Tuesday, December 23, 2008

Anthony Boeckh: 'Nobody's Had Time To Adjust' - National Post

Q Do you think we should be back on the gold standard then?

A The gold standard was denigrated and has been for decades. People say it was a really rigid system and there were all these crises in the 19th century, but one way of looking at it is it imposed a discipline on the system and nobody's figured out a better way to impose discipline. Even though you had crises every 10 years or so, they were never catastrophic. You took off the discipline in 1971 and we've had a debt bubble, an asset bubble building for 35 years and we're facing a crisis now much bigger than in the 19th century. The only way of preventing it from becoming a disaster is to print a whole bunch of money and have massive fiscal deficits, which nobody would argue isn't going to cause problems in the future.


Anonymous said...

To suggest we go back to the Gold Standard is to suggest we go back to the Horse and buggy. Some enviromentalists would welcome it but the modern world would not.

Louis Paquette said...

Thanks for commenting and Maybe so (reverting to the gold standard is as backwards as the horse and buggie).

But what will be the ultimate impact printing infinite dollars out of thin air have? We don't know for sure but I don't believe for a second there won't be unintended nasty consequenses...such as severe hyperinflation down the road..

Anyone else have any thoughts on this - feel free to post them.

Anonymous said...

Every large economy on the planet is printing money to stave off recession. So it's the same relativity among major currencies.
Will it still bring about hyperinflation ?

Louis Paquette said...

I don't see why not.

We had a global credit expansion, which lead to a global credit implosion and price deflation, that is being countered with global money expansion that should debase those same currencies around the globe. A race to the bottom.

Who knows when it will kick in but I bet within a year it will begin showing up.

Anonymous said...

I follow what you're saying. But I what I don't understand is if say a burger costs $5 now & it later costs $50, the same burger in Japan jumps from 500 yen to 5000 yen, the exchange rate between US$ & Jap yen remains the same despite tenfold inflation. Both currencies are equally debased. So where is the problem? I can understand hyperinflation as it happened in Germany after WW1 or Zimbabwe currently. Their currencies tumbled in relation to everyone else's.
Do I make any sense?

Louis Paquette said...

I understand what you're saying - a race to the bottom by many currencies, not just the U.S. Dollar.

In that case I see the gold price rising in all of those currencies in addition to the U.S. Dollar. The Gold bull market would then be universal, not just a rush to the exits by those holding U.S. Dollar denomiated assets.

Louis Paquette said...


Check the most recent post that I made today. It links to an article with a table what shows how gold has performed in a host of currencies over the past 8 years.

If these countries continue debasing their currencies we can expect gold could continue to appreciate in a similar fashion, not only in the Greenback.

Thanks for posting, I'd like to hear from other visitors to hear what they think of this or other topics.


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