7. OTHER CONSIDERATIONS FOR MAINTAINING GOLD RESERVES
"A further disadvantage of the sale of gold reserves is given by the fact that it increases the difficulty of an eventual return to the gold standard, or more generally to a commodity standard including gold as one of its components. This problem is certainly not important at the moment, especially since there seems no political chance for such a change in the foreseeable future. But in the long-term perspective taken here, it still merits our attention.
For it has to be expected that the problem will become more important when monetary systems approach more and more a pure credit money standard, in which the use of government money, that is of central bank notes and coins becomes superfluous. A development into this direction can already be observed and is obviously furthered by technical progress in computer and information technology. In this case central banks will lose control of the money supply, which would lead, as already seen by KNUT WICKSELL (1898/1965), to an unstable and thus inflation-prone price level. Given these conditions, a control of the money supply by central banks can only be maintained by either government regulations (for instance minimum reserves in government money to be held with the central bank) or convertibility of the internet or computer money into gold or another commodity standard at a fixed parity. It is interesting in this respect that the former President of the German Bundesbank, Hans Tietmeyer, has told me at a conference in November 2000, that this was the main reason that he insisted on the right of the European Central Bank, to oblige the banks to hold obligatory reserves at the Central Bank. I rather believe that the convertibility at a fixed parity would be a better solution."
[Mrt: Note that he has NOT chosen the option 2 due to MTM of the ECB reserves.]