Wednesday, 17 February 2010

The golden rule: whoever has the gold, rules

Just responded to a query by Obo:
I don't have any particular reason to disagree with John Redwood when it comes to rigged exchange mechanisms, but I found part of this curious:

History shows that rigged exchange rates do not work. The Gold Standard…bankrupted many businesses and created mass unemployment.The snake in the 1970s failed to keep the pound at a constant value against the Continental currencies. The Exchange Rate Mechanism caused a bad recession, and then collapsed.

Since there is a wing of the LPUK that wants us to go back to a gold-based currency, I wondered if they would comment on this and point out why he might be right or wrong. Or if I'm just misunderstanding what he's saying.

Yeah he probably just means that we were in at the wrong rate, as we were in the ERM.

The only "real" gold standard is the use of gold itself as currency, or private storage and receipts representing it.

Any state-created "gold standard" will be essentially fake, because they have always, without exception, sought to manipulate and debase the currency for their own ends (mostly to finance war, but also to extort for themselves). They may say, for example, that they will bring out a note which is redeemable for a certain amount of gold. And perhaps at first this works - this would nearly be a real gold standard. But it is inevitable as gravity that eventually they will impose restrictions on the exchange of notes into gold, through fees and taxes and increased red tape, forms to fill out, etc. These will pile up until the redeemability is all but gone - and they will then do away with it entirely. And keep the gold. As they have done. Bastards.

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