Thursday, November 11, 2010

Bring back the gold standard, says World Bank chief

From the UK Telegraph:

Robert Zoellick, the president of the World Bank, has called on bickering G20 nations to bring gold back into the global monetary system as an anchor to guide currency movements.

Ahead of a Group of 20 summit this week in Seoul, Mr Zoellick said an updated gold standard could help retool the world economy at a time of serious tensions over currencies and US monetary policy.

He said the world needed a new regime to succeed the "Bretton Woods II" system of floating currencies, which has been in place since the fixed-rate currency system linked to gold broke down in 1971.

"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values,"

"Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." Mr Zoellick said in a commentary in full

Currency War Hits Mexico as Carstens Signals Rate Cuts

The peso’s biggest rally on record may prompt Mexico’s central bank to cut interest rates next year to boost exports after other Latin American policy makers raised borrowing costs to cool their economies.

Governor Agustin Carstens signaled during a Nov. 2 meeting with economists in New York that he would consider cutting rates should the peso keep gaining, according to analysts from Barclays Capital, Deutsche Bank AG and UBS AG who attended the meeting. The bank may lower borrowing costs a quarter percentage point to 4.25 percent by March, Mexican futures trading show.

.......Countries from Brazil to Thailand to Colombia are imposing levies on foreign capital, ending tax exemptions for foreigners or stepping up dollar purchases in the currency market. Carstens criticized such moves in an Oct. 27 radio interview.

“We would try to avoid falling into these circumstances, although you can never discard all possibilities,” Carstens said. Currency wars are “very destructive,” in full

A President who actually understands the World

The Currency War - Good For Gold

By Peter Shiff:

As the world awaits another $600 billion flood from Bernanke's printing press, central bank governors from Brasília to Tokyo are preparing to respond in kind. This is the monetary equivalent of a nuclear war, except instead of radiation, bombs of inflation threaten to make the world economy uninhabitable for saving and productive enterprise.

While much of the attention has been focused on China and accusations that it is a "currency manipulator," the first shot in this war was clearly fired by the US Federal Reserve. Last month, the Fed came out with a statement that, for the first time ever, said inflation is rising at a rate "below its mandate." That is, they acknowledged that the deflation threat had passed, that prices were stable - but they still intended to send prices higher.

Since the Bretton Woods Agreement was signed in the wake of World War II, the global monetary system has been based on the US dollar. This means that when the Fed decides to create trillions of dollars of inflation, other countries can't simply say, "let them dig their own grave." Instead, because their international transactions are denominated in dollars, they feel a pressure to maintain relatively stable exchange rates between their currencies and the on