Re: The US Dollar and Gold

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

Re. the following:

> And still more non sequitur.  The issue was not about why the
> dollar is the world's reserve currency.  It was about what will
> cause the US trade deficit to continue to grow.

Comment:

The US trade deficit - like that of Third World and East European deficit
economies before it - is a measure of US absorption of Goods and Services
relative to US output of Goods and Services.

And how might the US - like many Third World and East European countries
before it - be persuaded to live within its means?

The Washington Consensus prescribes an appropriate combination of Monetary
and Fiscal policies along the following lines:

1.  The Fed should raise interest rates to Volcker-era levels to reflect the
"true" cost on borrowing.

2.  The Government should increase taxes to absorb remaining "excess" demand
in the US economy.

And why is such a "stabilization" program not being prescribed to the US?

Because the US dollar is the World's Reserve Currency.

How did the US dollar acquire the status of WRC?

It did so by default - see earlier message.

Question: Why is the IMF/Washington Consensus unpopular?

Answer:  See points 1. and .2.

Gunnar





----- Original Message -----
From: "William F Hummel" <wfhummel@xxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, January 07, 2003 4:34 PM
Subject: Re: The US Dollar and Gold


> Gunnar wrote
>
> >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.
>
> Non sequitur.  I said nothing about world monetary arrangements.
> >
> >Instead, the US dollar is World Currency by default - not by agreement
with
> >the Rest of the World.
>
> And still more non sequitur.  The issue was not about why the
> dollar is the world's reserve currency.  It was about what will
> cause the US trade deficit to continue to grow.
>
> William F Hummel
>
>