World Bank President Zoellick Clarifies That (a) He Did Not Mean What He Said, and (b) He Does Want to Become the Stupidest Man Alive
If you say on Tuesday that you are in favor of using:
gold as an international reference point of market expectations about... currency values...
you cannot then say on Wednesday that you are:
not proposing to judge whether currencies are undervalued or overvalued by looking at their price in gold...
You cannot say that, that is, unless you really are making a serious run for the crown of Stupidest Man Alive.
Robert Zoellick's Financial Times op-ed was composed of:
Two paragraphs of praise for his patron James Baker as the Greatest Policymaker of All Time (with not a mention of Baker's prime role as creator of the global imbalances with which we now struggle).
Five paragraphs of mush.
A call for a return to some gold-standard-ish international monetary system: "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."
Now he says that anybody who read him as meaning what he said was wrong.
Yglesias » Zoellick Clarifies That He’s Not for a Gold Standard, He’s Just Mumbling Incoherently: We had a lot of excitement yesterday over World Bank President Robert Zoellick seeming to call for a return to a Bretton Woods-style global gold standard system. Today at the G-20 meeting, though, he clarifies that that’s not what he meant. However, he doesn’t seem to be able to explain what it is he is proposing:
Mr. Zoellick said he thinks the coming monetary system will include a number of reserve currencies, including the dollar, euro, yen and, increasingly, the yuan, though he says the dollar is likely to remain “dominant.” He’s deliberately sketchy on the role he envisions for gold, calling it a “reference point” and an “alternative monetary asset.”... His main point, he said, was to point out that the stupendous rise in gold is a signal that markets are uncertain about the stability of the current exchange system. But he said he wasn’t proposing to judge whether currencies are undervalued or overvalued by looking at their price in gold...
I really don’t think Zoellick can blame outside observers for choosing to interpret him as making coherent, albeit misguided, comments rather than just offering up meaningless jibberish. What does this mean? Transitioning, over time, away from near-universal reliance on the dollar as a reserve currency is an important subject. But why mention gold in this context unless you have a real gold-related proposal?