Monday, July 18, 2011

PT - Monetary Episodes From History

Full article here: The following is collection of short articles on the history of money

Gold at the junction of monetary systems

"...A previously successful credit based system will eventually collapse under the weight of its historical circumstances and the excesses of credit which it is sucked into at the time of its greatest success. As the process of collapse unfolds one monetary store after another demolishes savers.  If they hold notional long term obligations like pensions the underwriters fail.  If they hold institutional debt the issuers fail.  If they hold bank notes and the banks fail It takes very few failures before the population starts to see risk in every credit based construct. Their faith in their institutions evaporates, and they become acutely aware of the dangers of anything intangible, and anything whose supply can relatively easily be expanded. This is when they begin to think obsessively about things whose supply is subject to some fundamental limit..." 

Gold as a money of choice

"...Gold based money - even for economic superpowers - is temporary.  It disappears from circulation and seeks out the next great producers - to whom it will generally gravitate in settlement of new international trading debts.

Curiously the strongest industrial exporting nations of the last 50 years (notably Japan and Germany) have chosen to accumulate US dollars rather than gold, and now, instead of possessing bullion within their own borders these great exporters now own substantial slices - apparently some 40% - of the capital stock of foreign countries (particularly the United States) which buy their exports.

This is a break with ordinary patterns of international trade.  It indicates that Germany and Japan are trusting the people of the USA to defend foreigners' property rights over American self-interest..."

"...There is evidence that the Arabian oil exporters show a growing appetite for gold, with Dubai having comfortably the largest per capita gold inventory in the world, and Saudi Arabia having a reducing tolerance for dollars.  Equally interesting is a growing Chinese demand..." 

Source: Money for the powerful

[Mrt: How interesting that: "Paul Tustain is the editor of and director of BullionVault". This reminds me of Alar Tamming and Tavex story :o)]

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