Re: (OPE-L) recent references on 'problem' of money commodity?

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Nov 18 2004 - 23:22:00 EST

At 9:54 PM +0000 11/18/04, Paul Cockshott wrote:
>  What would be the implications for the US governments budget
>deficit of a re-adoption of the gold standard by the Federal

I have been arguing that the Federal Reserve has adopted for close to
two decades a modified gold standard. This has been, as the kids say
today, on the down low as this is not Goldspan's official mandate.

>Would the current level of deficit be sustainable?

Greenspan's fear seems the opposite--widespread dumping of US dollar
denominated assets if dollar price of gold does not fall from its
present level of about  $430/oz to probably something closer to
$350/oz. Despite continued weakness in economy, Goldspan seems set to
raise rates in the near future to reduce the dollar price of the
Baker commodity index in which gold figures prominently.

Moreover, the econometric evidence is not clear that a weaker dollar
vis a vis a basket of foreign currencies does much to stimulate US
exports which are more sensitive to the strength of accumulation in
other countries.


>If it were not, would that not force the re-abandonment of the
>gold standard in a few years.

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