Re: [gang8] Dollar Hegemony Revisited

["Hugh Whinfrey" <econ@xxxxxxxxxxxx>]

Hi Barkley,

>      Hugh, what makes you think that "the era of fiat
> money is in turn evidently drawing to a close"?

I'm kind of shocked at the question, and I'll have to
admit that I'm not sure whether you're completely
serious or just having a bit of rhetorical fun. But,
I'll take it as a serious question directed to me:

If the current international system weren't on the
brink of total collapse I might agree that the fiat
system was working fine and still had some life
left in it.

So my assertion concerning the "era of fiat
money" rests aquarely upon the supposition that
the system with the US dollar at its core, in
particular as a reserve currency, is teetering
on the brink and is going to collapse in the
not so distant future.

If it doesn't, then I'm wrong. Fair enough ?

To take that a step further - yes, the Euro is also
a fiat currency. So if the Euro replaces the
dollar it would still be a "fiat era". And I totally
agree with that. So it's my belief that the US
will prefer to enter into a new era rather than
let the Euro win. I hope that's clear, as it is
also buried in my assertion. The point there is
that the US will find it to its advantage to change
the rules. I have no idea what post-fiat era money
would consist of, although I believe it would be
'cashless' electronic money of some form. Hey, the
door's open and it's a wonderful opportunity
for economists to do their masterpieces. I can't
understand why such talent is wasted on propping
up the so-to-speak 'rot' instead.

> I see
> no evidence of such an impending end.  Certainly
> there may be some unpleasant upheavals in the
> next few years due to the international financial system
> having to deal with the accumulation of the US imbalances.
> But I see no push in any powerful quarters to deal with
> this by going back to fixed exchange rates, much less
> some form of commodity money (or its equivalent) of
> any sort.

I appreciate your kind manner of trying to sympathetically
address what you've  evidently imputed to be my views
with respect to commodity money, etc. Unfortunately,
I have trouble responding to this as I see nothing in
what *I* have written in this thread that would suggest
that I see or support "fixed exchange rates" or "commodity
money" as a solution. I will admit to on occasion using 'evil'
"merchantilist" notation to express myself, yet that is
simply a function of the paradigms I was taught for such
reasoning in the courses I took in Economics.  It's just
the lingo as far as I'm concerned. The message and the
language are different beasts altogether.

One of the things I always liked about Europe was that I
could have the intellectual freedom to thoroughly investigate
possibilities in an open-minded manner without being branded
as an adherent of any of them for taking the time to try to
understand them in detail. That was never the case in the US
as I experienced it. So I'm saying that my familiarity with
the gold world is not driven by an ideological or academic
affiliation or advocacy. Nor is my familarity with Keynesianism,
capitalism, socialism, zoology, etc. to be equivalenced with
any rah-rah support of the thing. I'm just taking the extended survey
course here and am keeping my observations to the obvious. At
least what I thought was the obvious. Maybe it's time for me to
get up out of my chair in the lecture hall and get back up in
front of the classroom. I dunno.

>     The Bretton Woods system fundamentally broke
>down because US political leaders (Nixon then) did
>not want to have US macropolicy be beholden to any
>external pressure, especially prior to a presidential
>reerection campaign.  We are seeing this yet again,
>with Bush's flunkies encouraging depreciation of the
>dollar to prop up the midwest manufacturing belt.  No
>US president in the foreseeable future is going to give
>up this ability.  Heck, if the Brits are unwilling to tie to
>the euro, is there any reason to believe that we are
>even remotely near going to some kind of global
>fixed exchange rate system?  Not a chance.

Bingo. This is precisely why I draw the opposite
conclusion, i.e. that systemic collapse is in the cards.
The point being that everyone wants their own way
and is playing hardball over it. If nobody blinks
we're in trouble. And I don't believe anybody will
blink - not this time.

Hugh