Thursday, June 30, 2011

Milliarium Aureum? II

Do Freegold roots lead us also to The Per Jacobsson Foundation?

(The Per Jacobsson Foundation was established in 1963 to carry forward the work of international cooperation in the monetary and economic field to which Mr. Jacobsson had devoted his life. The institutions with which he was closely associated for over 30 years-the Bank for International Settlements and the International Monetary Fund-participated in this endeavor.)

Well, there is certainly an important nod here, see their:   Sponsors

DG - "What size is the fire exit?" by Daniel Gros

What size is the fire exit?
Daniel Gros

7 December 2010

"...After all, the claim that the risk of loss will arise only for debt issued after the new crisis-resolution mechanism starts in 2014 implies that all debt issued until then is safe, and that insolvency can occur only in some distant future, rather than now, as in Greece and Ireland. In effect, EU officials are saying to investors, “Whom do you believe – us or your own eyes?” Moreover, for too many investors, Portugal, with its poor growth prospects and insufficient domestic savings to fund the public-sector deficit, looks like Greece. And Spain clearly has to grapple with its own Irish problem, namely a huge housing over-hang – and probably large losses in the banking sector – following the collapse of an outsized real-estate bubble. The problems of Portugal and Spain might be less severe than those of Greece and Ireland, but this apparently is not enough to induce investors to buy their government debt. A risk these countries share is thus the acute danger of large-scale runs on their banking systems. So far, investors trying to exit first have been made whole. Holders of Greek debt maturing now are repaid courtesy of the €110 billion bailout programme, and holders of Irish bank bonds have been given a guarantee by the Irish government, whose promises have in turn been underwritten by the EFSF. The EFSF will also provide funds to ensure that Irish banks’ depositors can get their money back today.
The problem with this approach is that it creates the wrong incentives. Investors have now learned that the first to sell will avoid losses. The situation resembles that of a crowded cinema with only one exit. Everyone knows that in case of fire, only the first to leave will be safe. So, if the exit is small, even the faintest whiff of smoke can trigger a stampede. But if the exit looks comfortably large, the public will be much more likely to remain calm, even if parts of the room are already filling with smoke..."

"To return to the cinema analogy: investors know that the exit is not large enough to allow them all to squeeze through at the same time. So each one wants to be among the first to get out. The official line so far has been “no default”, meaning no sovereign default or that of any bank can be considered. If this line is to be maintained, the exit door must immediately be made much wider, and huge fire extinguishers must be brandished. The International Monetary Fund and the European Central Bank must show investors that they have enough funding to finance the simultaneous exit of all short-term investors.
It could work. A show of overwhelming force might restore calm to the markets. But it is a risky proposition: if investors exit nonetheless, the required funds might be so large that creditor countries’ taxpayers’ revolt..."

[Mrt: It does resemble of something familiar, doesn´t it?]

Source: What size is the fire exit?

DG - "Neither a borrower nor a lender be" by Daniel Gros

Neither a borrower nor a lender be
Daniel Gros

18 March 2011
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry
Hamlet, Act I, scene 2, 75-77

 Europe’s leaders should have heeded Lord Polonius’ wise words to his son Laertes. The countries now struggling under a mountain of debt should have realized earlier that excessive reliance on borrowing invites excessive consumption and wasteful investment. But the leaders of Germany and the other creditor countries should also be aware that a lender can lose both its capital and its friends...

...However, this widespread impression that the ‘bailout’ of Ireland constituted an onerous interest rate ‘diktat’ by the EFSF is misleading. A much larger ‘bail-out’ on very generous terms has taken place silently via the balance sheet of the ECB. Here again public attention has focused on a side show, namely the direct purchases of distressed government bonds by the ECB. However, the portfolio of government bonds held by the ECB under its ‘securities markets programme’ has so far amounted only to about €70 billion, of which only part will have been in Greek and Irish bonds. But more importantly, the ECB has not provided any fresh money to the countries concerned by buying their bonds in the secondary market. It has only increased the price at which some investors were able to sell their holdings of Greek and other bonds. The ECB is, however, providing direct support to the countries in difficulties via its normal monetary policy operations, which allow the banking systems of these countries to refinance themselves at the official rate of 1%. This has resulted in an infusion of liquidity of an unprecedented magnitude given the small size of these economies...

...Insolvency can certainly be avoided as long as liquidity is (almost) free and available in unlimited amounts. However, unlimited cheap financing (‘liquefaction’) has its disadvantages. First of all, it is obviously not a solution for insolvent debtors; it just postpones the day of reckoning – and makes it more painful when it does arrive because the debt burden will be even larger. Secondly, it is addictive. The European Central Bank will remain by far the cheapest source of funds for banks in the euro periphery. Those countries will thus try to maintain and increase their recourse to ECB funding for as long as possible, with the result that the risk on the balance sheet of the ECB will also increase. This is why the ECB recently had to tighten its eligibility criteria for the collateral it accepts.

[Mrt: Gold a wealth asset par excellence here we go!]

Source: Neither a borrower nor a lender be

Milliarium Aureum?

Do Freegold roots lead us to Katholieke Universiteit Leuven?

(Strictly speaking, the Old University of Leuven is the oldest, and the Catholic University of Leuven is identified as a continuation of it although they are legally separate. See the History section.)

Well, there is certainly an important nod here, see:

...and many others, see:

Leuven has a good research and good libraries:

Mrt Update 18-08-2011:

One another name is missing. It is now very easy to find out :o)

Tuesday, June 21, 2011

RM - Robert Mundell on USAgold

Part 1

Exchange Rates, Currency Areas and the International Financial Architecture

by Dr. Robert A. Mundell, Columbia University
1999 Nobel Laureate Economics

 Remarks delivered at an IMF panel, September 22, 2000, Prague, Czech Republic.

"It is important to realize the significance of the change that has come upon the world with the creation of the euro. We no longer think in terms of flexible exchange rates, but rather of currency areas. And increasingly, we will no longer think of a dollar-dominated international monetary arrangement but one in which the power is shared by the dollar, euro and yen areas, with a residual amount of power held by the IMF representing the other countries. This is in my view a great step forward, because it will bring forth new and for once meaningful ideas about reform of the international financial architecture. The euro promises to be a catalyst for international monetary reform...."

Alternative Monetary Targets

"...If international financial architecture has any meaning at all, it applies to the exchange rate arrangements at the core of the world economy, the anchor for achieving and numeraire for measuring global price stability, and management of a world currency, if one exists. In other words there is no financial architecture today, and the problem of reform is to create it...."

Source: Exchange Rates, Currency Areas and the International Financial Architecture

Part 2

Nobel Laureate Robert Mundell: 'Ahead of his Time'

by Laura Wallace, International Monetary Fund

"Editor's Note: In doing some judicious pruning of the Gilded Opinion index, we decided to leave this portrait as a standing tribute to the visionary Dr. Mundell. Long before gold became fashionable discussion fare among economists and policy-makers, Mundell was one of its most ardent advocates among his colleagues. Considered by many to be the "father of the euro, he suggested its use as a monetary asset in the contruction of that currency. If the world monetary system is to include gold as part of its make-up, Mundell's thinking likely will play a significant role. Dr. Mundell is and remains truly a man ahead of his time...."

Source: Nobel Laureate Robert Mundell: 'Ahead of his Time'

[Mrt: re-discovering is fun]

EU - Subject: The choice of a numeraire for the European Monetary System

Part 1.

 Subject: The choice of a numeraire for the European Monetary System

"...1. Although the official communique issued after the meeting of the European Council at Bremen is not entirely explicit on this point, it appears that the choice for the numeraire fonction of the ECU (1) has now been reduced to two options, namely:
a) 8 "parity grid" of the kind currently applied in the snake(2),
b) a "basket of currencies' definition" to be equivalent in its composition
and weighting to the Europen Unit of Account (EUA). 2. There is some presentational advantage in having the same unit performing both the role of numeraire and that of main reserve and settlement instrument in the system." ..."
Source: Subject: The choice of a numeraire for the European Monetary System

Part 2.

Subject: Alternative numeraires for exchange rate guidelines

1.. In setting exchange toste guidel ines (or "target zones") for a currency it is necessary that the guidelines should be defined in relation to some specific point of reference or intervention numeraire.

Source: Subject: Alternative numeraires for exchange rate guidelines

[Mrt: Tracking history/evolution]

EU - Emu and Euro - history


1. The idea of a common currency in EuropeBU (1929 – 1967) 
2. Run-up to the Barre Plan (1968 – 1969) 
3. Preparing the Den Haag summit (1969 – 1970) 
4. The Commission's mandate to draw up the first plan for EMU (1970 – 1970) 
5. Preparing the Werner Report (1970 – 1970) 
6. The need for a European Monetary System (1971 – 1973) 
7. The period of discussion about the European unit of account (1973 – 1975) 
8. Period of intensive studies (1975 – 1977) 
9. Revival of the idea of EMU (1977 – 1978) 
10. The need to coordinate economic policies (1978 – 1978) 
11. Discussions about the European Monetary System (1978 – 1988) 
12. The ECU at the centre of discussion (1981 – 1988) 
13. Run-up to the Maastricht Treaty (1989 – 1991)


Additional documents and info:

The Euro

[Mrt: In the search - history of Another Monetary Regime :o)]

RM - Robert Mundell latest about Freegold

The Emerging New Monetarism: Gold Convertibility To Save The Euro

"...Professor Robert Mundell urges gold convertibility for the euro, the currency which he fathered, as well as for the dollar. This is a major step forward. Thought leaders are abandoning “old monetarism,” which was vainly fixated on quantity. Even its chief proponent, Milton Friedman, acknowledged old monetarism as unsuccessful in a 2003 interview with the Financial Times.  An emerging “new monetarism” is quickly taking its place — one that focuses on the quality, not quantity, of money.
Empirical data suggest that the gold dollar represents the epitome of quality.  As Forbes’ own Steve Forbes advised the presidential candidates last week, the “debate should be focused on what the best gold system is, not on whether we need to go back on one.”..."

Source: The Emerging New Monetarism: Gold Convertibility To Save The Euro

Thursday, June 16, 2011

RM - Robert Mundell & Gresham law revisited

Uses and Abuses of Gresham's Law in the History of Money

Robert Mundell
Columbia university
August 1998

The economist H. D. Macleod, writing in 1858, first brought attention to the law that he named after Sir Thomas Gresham:

No sooner had Queen Elizabeth ascended the throne, than she turned her attention to the state of the currency, being moved thereto by the illustrious Gresham, who has the great merit of being as far as we can discover, the first who discerned the great fundamental law of the currency, that good and bad money cannot circulate together. The fact had been repeatedly observed before, as we have seen, but no one, that we are aware, had discovered the necessary relation between the facts, before Sir Thomas Gresham.
This passage errs in two points: Gresham was not the first to make explicit the idea we now know as "Gresham's Law," and the assertion that "good and bad money cannot circulate together" is a glaring error. It is a far cry from Gresham's Law. That Macleod was careless about his statement of the law he named after Gresham serves as a warning that the ideas involved are more subtle than at first appears...."

[Mrt: and now the body .... the interesting part....(read, my usual advise)]

"12. Conclusions
Gresham's Law, properly understood, can be a powerful tool in the hands of historians for the study of monetary history. The catchy phrase, "bad money drives out good," is not a correct statement of Gresham's Law nor is it a correct empirical assertion. Throughout history, the opposite has been the case. The laws of competition and efficiency ensure that "good money drives out bad." The great international currencies--shekels, darics, drachmas, staters, solidi, dinars, ducats, deniers, livres, pounds, dollars--have always been "good" not "bad" money."...

 "...Our discussion has been confined to the literal subject matter of Gresham's Law, i.e., its applications to the money sphere. It is of course a completely general law that holds whenever the isomorphism that constitutes its theoretical content applies. As Aristophanes knew as well as we, bad politicians drive out good, cheap conversation drives out dear, bad theory drives out good; cheap gifts drive out dear, bad food drives out good, and so on indefinitely. In each case the qualification must be made that from one standpoint (e.g., acceptability) good and bad have the same value...."

[Mrt: will be revisited and relevant freegold parts extracted]

Source: Uses and Abuses of Gresham's Law in the History of Money (does not open straight, search)

Wednesday, June 15, 2011

RM - Robert Mundell about "dollar IMFs" versus "gold BIS"

The European Monetary System 50 Years after Bretton Woods: A Comparison Between Two Systems

A Comparison Between Two Systems
R. A. Mundell
Columbia University
Paper presented at Project Europe 1985-95, the tenth edition of the "Incontri di
Rocca Salimbeni" meetings, in Siena, 25 November 1994.

"...In a presentation before the Subcommittee on International Exchange and Payments of the U.S. Congress, I presented, in a paper entitled "Rules of the Gold Exchange Standard," the first complete analysis of the gold exchange standard as coherent system:...


...The rules of the game of the system constitute a combination of laws, commitments, conventions and gentlemen's agreements by which the inner country (the United States) pegs its currency (the dollar) to gold and the outer countries (Let us call them Europe) peg their currencies to the dollar, either directly or indirectly through another currency (such as the pound sterling or the franc). This means that the United States acts as the residual buyer or seller of gold, whereas Europe acts as the residual buyer or seller of dollars. The U.S. has to buy up any excess supply of gold on world markets and satisfy any excess demand out of its own reserves; failure to do so would result in the dollar price of gold moving away from the dollar parity. Europe, on its part, has to take up any excess of dollars offered to it or supply any excess of dollars demanded; failure to do so would result in the exchange rate moving away from its dollar parity. 

 The boundary conditions are given by the U.S. stock of gold and Europe's stock of dollars; the United States cannot supply gold, nor Europe dollars, they lack. But there is an asymmetry in these conditions because, as long as gold and dollars can be supplied at the U.S. Treasury, Europe has access to additional dollars in exchange for gold. The total reserves (dollars and gold) of Europe therefore constitutes Europe's boundary condition, whereas the gold reserve of the United States represents the U.S. constraint.
Control of the system rests on U.S. monetary policy, on the one hand, and Europe's gold-dollar portfolio on the other. When the United States expands the dollar supply it puts upward pressure on world incomes and prices--directly, because of interest rate effects and spending changes in the United States, and indirectly because of increases in European reserves. Similarly, when the United States contracts the dollar supply, it puts downward pressure on world prices.

Europe's gold-dollar portfolio is the other control variable. When Europe converts dollars into gold it weakens the U.S. reserve position and stimulates or compels a monetary contraction(7) and when it converts gold into dollars it strengthens the reserve position and permits or compels a monetary expansion. Europe's goldpurchase policy thus influences U.S. monetary policy, while the latter "determines" world prices and incomes. When U.S. monetary policy is forcing inflation on the rest of the world, Europe can stimulate or compel a contraction by gold purchases; and when U.S. monetary policy is deflationary, Europe can entice an expansion by gold sales.

We may thus express the control mechanism of the system as follows: The United States expands or contracts its monetary policy according to whether its gold position is excessive or deficient, and Europe buys or sells gold from the United States according to whether U.S. policy is causing inflation or deflation. The gold exchange standard therefore constitutes a "system" and it is with its implications that we must now be concerned..."

[Mrt: This was past. Where are we today? What is likely to change into tomorrow?]

5. The Mounting Crisis

"...In the 1960s the United

...States and Europe were on a collision course with respect to the international monetary system--what Prime Minister Harold Wilson of the U.K. called a "monetary war." The risk lies that the variables would hit the boundary conditions determined by the stock and price of gold, bringing on a convertibility crisis. A higher price of gold--to make up for World War II and post-war inflation--would have provided more room for adjustment within the parameters of the system. But, in the 1960s, an increase in the price of gold was ruled out--mainly for political reasons...."

"...Beneath the threat-counterthreat struggle between the two continents, lay a powerful undercurrent of bluff. Neither-- and least of all Europe--wanted the system to collapse. Rather than bring on a collapse of the system, countries changed their mode of operation...."

...First, palliatives kept the system in operation for some years. Indeed, it was widely hoped that if the system could be kept in place for some years, efforts to modify it through the creation of SDRs--a kind of paper gold insofar as it was intended to be a gold substitute--would create a sounder basis for equilibrium. The palliatives were, first, mechanisms for reducing the excess demand for gold by economizing on it. The United States removed the 25% gold reserve requirement behind member bank deposits at the Federal Reserve in 1965, and behind Federal Reserve currency in 1968. These measures removed the internal gold reserve requirement and freed what was left of the US gold stock for the requirements of external convertibility. (14)..."


14. By 1968 the private market demand for gold had caught up with market supply and the gold
pool--composed of the few countries that were major gold holders--was disbanded. In March of
that year, the central banks made the decision to withdrew from the private market, allowing the
private market price to rise above the official price
. This measure prevented any further drain of
gold from official to private stocks.

[Mrt: Was it some time ago when I put a signature something like "Monetary systems, educate yourself!"]

Source: The European Monetary System 50 Years after Bretton Woods: A Comparison Between Two Systems (the link does not open straight file, search)

RM - Return to roots - Robert Mundell 1999 - The Euro and the Stability of the International Monetary System

The Euro and the Stability of the International Monetary System
Robert Mundell
Columbia University
January 1999

 "The introduction of the euro at the beginning of 1999 promises to mark a turning point in the international monetary system. It is often compared with the transformation of the international monetary system in the early 1970s from the system of fixed exchange rates endorsed at the Bretton Woods conference to the regime of managed flexible exchange rates. But in fact its significance is deeper. The collapse of the Bretton Woods arrangements did not alter the power configuration of the international system. Both before and after the breakdown, the dollar was the dominant currency. The introduction of the euro, on the other hand, will challenge the status of the dollar and alter the power configuration of the system. For this reason the introduction of the euro may be the most important development in the international monetary system since the dollar replaced the pound sterling as the dominant international currency soon after the outbreak of World War I.(1)

If it is true that the euro will challenge the dollar in the system, will the new international monetary system be more or less unstable? The answer to this question depends in part on the meaning attached to stability. The word as defined in the dictionary has at least three relevant meanings: (a) the state or quality of being stable, or fixed; (b) resistance to change, or permanence; or (c) the tendency of an equilibrium position to be restored after an initial displacement. All three of these meanings have relevance to the euro, as indicated by the following three questions:

(a) Will economic variables, say exchange rates, fluctuate more or less as a result of the introduction of the euro?

(b) Will the euro create a new configuration of currency areas that will last for, say, several decades in the 2000s?

(c) Will the euro alter the convergence conditions of exchange rate dynamics: will it turn a stable system into an unstable one or aggravate any instability of the existing system?

These issues will be addressed in this paper. First, however, we shall try to see what history and theory says about how well the euro will stack up against the dollar. We begin by discussing the characteristics of currencies that have in the past become successful "dominant" international currencies..."


"...The most urgent focus for management will be on the dollar-euro rate. As the world moves from monetary unilateralism to bilateralism, policy coordination will become more important. Under unilateralism, other countries were comparatively free to fix or change their currencies against the dollar, with a kind of benign neglect of exchange rate on the part of the United States. That will no longer be possible with the euro. If intervention is required it will have to be cooperative. In view of the long period of transition from a mainly dollar world to a world in which the dollar and euro vie on equal terms, it may be necessary to develop the infrastructure capable of dealing with the problem.

International management of the dollar-euro rate will not be easy. Suppose the dollar is depreciating against the euro and it is agreed that intervention is desirable. Where should the responsibility for intervention lie? Should the U.S. support the dollar by selling reserves, or should Europe support the dollar by buying reserves? Action by the U.S., taken alone, without sterilization, is deflationary for the world economy; action by Europe is inflationary. Obviously action by the US would be desirable if there were excess inflation in the world economy, whereas action by Europe would be desirable if there were excess deflation. The division of responsibility would have to be determined by an inflation index for the world economy. If gold were stable in terms of commodities the price of gold would itself serve as a satisfactory index..."

Source: The Euro and the Stability of the International Monetary System (does not open straight)

Tuesday, June 14, 2011

RM - The International Monetary System in the 21st Century: Could Gold Make a Comeback? by R.Mundell

The International Monetary
System in the 21st Century:
Could Gold Make a Comeback?

Robert A. Mundell
Columbia University
Lecture delivered at St. Vincent College, Letrobe,
Pennsylvania, March 12, 1997.

"...Even today, the importance of gold in the international monetary system is reflected in the fact that it is today the only commodity held as reserve by the monetary authorities, and it constitutes the largest component after dollars in the total reserves of the international monetary system..."

"...The competing asset, the SDR or Special Drawing Right, was a "facility" or "reserve asset" created by the members of the IMF in 1968 as a substitute for gold. It was initially given a gold guarantee by members of the Group of Ten, which would have made it extremely valuable today; however, its gold guarantee was stripped away in the early 1970s when the price of gold soared, and ever since the SDR has floundered as an important component in the international monetary system. Later in the 1970s, when the Second Amendment to the Articles of Agreement, which endorsed managed flexible exchange rates, was enacted, it was decided to emphasize the SDR as an asset and de-emphasize gold; to further this end both the IMF and the US Treasury sold part of their gold holdings. The other countries, however, held onto their gold and experienced as a result reaped huge (if unrealized) capital gains when the price of gold soared in the late 1970s..."

"...The gods changed but the principles stayed the same! Just look at the Masonic hocus-pocus that still remains on our dollar bills! "In God We Trust" introduced on our dollar bills in 1862 when their gold backing was dropped...."

"...When the international monetary system was linked to gold, the latter managed the interdependence of the currency system, established an anchor for fixed exchange rates and stabilized inflation. When the gold standard broke down, these valuable functions were no longer performed and the world moved into a regime of permanent inflation. The present international monetary system neither manages the interdependence of currencies nor stabilizes prices. Instead of relying on the equilibrium produced by automaticity, the superpower has to resort to "bashing" its trading partners which it treats as enemies..."

"...Recovery from the end of the Cold War has been far more disruptive than recovery from the end of the most devastating hot war in history..."

"...It is inappropriate to speak of a "Bretton Woods system." The conference at Bretton Woods, New Hampshire, in 1944 did not create a new international monetary system. Rather, it created two new international institutions, the IMF and the World Bank, were set up to manage international interdependence in the international financial system and provide a supranational veneer for the anchored dollar standard. As Joan Robinson once said, shrewdly: the IMF is "an episode in the history of the dollar."..."

..."A Theory of Superpower Influence 
Historically, whenever there has been a superpower in the world, the currency of the superpower plays a central role in the international monetary system. This has been as true for the Babylonian shekel, the Persian daric, the Greek tetradrachma, the Macedonian stater, the Roman denarius, the Islamic dinar, the Italian ducat, the Spanish doubloon and the French livre as it has for the more familiar pounds sterling of the 19th century and the dollar of the 20th century. The superpower typically has a veto over the international monetary system and because it benefits from the international use of its currency, its interest is usually in vetoing any kind of global collaboration that would replace its own currency with an independent international currency..."

"Like the pound, most currencies lost their gold base in the 1930s, thus removing an important convertibility constraint on money supplies. Nevertheless, until 1971, the system did preserve an indirect link to gold through fixed exchange rates with the anchored dollar. It was the severing of the link to gold in 1971 and the movement to flexible exchange rates in 1973 that removed the constraint on monetary expansion."

"...The newly elastic international monetary supply was now made to order to accommodate the supply shock of the oil price spike at the end of 1973. The quadrupling of oil prices created deficits..."

"After 1971, when the Golden Anchor was lifted, inflation control had to depend on the slender reed of Federal Reserve discipline. The result was pandemic inflation that has all the characteristics of becoming a permanent feature that future generations will have to cope with."

A Historical View
[Mrt: the whole paper is so good so it should be pasted in full especially this part which should be highlighted word by word, respecting copyright picking only relevant to Freegold.]

Gold is going to be a part of the structure of the international monetary system for the 21st century, but not in the way it has been in the past. We can look upon the period of the gold standard, the free coinage gold standard, as being a period that was unique in history, when there was a balance among the powers and no single superpower dominated.
Let me just conclude with a final thought: Bismarck once said that the most important event in the 19th century was tha t England and America spoke the same language. In the same spirit, the most important event in the 20th century was the creation of the Federal Reserve System, the vehicle for the spread of the dollar. Without that, you would not have had the subsequent monetary events that took place. Let us hope that the most important event of the 21st century will be that the dollar and the Euro learn to live together."

Source: The International Monetary System in the 21st Century: Could Gold Make a Comeback?

[Mrt: Advance "connect dots" reading]

RM - Overview of monetary standards by R.Mundell & more

The Middle Income Trap
Robert Mundell
Columbia University
May 6, 2011
ADB Conference
Hanoi, Viet-Nam

Extracted from pg.15:

Date------------System-------------Reserve Asset-------Leaders

1803-1873---Bimetallism-------Gold & Silver--------France, Britain.

1873-1914---Gold Standard------Gold and £---------Britain,

1915-1924---Anchored $ St.----Gold and $----------U.S., Britain, France

1924-1933---Gold Standard-----Gold,$ and £--------US, UK, France

1934-1971---Anchored $ St.----Gold and $----------U.S., G-10, Britain

1971-1973---Dollar Standard---$------------------------U.S.

1973-1985---Flex. Ex. Rates---$, DM, £-------------U.S., Germany, Japan

1985-1999---Man. Ex. Rates----$, DM,--------------U.S., G-5, IMF

1999-2011---Dollar and Euro---$, €, ¥,---------------U.S, EMU, IMF

2011-?-------Currency Areas----$, €, ¥, £, C¥,-------US, EMU, China

[MRT: adding a possible scenario

2014-?---Freegold---GOLD + SDR as complementary reserve---EMU,Ch,SA,In/ All]


Some great parts from which I quote:

Part: The International Monetary System

Re-Forming an International Monetary System
• For most of world history there has been an international monetary system to which countries could belong...
• That broke down in 1971.

The Dollar
• The Dollar took over from Gold as the principal international money in the inter-war and post-war periods.
• The Bretton Woods System of fixed exchange rates tied to the convertible dollar broke down in 1971.
• Since then the dollar as continued as the closest thing to a world currency there is, but less so as time passed.

Dollar Less Effective Because of the Rise of the Euro
• Already in the late 1970s with the formation of the EMS in Europe a competing currency area was forming around the DM.
• The creation of the euro in 1999 confirmed that split.
• The Dollar no longer represents the mainstream of the world economy.

Split in the Mainstream
• The IMS is less effective now because there are two world currencies, the dollar and the euro.
• It would not be so bad if the exchange rates were fixed or fluctuating within small margins, but the dollar-euro market gyrates like a casino.
• Poor management by the Fed, ECB and the IMF!

Effect on Asia
• If reform cannot be achieved, Asia should go ahead, as Europe did, with forming its own Asian Monetary System.

• The SDR was a good idea when it was created as a value of gold, but it has become not much more than a toy since 1974.
• As long as the dollar-euro rate fluctuates wildly, there can be no international monetary system.
• Basic reform would have to stabilize the Dollar-Euro Rate
& more...

Source: Monetary standards, pg 15

[Mrt: Lets be realist about where we are]

Monday, June 6, 2011

02 Gold history in Europa search reading

The Europa search page is an excellent tool.
Search word "gold":

There are many nice docs revealed here, good to research, e.g. history how investment gold got its 0% VAT in EU..

Many Finds e.g.:

1. Basics:

2. One from many explanations:
The European flag – 12 gold stars in a circle
(nice - - "12 ounces in a troy pound")

3. Nice doc:

A return to the convertibility principle?
Monetary and fiscal regimes in historical perspective.
The international evidence by Michael D. Bordo and Lars Jonung

4. Nice doc:
A long term perspective on the euro; Michael Bordo and Harold James

Sunday, June 5, 2011

02 LBMA on Bank of England reading

The London bullion market is a wholesale over-the-counter market for the trading of gold and silver. Trading is conducted amongst members of the London Bullion Market Association (LBMA), loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners. ~wiki

So, lets then have some simple reading at Bank of England, search word "lbma":

Questions regarding gold retained by the Bank

Gold Holdings

"Gold at the Bank of England is held on behalf of our customers. This can be subdivided into two categories. First, reserves are held in a government account administered by HMT Treasury (HMT), called the Exchange Equalisation Account (EEA). The Bank acts as HMT’s Agent for the daytoday management of the EEA.

Second, gold is held on behalf of its other customers (ie other than UK Government), including foreign central banks and brokers. All information below relates to EEA gold only:
‘In what form is the gold retained by the Bank of England?’ and ‘Is the retained gold in ingots, coins or other form?’..."


"...‘Does the Bank of England have assay certificates for the gold that it retains?’
None of the gold held by the Bank on behalf of the EEA has assay certificates...."

Speech by Graham Young at the London Bullion Market Association ...

Speech given by
At the London Bullion Market Association Annual Conference, Lisbon; Tuesday 3 June 2003


"1 This morning I would like to talk about the role of the Bank of England in the gold market. One element of that is our management, on behalf of the Government, of the UK’s official gold reserves, and I’ll be saying a little about that. But I will be saying more about other aspects of our involvement in the gold market that may be less familiar to some people in the audience here. In particular I will describe the Bank’s provision of custodial and account management services to central banks and to commercial firms active in the London market, reflecting our role in seeking to ensure the efficiency and effectiveness of the UK financial sector. And I will explain the Bank’s contribution to the self-regulation of the wholesale gold market. In all these areas we cooperate closely with the LBMA, and I shall explain how that relationship functions..."