Re: (OPE-L) Re: on money substance and abstract labor

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Wed Jun 23 2004 - 11:52:09 EDT

At 9:57 PM -0400 6/21/04, Allin Cottrell wrote:
>On Mon, 21 Jun 2004, Rakesh Bhandari responded to:
>>>The role of gold in present-day monetary systems seems
>>>nugatory, a mere historical hold-over.
>>Yes but if the former gold bug Fed chief does try to maintain over
>>the long term the dollar constant in terms of a basket of gold, oil,
>>wheat, then is he not running a modified gold standard?
>He's trying to maintain a CPI inflation rate of around 2 percent.
>Who cares what happens to the price of gold?  Gold is not in the CPI
>and the dollar is not convertible into gold (any more or less than
>it's convertible into cheese).

Not sure that he is in fact focused on the CPI as such.

>Given that CPI inflation (or possibly GDP deflator inflation) is the
>relevant target, it would make sense to focus on some other price
>index (gold + oil + wheat, say) only to the extent that the latter
>serves as a "leading indicator" of the former.


>   The price of oil might
>have a predictive role.  I'm not aware of econometric evidence that
>the price of gold has such a role.

OK. I don't know what is in the basket of commodities on which
Greenspan may or may not focus.

>>And if Greenspan does not do this, what are the consequences on the
>>role of the dollar as international currency, the closest thing we
>>have to world money?
>What are the consequences if G'span omits to do what, exactly?  If he
>omits to consider the price of gold as such, nothing.

Well the argument is about whether the commodity basis of money has
been transcended. My point is that non convertible money or even
irrelevance of gold does not prove that said basis has in fact been

>   If he's willing
>to let inflation rip in the U.S. (say, monetizing Bush's deficits)
>there may be consequences.

Well he seems to have accomodated federal spending.


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