From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Mon Jun 21 2004 - 20:01:39 EDT
At 9:03 PM -0400 6/12/04, Allin Cottrell wrote: >Claus wrote: > >"Now, the widespread view today is that money is no more a commodity, >because gold not only does not circulate, as is also not used >officially to define the standard of prices. In my opinion this >conclusion has two problems:" > >"1) it does not account for the role played by gold in the monetary >system of our days. This account seems to me to be necessary, since >gold is present in very expressive amount as an official international >monetary reserve and in even greater amount as private reserves;" > >Petroleum also bulks large in national reserves; so do wheat and >butter. The role of gold in present-day monetary systems seems >nugatory, a mere historical hold-over. Yes but if the former gold bug Fed chief does try to maintain over the long term the dollar constant in terms of a basket of gold, oil, wheat, then is he not running a modified gold standard? And if Greenspan does not do this, what are the consequences on the role of the dollar as international currency, the closest thing we have to world money? I asked last year: 28 Aug 2003 23:37:01 -0700 Isn't the Federal Reserve Board under Greenspan known to have implicitly followed sensitive commodity prices such as gold and oil in the determination of US monetary policy (I think Barkley Rosser mentioned this years ago on the pkt list)? Could something like a modified gold standard be developing with central banks attempting to maintain the value of their currency as some tradeable basket of goods and services, e.g. x amounts of gold and y amount of crude oil and z amount of corn? Do central banks find themselves limited in deviating from such a policy or having to play a catch up if they do deviate temporarily from this policy? If the "producers" of government monies fail to maintain fairly constant measures of purchasing power--that is, if they allow their money to 'inflate' or 'deflate'--will "private producers" of monetary numeraires gain acceptance for their products (as Hayek perhaps fantastically suggested)?
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