, in effect WWII
put the USA, till 1940 in recession, back on its pre '29 feet.
Adoption of a new base currency would allow a free fall of the US$ to it's true
value and free up the present constraints. I suggest grams of gold be the base
currency - my "2 grams "worth, Gerald.
I agree completely. I seem to remember we used to have a fixed $AU, that's almost has the same effect as having a global currency. I really can't see why we need to have our exchange rate set by a bunch of high flying cowboy businessmen whose only object is to make themselves a fast buck. I'd love to know how much of our current financial troubles has been caused by short selling.
It's been about 25 years since I read economic theory, so I'm a bit rust but as I recall gold really is the base currency. Any and every attempt to have another base, or not to have any base, is just smoke and mirrors. The situation may look stable during good times but you just have to look at how people flock to gold in times of crisis to see what the real base is.
The base currency was introduced a while back and was called the euro
But the powers that be in world finance arn't about change .
Having a world currecy reserve in just one nations favour isnt a teat you stop
suckling on easily
Looking at crude well its the major commodity that once again is traded in US dollars through I believe two companies Us / uk based.. I read a piece a while back that made a observation that Saddams final nail in his well deserved coffin was that he demanded payment for crude in euros rather than US dollars
(thats been fixed btw back to us $ now))..and that was indeed a weapon of mass destruction .. I believe Iran is rocking the boat also of late http://economictimes.indiatimes.com/...ow/3000162.cms
And lets not forget venezuala .. socialising national resources by whatever whacko
is always going to come down to the money lost by investment even if there principil is paid out to exon or whoever.
"After Hurricane Katrina battered the United States’ Gulf Coast in late 2005, the Chávez administration was the first foreign government to offer aid to the devastated regions. The Bush administration opted to refuse this aid. Later during the winter of 2005, various officials in the Northeastern United States signed an agreement with Venezuela to provide discounted heating oil to low income families.Chávez's socialist ideology and the tensions between the governments of Venezuela and the US have had little impact on economic relations between the two countries. In 2006, the US remained Venezuela's largest trading partner for both oil exports and general imports; bilateral trade expanded 36% during that year[169]"
My and your money in the scheme of the global ecconomy just dosn't matter much
Though it is a handy little cash cow to use to try and fix up the big end of town
while keeping us feeling all warm and fuzzy about it .
One respondent noted that using currency as distinct from gold
has led to trading in equities and allowed a few to benefit in accruing
wealth without producing an end product (other than personal gain)
If we were to revert to gold as the medium of trade, many equities
would return to book value, ie what the Company (represented by the
equitty) is worth in terms of it's tangible (saleable) assets. Today most
are valued not only on their actual assets but (and in many cases principally)
on their percieved profits. I know of at least one manufacturing engineering
tool company in the US that traded at 5 times it's real book value One wonders
what Microsoft and the like are actually worth in therm of tangible assets. If
all Microsoft licencees and software purchases were to stop now it would be
like a pin into a baloon (not a bad adea either !)
The Euro whilst once a good idea is just another currency and does not remove
the need to value things for their material rather than percieved value, which is
at the root of our present problem.
When will the world wake up to the fact that most of us are subsidising
American debt - some trillions of dollars that they can never repay. Gerald.
True Gerald ..that would work !..Maybe the change has got to come from within ? http://www.house.gov/paul/tst/tst2007/tst010107.htm
Most Americans I have met are great observers of there countries rights and wrongs
I don't know a great deal about this guy but he does make some fairly brutal and frank assesments of
political desisions of his own party and countries general direction http://www.ronpaul.com/
Aside a major global shift in money away to cowrie shells ..hey I'm with ya alex .. I
have some rippers in the cupboard somewhere.. that will be worth a squillion when the changeover occurs
I fear we are all buying into more of the same
Sorry, I have to disagree with most of this. Having worked with some very major banks in both the equities and foreign exchange areas I have seen some of what goes on, and why it goes on.
Having a global currency would change nothing, be it based on gold, shells, sand or anything else. If you think about it, why does the currency need to be based on gold? You cant eat it, you cant drink it, you cant sleep on it (comfortably), heck its even a bugger to carry around. What makes Gold special? Might as well base the currency on turnips, at least you can eat them when times are tough(at a pinch). So if it doesnt matter what the currecy is based on, then anything is as good as the next, and in our case it just happens to be the USD. Mostly. Funny enouh for Wool its actually the Assie $ that is the base currency.
Anyway simply having a base currency be it Gold or the USD, does not prevent the USD for falling. As it stands the USD falls quite regularly, you see it in the price of the AUD. 6 Mths back the USD was falling like a stone, and hence the AUD was up around 90c. The difference is that its not so obvious when the USD is falling as you need to know what to look for. There are two things that can make the AUD rise, and that is a change in our economic outlook, ie people investing in AUD because they think we are doing things well, in which case the AUD rises, both against the USD and all other currencies, or a fall in teh USD. This however is different to the USD falling, in which case the AUD will rise, but so will every other currency.
As an example of the above, even though 6mths back the AUD was worth about 90c, it was still worth about 2.5 GBP, or 2EURO. Today its much the same, hence it wasnt anything we were specifically doing well, but rather a change in the USD that changed our value.
So in short if you want the AUD to do well against not only the USD but other currencies, then there needs to be a reason for people to buy it. More people buy it, the more its worth. One reason to buy it is higher interest rates, but as we just got a 1% drop that is no longer the case, another reason is expected growth, or a boom area specific to Australia such as mining. Again none of these are expected. So while the Government / Industry / Regulators etc do nothing to change this, our AUD will be seen to fluctuate in relation to the rise n fall of the USD. But that does not mean it must.
Oh in relation to fixing the AUD. That is a disasterous move, that would simply bankrupt the country. This is what occured both in the UK and here. This is what occurs... the Government fixes the AUD at say $0.5 USD. Australia finds some new super metal for example, only found in Australia (hence one of the reasons for the AUD to rise) and people/investors overseas start buying AUD, its cheap, you get 2 AUD for 1 USD, and the Australian government must supply it. Hence the Australian Government dips into its reserves of cash and sells it off. Soon the reserves are empty. This puts more upward demand on the AUD. What can the Government do? A. Print Money, putting up inflation. or B. Restrict sales of the new metal, putting us into a false economy (ie the Wool market), or C. Float the AUD. This is essentially what occured in both the UK and Australia before they both floated the $.
And yes that is the short version of what occurs...
Sorry fixing the AUD or using a central currency is not a solution.
Sorry, I have to disagree with most of this. Having worked with some very major banks in both the equities and foreign exchange areas I have seen some of what goes on, and why it goes on.
Having a global currency would change nothing, be it based on gold, shells, sand or anything else. If you think about it, why does the currency need to be based on gold? You cant eat it, you cant drink it, you cant sleep on it (comfortably), heck its even a bugger to carry around. What makes Gold special? Might as well base the currency on turnips, at least you can eat them when times are tough(at a pinch). So if it doesnt matter what the currecy is based on, then anything is as good as the next, and in our case it just happens to be the USD. Mostly. Funny enouh for Wool its actually the Assie $ that is the base currency.
Anyway simply having a base currency be it Gold or the USD, does not prevent the USD for falling. As it stands the USD falls quite regularly, you see it in the price of the AUD. 6 Mths back the USD was falling like a stone, and hence the AUD was up around 90c. The difference is that its not so obvious when the USD is falling as you need to know what to look for. There are two things that can make the AUD rise, and that is a change in our economic outlook, ie people investing in AUD because they think we are doing things well, in which case the AUD rises, both against the USD and all other currencies, or a fall in teh USD. This however is different to the USD falling, in which case the AUD will rise, but so will every other currency.
As an example of the above, even though 6mths back the AUD was worth about 90c, it was still worth about 2.5 GBP, or 2EURO. Today its much the same, hence it wasnt anything we were specifically doing well, but rather a change in the USD that changed our value.
So in short if you want the AUD to do well against not only the USD but other currencies, then there needs to be a reason for people to buy it. More people buy it, the more its worth. One reason to buy it is higher interest rates, but as we just got a 1% drop that is no longer the case, another reason is expected growth, or a boom area specific to Australia such as mining. Again none of these are expected. So while the Government / Industry / Regulators etc do nothing to change this, our AUD will be seen to fluctuate in relation to the rise n fall of the USD. But that does not mean it must.
Oh in relation to fixing the AUD. That is a disasterous move, that would simply bankrupt the country. This is what occured both in the UK and here. This is what occurs... the Government fixes the AUD at say $0.5 USD. Australia finds some new super metal for example, only found in Australia (hence one of the reasons for the AUD to rise) and people/investors overseas start buying AUD, its cheap, you get 2 AUD for 1 USD, and the Australian government must supply it. Hence the Australian Government dips into its reserves of cash and sells it off. Soon the reserves are empty. This puts more upward demand on the AUD. What can the Government do? A. Print Money, putting up inflation. or B. Restrict sales of the new metal, putting us into a false economy (ie the Wool market), or C. Float the AUD. This is essentially what occured in both the UK and Australia before they both floated the $.
And yes that is the short version of what occurs...
Sorry fixing the AUD or using a central currency is not a solution.
Without looking to start a bunfight, IMHO that was the "best" economics post we have had concerning any of the recent financial topics posted...as I am someone with an economics background, I appreciate your taking the time to IMHO accurately lay out in basic terms this topic...
Thanks Scott, I appreciate the vote of confidence.
By trade I am a Software Engineer, and spent many years designing and developing the systems that support Foreign Exchange, Equities and the like, so had to have a good understanding of how it worked to make it work...
Though my knowledge is somewhat dated (and my memory is not so good) these days the principles are fairly sound...
What would this lot be worth now "inflation adjusted" if you had never have built em in the 50s, and 60s and put the money into something constructive...Ok it had to be done I guess...
All this gloom and doom. I think its time to inject a lighter note.
Two merchant bankers are talking. One says:
"This financial crisis is worse than my last divorce"
"Why's that?", was the reply.
"Well I've lost half my assets again, but still have my wife!"
