Kremlin to pitch new global currency at G20 summit

[AZRedhawk44]

http://www.themoscowtimes.com/article/600/42/375364.htm

Duh... howabout gold?

The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.

The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a "superreserve currency accepted by the whole of the international community," the Kremlin said in a statement issued on its web site.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

The Kremlin has persistently criticized the dollar's status as the dominant global reserve currency and has lowered its own dollar holdings in the last few years. Both President Dmitry Medvedev and Prime Minister Vladimir Putin have repeatedly called for the ruble to be used as a regional reserve currency, although the idea has received little support outside of Russia.

Analysts said the new Kremlin proposal would elicit little excitement among the G20 members.

"This is all in the realm of fantasy," said Sergei Perminov, chief strategist at Rye, Man and Gore. "There was a situation that resembled what they are talking about. It was called the gold standard, and it ended very badly.

"Alternatives to the dollar are still hard to find," he said.

The Kremlin's call for a common currency is not the first in recent days. Speaking at an economic conference in Astana, Kazakhstan, last week, Kazakh President Nursultan Nazarbayev proposed a global currency called the "acmetal" -- a conflation of the words "acme" and "capital."

He also suggested that the Eurasian Economic Community, a loose group of five former Soviet republics including Kazakhstan and Russia, adopt a single noncash currency -- the yevraz -- to insulate itself from the global economic crisis.

The suggestions received a lukewarm response from Foreign Minister Sergei Lavrov on Saturday.

Nazarbayev's proposal did, however, garner support from at least one prominent source -- Columbia University professor Robert Mundell, who was awarded the Nobel Prize in 1999 for his role in creating the euro.

Speaking at the same conference with Nazarbayev, he said the idea had "great promise."

The Kremlin document also called for national banks and international financial institutions to diversify their foreign currency reserves. It said the global financial system should be restructured to prevent future crises and proposed holding an international conference after the G20 summit to adopt conventions on a new global financial structure.

The Group of 20 industrialized and developing countries will meet in London on April 2.

[Zardozimo Oprah Bannedalas]

It would probably be easier to trust various nations with nukes than to trust them to print currency in a responsible manner.

[Standing Wolf]

The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.

Yeah. Right. Maybe we could call it the "esperanto."

[MicroBalrog]

So Rothbard was right?

[209]

I volunteer to build a mint and print it.  I'll call the new bill a "209". 

Who wants in? 

[Jocassee]

Someone tell me if I'm wrong...don't these G(number here) summits just invite the Russians to be nice? Does anyone actually take them seriously?

[Balog]

Someone tell me if I'm wrong...don't these G(number here) summits just invite the Russians to be nice? Does anyone actually take them seriously?

Actually I think they do. Russia is still a pretty strong force in the world, and with the rapidly weakening American presence in the world that role is only likely to increase.

[Jocassee]

Actually I think they do. Russia is still a pretty strong force in the world, and with the rapidly weakening American presence in the world that role is only likely to increase.

Do they continue to take them seriously when they make these kinds of noises, or is it just Crazy Putin trying to draw attention to the fact that the dollar is weakening? In short is this a publicity stunt?

[Balog]

Do they continue to take them seriously when they make these kinds of noises, or is it just Crazy Putin trying to draw attention to the fact that the dollar is weakening? In short is this a publicity stunt?

I'd imagine a lot of the nations in the Eu who've agreed to a common currency might like the idea of a global currency. Opposition to one world .gov is less strong in many quarters than you seem to think. Many of the You'reapeons would welcome it with open arms.

[lupinus]

Duh... howabout gold

How about not?

Gold, like any other item, has only what value people place on it.  It no more establishes its own value then silver, clam shells, or the American dollar. High demand low supply or low supply high demand can inflate or deflate gold value just as easily as other currency.  We also have control over our own printed currency, gold is available the world over and all it takes is one country with a large pile of it to flood the market.

I'd rather have responsible printing of dollar bills then rely on stamping some little pieces of metal.

[MicroBalrog]

.  We also have control over our own printed currency,

No, you don't. A group of unelected officials does.

[Bigjake]

No, you don't. A group of unelected officials does.

They don't have the slightest idea what they've unleashed.  Niether did the previous administration.

[Gewehr98]

Duh... howabout gold?

No.  There was a reason we took ourselves off the gold standard, lest we forget.

[MicroBalrog]

No.  There was a reason we took ourselves off the gold standard, lest we forget.

There was also a reason you banned alcohol.

[seeker_two]

No.  There was a reason we took ourselves off the gold standard, lest we forget.

Doesn't mean it was a good one....

[Gewehr98]

What, you didn't read Lupinus' post above?

"Those who forget history are doomed to repeat it..."

[MicroBalrog]

What, you didn't read Lupinus' post above?

"Those who forget history are doomed to repeat it..."

I have read Lupinus' post above. I, however, disagree with it. There are several point in which he is wrong:

1.It is correct that the price of gold varies. The price of everything varies in a free market. However, I'd rather have something vary as part of supply and demand, rather than a process of government regulation.

2.A Central Bank is not just a place where they print money. In effect, it is a regulatory body that controls the entire banking system, and, in effect, the economy.

3.Most money is not green pieces of paper. The green pieces of paper constitute a mere fraction of the money supply altogether. Most of the money supply is what economists term 'inside money' – derivatives, loans, and obligations maneuvering inside the banking system. For the central bank to control inflation, it must control these as well. In a gold-standard (or free banking) system, central banks would not control these, as central banks would not exist. There would be no central entity capable of engineering a screwup on this scale.

[Gewehr98]

Maybe if gold hit $2K/ounce.

There's really not enough gold in the world right now to back up the U.S. economy, which is estimated to be several trillions of dollars in overseas debt alone.

Fort Knox holds a whopping $182 Billion. 

See where this is going?

http://useconomy.about.com/od/monetarypolicy/p/gold_standard.htm

[MicroBalrog]

There's really not enough gold in the world right now to back up the U.S. economy, which is estimated to be several trillions of dollars in overseas debt alone.

And that is entirely irrelevant, for three reasons:

1.Most of the US economy today is NOT greenbacks, as you full well know. In a gold (or any other non-fiat economy), it wouldn't have to be entirely backed by physical gold bricks either.
2.Imagine the jump gold prices would take if any one nation announced even a partial return to the gold standard.
3.I am not as much an advocate of the gold standard in the sense it existed before 1913, as I am an opponent of the current system. While it may be easy for you to oppose the crazed, semi-literate ramblings of SOME opponents of the fiat system, I recommend that you familiarize yourself with the work of more qualified anti-fiat economists before  defending the fiat system.

[lupinus]

1.It is correct that the price of gold varies. The price of everything varies in a free market. However, I'd rather have something vary as part of supply and demand, rather than a process of government regulation.

You'd rather use as currency a medium whose value can be changed very easily by another country?  Inept as those handling the money now, I'd rather have them doing so then Russia or China.  At that point any country with a large enough economy to do so can flood the market with gold, therefore devaluing it, therefore devaluing our currency.

2.A Central Bank is not just a place where they print money. In effect, it is a regulatory body that controls the entire banking system, and, in effect, the economy.

As long as the market remains a free one, it's hard to argue the government can regulate with paper money any more easily then with a gold standard.

3.Most money is not green pieces of paper. The green pieces of paper constitute a mere fraction of the money supply altogether. Most of the money supply is what economists term 'inside money' – derivatives, loans, and obligations maneuvering inside the banking system. For the central bank to control inflation, it must control these as well.

No, it only has to responsibly control how much it prints.  Money doesn't magically appear from thin air, if the presses aren't turned on, no more money pumped in, inflation is kept low.  There doesn't need to be direct control over the entire economy in order to avoid massive inflation.

There would be no central entity capable of engineering a screwup on this scale.

Sure there would.  The government could just as easily screw up our economy if it had a gold standard.  As could any other entity with a large supply of gold to flood the market.  That is the very heart of the problem in a system that is based on the value of a commodity that is traded openly on the world market.

1.Most of the US economy today is NOT greenbacks, as you full well know. In a gold (or any other non-fiat economy), it wouldn't have to be entirely backed by physical gold bricks either.

While there may not be one physical bill for each dollar out there, money is money.  Regardless if it is a piece of paper, a metal coin, or a piece or code in my banks computer system.  All the forms represent the same thing- a certain amount of whole or partial dollars.  On a gold standard money would need to either be physical piece of gold or something representing a certain amount of gold held in reserve by the issuer (if that note is paper money or electronic in a bank doesn't matter).  While it wouldn't need to be a piece of gold it would need to represent a piece of gold somewhere....otherwise it isn't a gold standard.

Imagine the jump gold prices would take if any one nation announced even a partial return to the gold standard.

Imagine the dump in gold prices would take if any one nation announced a huge amount of gold released onto the market creating a huge and sudden supply.

3.I am not as much an advocate of the gold standard in the sense it existed before 1913, as I am an opponent of the current system.

And I'm not saying our system is perfect, I'm saying a return to gold (or any other commodity backed) standard is dangerous and foolish.

[Gewehr98]

See above, as well as links I've provided.

I'd have to agree with Lupinus, as well as several other educated financial people warning about the fallacies of returning to a bona-fide gold standard.  Fiat money ain't the greatest, but compared to going back to the gold standard?  Oy-Veh!

I know, it's really easy to sit there in Israel and blather about how things work here in the U.S.   

Do you even know what the leading currency traded in world markets is?

It's the dollar.  Not the shekel, not the Euro, but the almighty dollar, and the world market is inexorably tied to it.

Something tells me that you're in for a hell of an educational deal in the near future.

When you get to CUNY, ask your professors about it, ok?  Give them some recommendations.

Maybe you can get your student aid in gold...

[MicroBalrog]

No, it only has to responsibly control how much it prints.  Money doesn't magically appear from thin air, if the presses aren't turned on, no more money pumped in, inflation is kept low..

Inflation is not merely a function of the physical increase in the amount of greenbacks. Loaning out large amounts of 'inside' money is also an inflationary process.

While it wouldn't need to be a piece of gold it would need to represent a piece of gold somewhere....otherwise it isn't a gold standard.

No, this is not necessary at all. Gold can be used as the basis for the M0 money supply, while derivatives control the rest of the process.

if any one nation announced a huge amount of gold released onto the market creating a huge and sudden supply.

And they cannot rather easily screw over your economy by dumping their dollars, or even refusing to accept them as payment for their oil (as Iraq has threatened to do in the past)?

I know, it's really easy to sit there in Israel and blather about how things work here in the U.S. 

I don't believe I was walking about the US specifically. Nor is magical economic knowledge conferred by stepping on your sacred soil. I don't know about you, but I'd think learning economics is sort of useful.

[lupinus]

Inflation is not merely a function of the physical increase in the amount of greenbacks. Loaning out large amounts of 'inside' money is also an inflationary process.

And that money comes from where?  To increase money you need to increase the amount of dollars in the system.  Otherwise, it isn't generating new money.  Freeing up money perhaps, but that is by extension controlled by the amount of money available in the first place.  Gold can come from anywhere and any country, dollars are a tad more limited in source.

No, this is not necessary at all. Gold can be used as the basis for the M0 money supply, while derivatives control the rest of the process.

If one unit of money does not = one unit of gold then it isn't tied to the gold, and therefore isn't part of a gold standard.  A gold note has to be backed by it's equivalent in gold, doesn't mater what shape size or form that note is.

And they cannot rather easily screw over your economy by dumping their dollars, or even refusing to accept them as payment for their oil (as Iraq has threatened to do in the past)?

Sure they can screw with it's value on the world market, never said it can't be done.  But it does not have the same direct connection as having a commodity with a value that can be directly changed on a large scale by another nation.  A one dollar gold note represents one dollar of gold, and if there is a huge supply of gold on the market that means it's worth less due to supply and demand.  A dollar currently represents....a dollar and while it's value can be influenced by world acceptance, other nations can not influence it's value by toying with the value of the commodity a note would represent.

I don't know about you, but I'd think learning economics is sort of useful.

Exactly, which is why most everyone but the ideological agree the gold standard is outdated, foolish, and more dangerous and open to influence by outside forces then our current system..

[makattak]

Alright, for the gold debate:

Put simply, gold is not the cure-all to the problems of a fiat monetary system.

Nor is it an overly dangerous means of regulating your currency.

A gold standard simply has a different set of problems than our current monetary system.

Personally, I'd prefer the Friedman suggestion of a money supply that grows by 3% each year.

(Actually, I'd just prefer not to have the government involved in the money supply at all, but since we're VERY unlikely to ever accomplish that politically, the Constant Growth Rate money supply is an acceptable solution.)

[AZRedhawk44]

  A one dollar gold note represents one dollar of gold, and if there is a huge supply of gold on the market that means it's worth less due to supply and demand. 

Quit thinking in terms of dollars.  Think of grains/grams/ounces/whatever of gold.  You lose every time you fire up currency conversions, even if it is done between FRN's and commodities. 

A dollar currently represents....a dollar and while it's value can be influenced by world acceptance, other nations can not influence it's value by toying with the value of the commodity a note would represent.

Other nations can dump their FRN T-bill reserves onto the open market and hurt us pretty badly.  A lot worse than they can do to gold.  If China dumped T-bills, it would hurt our currency and increase the value of theirs.  If they dumped gold onto the market, it would hurt all currencies.  Including their own.  MAFD - Mutually assured financial destruction.