Re: [gang8] Dollar Hegemony Revisited

["Barkley Rosser" <rosserjb@xxxxxxx>]

Hugh,
      Correct me if I am wrong, but I do not think that
there has been an intergovernmental transfer of gold
from the US to any other country since the 1960s, when
de Gaulle demanded that gold bars be moved in the
basement of the New York Fed from the trays labeled
"US" to the trays down the hall labeled "France."
So much for all this "bleeding" and "physical movement,"
although I stand to be corrected if wrong on this.
     What
J.P. Morgan does has not been US policy since before
the Fed was created, or at least not since WW I.  They
are out to make money and such a position involves a
forecast on their part about the future price of gold.  Such
a forecast could of course be wrong, but the obvious
reason for it has been the apparent desire in recent years
of the various central banks that do hold substantial amounts
of gold to unload it onto the free market from time to time
anytime the price goes up very much.  There is no "plot"
here to "cap" the price.  This is a matter of them not wanting
the stuff anymore because it does not earn interest, and
they would prefer to sell it off whenever the price is high
enough to make it worthwhile for them to do so.
      Again, they do not sell it to each other or transfer it to
each other.  They sell it into the private market.  None of
them are accumulating gold, unless maybe the South Africans
are.  They are all trying to unload it as gracefully as possible
in a manner that creates the least discruptions to the global
market in gold.
Barkley Rosser
----- Original Message -----
From: "Hugh Whinfrey" <econ@xxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, July 10, 2003 5:09 AM
Subject: Re: [gang8] Dollar Hegemony Revisited


> William notes:
>
> > In my view GATA is a collection of conspiracy theorists with a gold
> > bug's religion.  That includes Bill Murphy, their chairman.  A good
> > name for them is "gold nuts."
>
> OK, fine. I'll then change my previous comments to suit your
> terminology then. I don't have any emotional attachment to the
> terms one way or the other, so it's no problem.
>
> >What is in it for them as individuals?  Why would
> > they risk their hard-earned reputations and possible jail time by such
> > a conspiracy?  And what would they gain by destroying the economies of
> > developing countries?
>
> Folks all over the world are asking these questions. So you're
> certainly not alone in posing them.
>
> > Whether gold is or is not a "reserve currency" is of no real
> > importance.  As I have already noted, the gold held by the US Treasury
> > was monetized at a value of $11 billion, which is trivial in terms of
> > the current size of the monetary base.
>
> You realise of course that what you're saying there is enough to scare
> the heck out even those folks those who aren't staunch advocates of a
> gold standard, i.e. that the gold backing for the US dollar is "trivial"
in size.
>
> > The "dollar hegemony" exists because of the economic strength of the
> > US economy.
>
> Nope. It exists because of its weaknesses and/or vulnerabilities.
>
> History says that gold flows to the stronger economy. The US has
> been bleeding gold ever since the end of WWII. That is to say
> that the economic strength of the US is in decline. You can trace
> that back to the fact that it was really the only major economy
> left standing after WWII. So its relative strength was in fact illusory
> and predicated upon the destruction elsewhere - as the other
> economies around the world shattered by the war began to
> rebuild it was natural that the US would fall back to a more
> subeservient place in the world order - and the flow of gold
> shows that it in fact happened in spades. The fact that it was so
> predictable certainly argues for moves in advance purely out of
> self-interest aimed at hanging on to what would obviously be a
> temporary advantage..
>
> "Dollar hegemony" is part and parcel of the denial of the gold
> situation for the US, ultimately caused by the temporary imbalances
> cast in concrete at Bretton Woods. The seignorage makes up the
> difference, i.e. it basically serves the role of the 'missing' gold which
> the US has failed to acquire, using that manner of thinking about it.
>
> > It is a legacy of the aftermath of World War II, and took
> > shape under the Bretton Woods agreement.  Although it is a net benefit
> > to the US, one should not discount the value of a de facto
> > international currency to other nations.
>
> Pretty much what I was saying above. I see we're on the
> same wavelength then.
>
> You're confusing me here. Gold has been a de facto
> international currency since time immemorial - I'm
> not at all discounting its usefulness in that regard although
> I do think it's a bit barbaric of a thing to be moving
> around in physical quantities and, personally, I'd
> rather use paper money instead.
>
> >
> > What you meant was manipulating the market, which is not the same
> > thing as "capping on gold."
>
> No. I pretty much meant what I had said, actually. In this case, JP Morgan
> has held an extremely large short position in gold in recent years. The
figures
> are a matter of public record. The point is that you don't hold an
extremely
> large short position if you want to make the price to go up sometimes.
This is
> pretty elementary numerical stuff .
>
> Hugh
>
>
>