Re: The US Dollar and Gold

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

Gold will remain a commodity.  It's price against the US dollar
will fluctuate for a number of reasons, but not high on the list
is the US trade deficit.  That deficit will continue to grow as
long as the US is seen as a better place to invest than in the
domestic economies of those nations running trade surpluses.

Comment:

Nonsense - current world monetary arrangements have NOTHING to do with the
US being "seem as a better place to invest" than the Rest of the World.

Instead, the US dollar is World Currency by default - not by agreement with
the Rest of the World.

Of course, this is not to apportion blame between the US and the Rest of the
World for the breakdown of negotiations in the early 1970s on post-Bretton
Woods world monetary arrangements - one side exerted superior economic and
political power while the other side, putting principle aside, opted for a
piece of the action.

Gunnar



----- Original Message -----
From: "William F Hummel" <wfhummel@xxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Monday, January 06, 2003 4:26 PM
Subject: Re: The US Dollar and Gold


> Gary Santos wrote:
>
> >I would like to get comments on the above issue especially what policy
> >response is likely on the part of the Fed in light of the introduction of
> >Mahathir's Gold Dinar, the Arab Dinar and other such new currencies. I
was
> >made to understand that some policy circles have proposed a new currency
> >based on a basket of commodities.
> >
> >As for my thoughts, I append below an email I recently sent to another
> >discussion group:
> >
> Gold will remain a commodity.  It's price against the US dollar
> will fluctuate for a number of reasons, but not high on the list
> is the US trade deficit.  That deficit will continue to grow as
> long as the US is seen as a better place to invest than in the
> domestic economies of those nations running trade surpluses.
> Another factor is the prevalence of national policies that
> promote trade surpluses to maintain their domestic employment
> levels.  Other nations that may be playing with gold are just as
> eager as ever to accumulate reserves of US dollars.
>
> Only if the US runs a serious and protracted inflation or its
> economy suffers a major blow from terrorists or from a natural
> disaster would there likely be a collapse in the dollar as the
> world's primary reserve currency.  Gold coins as money are a
> trivial part of the picture, a relic of the past.  Now that world
> commerce has learned to operate on fiat money, there is no
> turning back to a commodity based monetary system.
>
> William F Hummel
>
>
>
> >----------------------------------
> >
> >I did not want to bias anyone with my prognosis but here are my thoughts
> >which I hope will solicit more from the group:
> >
> >There are three factors that are putting heavy pressure on the US dollar:
> >
> >a. A deteriorated and deteriorating external position. Deficits in the
trade
> >and current accounts and a hugely negative net investment position.
> >
> >b. A frustrated world that has its savings and central bank reserves
largely
> >in US dollars and has seen its purchasing power deteriorate since 1971.
The
> >gold dinar of Mahathir and the Arab dinar of Saudi Arabia et. al. are
just
> >present manifestations of this frustration. I understand the Russians
> >reintroduced a gold coin (last year, was it?), the chervonet, and are
> >currently talking of a Gold Ruble.
> >
> >c. Improving (and that's an understatement) gold fundamentals given a
> >demand-supply deficit of 1,000 tons per annum and what appears to be a
> >humongous short position in gold with producers unwinding their hedges.
> >
> >It certainly doesn't help that China opened a gold exchange in Shanghai
last
> >October and that Governors Greenspan and Bernanke gave those "We can
print
> >money" speeches last November and December. From the news coming out of
GATA
> >and LeMetropole, it would seem by the timing of the price of gold that
the
> >Chinese and Arabs have stepped up their gold buying. Gold just broke $354
(a
> >magic number according to the gold bugs as it is tied to the hedging
> >programs of the shorts) as I write this note.
> >
> >As for the counter, I suspect that it would be best for the slide of the
> >dollar back to support levels be accomplished (there are those who think
> >that the dollar decline so far is being managed downwards) before the
Gold
> >Cover Clause is reinstated given the gold the US has in West Point(?).
But,
> >now you tell me that that gold is gone??? (***Please send me a copy of
this
> >Fed report and of the commodities-currency report as I would certainly
want
> >to read it for myself.***) If that is indeed the case, I can only think
of
> >one other thing -- food. If there is one thing that the Arabs don't have
and
> >that is America's strength, it is food. Food for oil. Perhaps, this is
the
> >gist of that move for a currency backed up by commodities.
> >
> >The interesting thing in this Longwave forum is the cyclical nature of
the
> >currency-gold issue -- we have come back full circle to the 1930's, don't
> >you agree? Now that I said this, all the more I believe a war is upon us.
> >Any stalling on the part of the US and Britain is only because of the
> >trouble Venezuela is causing to the effort.
> >
>
>
>