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Saturday, October 19, 2013
China and Gold
China and Gold, by Alasdair Macleod
Rather than some conspiracy to destroy America via the dollar, one should see China's actions as an act of rational self-interest. China was very happy to accumulate over a trillion US dollar reserves, but now it rightly sees that Quantitative Easing to Infinity means the ultimate destruction of the dollar. Alasdair Macleod explains China's actions in the link above.
There is still time for the US and the West to regain financial supremacy by tying their currencies to their still huge gold reserves. The West's advantage is the rule of law; i.e., that one may actually demand specie for a gold-backed dollar or deutschemark (should Germany wake up and act rationally to protect itself from the European inflationists). One would never be certain that such a demand to the Bank of China or the Russian central bank would be honored. Without confidence in its redeemability, any gold-backed currency is little better than a fiat currency.
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Recently an article was posted stating that,
ReplyDelete“Both the U.S. dollar and euro are doomed.
Why? Because in addition to being in slow-growth economies, saddled with debilitating debts, they’re the victims of an enormous increase in money supply.
The obvious result is serious inflation and the devaluation of both currencies in the coming years.
Herein three currencies are specified for increasing valuation:
http://streetreport.net/markets/the-three-super-currencies-of-tomorrow/
A contemporary economist advocating free markets replies:
“China and Gold, by Alasdair Macleod
Posted @ http://patrickbarron.blogspot.com/
“Rather than some conspiracy to destroy America via the dollar, one should see China's actions as an act of rational self-interest. China was very happy to accumulate over a trillion US dollar reserves, but now it rightly sees that Quantitative Easing to Infinity means the ultimate destruction of the dollar. Alasdair Macleod explains China's actions in the link above.”
“There is still time for the US and the West to regain financial supremacy by tying their currencies to their still huge gold reserves. The West's advantage is the rule of law; i.e., that one may actually demand specie for a gold-backed dollar or deutschemark (should Germany wake up and act rationally to protect itself from the European inflationist). One would never be certain that such a demand to the Bank of China or the Russian central bank would be honored. Without confidence in its redeem ability, any gold-backed currency is little better than a fiat currency.”
What Macleod fails to account for is what in colloquial English we refer to as honesty and fairness. When a country intentionally undervalues its currency, as China does, that is not a true free market. Rather it is using others free markets furtively and deceptively for advantage. Such a game can never be called a free market. It is called rigging or crookedness.
This is not to say or imply that crookedness has never been used under capitalism to attain competitive advantage rather it is merely states what is called free markets here denies some current truths about manipulation of currencies.
The best example is the conniving George Soros who has manipulated currencies. The results may eventually demonstrate a truer value for currencies than the markets.
All the above does not account for wealth transfers under governments that do not compensate the creators or holders of current wealth.
Where is the discussion of free market economist on honesty?