[OPE-L:1283] Gold and credit-money weaknesses

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Sun, 3 Mar 1996 09:12:44 -0800

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1) If a large enough percentage of the available world supply of gold is
owned by a small group of individuals, firms, or nations, there is the
possibility of unloading gold on world markets causing the market to
crash and, possibly, initiating a general rise in the price level.

2) If there are new methods of production that greatly increase the
productivity of labor in gold production, a similar result might occur.

3) If there is a new, cost-effective method of converting another
substance (water?) into gold, that as well would both shake up world
markets and make those economies like South Africa that depend on gold
production vulnerable.

4) A "socialist" nation (like the former USSR) could decide to do 1)
above. This was something that Western capitalists, after all, feared for
many decades.


1) Counterfeiting. Suppose millions of fake Federal Reserve notes were
dropped over the city of Los Angeles. What would happen? BTW, advances
in photocopying and laser technologies make this option increasingly
possible. During WW2, the Nazi's with less sophisticated technologies
tried to counterfeit millions of 5 pound notes with the aim of
de-stabilizing the British economy.

2) Countries that receive credit from commercial banks, the IMF, and/or
the world Bank can "simply" refuse to pay. Individual nations, after all,
have sovereignty. If a small country like Grenada tries this, they could
find US Marines on the beaches in the morning. If a country like Mexico or
Brazil defaulted, the same military option would probably not be used
(too many body bags would be required). This was, after all, an option
that many countries in Latin America considered in the 1980's. At one
point, I believe, it was forecasted that if the Mexican government
defaulted on its loans, that would cause major commercial banks like
Citibank, Chemical, Chase Manhattan etc. to declare bankrupcy. One would
imagine that this would then lead to a temporary collapse of world
financial markets. In any case, the mere fact that the US government and
banks, as well as international lending agencies, knew that default was a
possibility, gave the Mexican government bargaining power to
re-negotiate the terms of the loans.

3) Housing activists in a number of countries have supported calls for a
general rent strike. What would happen if workers organized a loan strike
by collectively refusing to pay back loans for homes, cars, etc.? One
might anticipate a state response and a political crisis, but the result
would largely depend on the balance of class forces, the level of worker
militancy and solidarity, and the degree of workers self-organization.

Michael P: Is this what you had in mind in terms of "vulnerabilities and

In OPE-L Solidarity,