In Which Bob Zoellick Makes His Play for the Stupidest Man Alive Crown
The last thing that the world economy needs right now is another source of deflation in a financial crisis. And attaching the world economy's price level to an anchor that central banks cannot augment at need is another source of deflation--we learned that in the fifteen years after World War I.
Which is why Bob Zoellick says that we need it.
Alan Beattie watches the intellectual train wreck:
Zoellick seeks gold standard debate: Leading economies should consider readopting a modified global gold standard to guide currency movements, argues the president of the World Bank. Writing in the Financial Times, Robert Zoellick, the bank’s president since 2007, says a successor is needed to what he calls the “Bretton Woods II” system of floating currencies that has held since the Bretton Woods fixed exchange rate regime broke down in 1971. Mr Zoellick, a former US Treasury official, calls for a system that:
is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account.... 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.”
They do not. They simply do not. That is not true. Markets are using gold as a speculative asset and a hedge. They are not using it is a medium of exchange, a unit of account, or a safe store of nominal value.
He really may be the Stupidest Man Alive.
Alan Beattie politely says:
Although there are occasional calls for a return to using gold as an anchor for currency values, most policymakers and economists regard the idea as liable to lead to overly tight monetary policy with growth and unemployment taking the brunt of economic shocks...