But what if an entire continent uses the same currency (like the US or the Eurozone)? Then the imbalance between regions within that area must be made up by labor and capital flows without the assistance of currency differentials. This is less efficient.


The costs for trying to plan for and run an international company with nationwide stores, suppliers or factories (preferably all) would turn into a nightmare if there were 10,000 different currencies.

The costs for trying to plan for and run an international company with nationwide stores, suppliers or factories (preferably all) would turn into a nightmare if there were 10,000 different currencies.

I certainly understand the attraction of a single currency and, historically, I'm sure this has had a lot to do with the economic dominance of the US.

But I'm wondering if we are overlooking the ability of computers to smooth out these transactions. When I went to Mexico this January, I tried to refrain from using my Mastercard. But when I got home, I found out that the few times I did, I got a more favorable currency rate that the one I got from the "cambios". And it was certainly no harder to use my card at the Walmart in Cancun than at the one here at home.

Imagine a purchasing agent looking for the best price on a commondity. A computer could use real-time currency rates to display the best prices from all possible suppliers.

Peter

Peter....
Not to be unfriendly but there are a couple glaring inconsistencies in you

AG explained that having a gold standard (where every currency has a stated value in gold) is like having the same currency all over the world. .....

This is the usual Greenspan double-speak, if that is what he said. Nobody in the hard money movement says that "every currency has [should have]a stated value in Gold"

The point is that Gold as the currency that no one country can manipulate would give a "hitching post" for all national currencies to be measured against. They would still fluctuate.

So AG is arguing against a world-wide gold standard because it would act like a single world-wide currency and be less efficient at mediating economic imbalances.

No ,,,, what I think he is saying is that if there was a Gold standard, he would be out of a job !!! And he much prefers being the monetary "cult hero".

Wayne

WayneOwl: The point is that Gold as the currency that no one country can manipulate would give a "hitching post" for all national currencies to be measured against. They would still fluctuate.

How would they fluctuate?

When gold was worth $32 per ounce by law in the US, it meant that each US dollar was worth 1/32 oz of gold. As long as the US is willing to exchange dollars for gold at this rate, no trader is going to give a different price.

I understand that each government could periodically adjust the rate at which its currency trades for gold. Is this what you mean?

BTW, I don't like fiat currencies.

Peter

How would they fluctuate? ...... I understand that each government could periodically adjust the rate at which its currency trades for gold. Is this what you mean?

The free market would set the rates. If a country printed more currency than its GDP could support, it would become debased.

Bananas are damned near free in Guatemala ( or wherever )..... they're 59 cents a pound around here.

I cannot explain it as well as others ,,, and certainly there's no room to do it here.

Have you ever taken a look at www.gata.org or www.mineset.com

Thos guys are the experts.

Wayne

The free market would set the rates. If a country printed more currency than its GDP could support, it would become debased.

Where does gold come in?

I looked at the GATA site but saw no paper explaining how a gold-based currency would fluctuate.

Peter

http://www.goldinstitute.org/news/pr8nov99.html

But I'm wondering if we are overlooking the ability of computers to smooth out these transactions. When I went to Mexico this January, I tried to refrain from using my Mastercard. But when I got home, I found out that the few times I did, I got a more favorable currency rate that the one I got from the "cambios". And it was certainly no harder to use my card at the Walmart in Cancun than at the one here at home.

You have to plan ahead, and then you have to hedge. Imagine the amount of effort and cost required to hedge the fluctuation in 10.000 currencies.
The size of .he individual currency markets is relatively small so in many cases you would constantly have to worry about liquidity.
What you would definitively need would be a worldwide reserve currency.

I can understand what the guy who called for the city-region currency wants, but I wonder if he has been saying this as anything more than a theoretical concept to make some point or other.

PR:

She argued that when one region slows down, changes in the exchange rate of its currency provide an automatic correcting mechanism. The declining currency eventually encourages exports and attracts new capital investment.

That is a pretty broad assumption that I don't entirely agree is true.

Yes the devaluation may have the effect of helping a slowing economy. However, I don't see it as a major effect. It's more of a helpful after-thought.

I don't think any nation is going to rely on the devaluation of its currency abroad to spur exports and revive it's economy. It will help, no doubt. But other steps need to be taken.

Splotto

PR:

When I went to Mexico this January, I tried to refrain from using my Mastercard. But when I got home, I found out that the few times I did, I got a more favorable currency rate that the one I got from the "cambios". And it was certainly no harder to use my card at the Walmart in Cancun than at the one here at home.

That's because big firms who deal in huge exchanges get better rates then you and I at the McDonalds in Mexico.

Splotto

don't think any nation is going to rely on the devaluation of its currency abroad to spur exports and revive it's economy.

I have to disagree. Imo, a worldwide round of "competing currency devaluations" has already started. That's what is causing all the recent talk about 'deflation'.

e.g. Bank of Japan has stepped into the markets 3 times recently and bought billions of US Dollars with Yen precisely because they felt a rising Yen was hurting their exports.

WO:

I have to disagree. Imo, a worldwide round of "competing currency devaluations" has already started. That's what is causing all the recent talk about 'deflation'.

I don;t doubt that there is an effect. I just don't think anyoe will rely on that alone to solve our problems.

Splotto

Is not this
She argued that when one region slows down, changes in the exchange rate of its currency provide an automatic correcting mechanism. The declining currency eventually encourages exports and attracts new capital investment
what we have NOW?

We have a high currency, with flight of capital and jobs to 2nd/3rd world countries (i.e. 'lower' currencies), so that THEIR exports increased and economies are improving?

The problem I see with this statement:
So AG is arguing against a world-wide gold standard because it would act like a single world-wide currency and be less efficient at mediating economic imbalances.

Is not the Dollar the de facto standard for the GLOBE? As such is it not, then, in essence a single world-wide currency and therefore less efficient at mediating economic imbalances?

IIRC, US support for the Euro includes this viewpoint, since it gives the 'consumer' an alternative.

ralph

rainphakir: Is not the Dollar the de facto standard for the GLOBE? As such is it not, then, in essence a single world-wide currency and therefore less efficient at mediating economic imbalances?

The US Dollar is a worldwide currency (recognized and accepted everywhere) but the exchange rates are not standard. Most countries allow the value of their currencies to float against the dollar (with occassional interventions). China is a current exception with 8.27 Yuan Renmimbi to the dollar. I note that it seems to float a small amount.
http://www.cdi.com.cn/english/bbs/booklist.asp?topicid=215&classid=5

Argentina was a former example fixing one Peso as equal to one Dollar.
http://www.wtexec.com/lf021599.html
http://www.emta.org/keyper/anidjar.pdf
http://www.cato.org/current/argentina/pubs/hanke-01-05-02.html

Peter

Hi Peter
the dollar is a currency
but it is also the medium used to purchase energy, the so-called Petro-Dollar

http://www.wtrg.com/prices.htm
shows that since 1867, the avg price of oil is ca. $20/bbl - although the price has on occasion fluctuated some, for the most part, it has remained between $15 and $30/bbl. FWIW prices greater than $30/bbl apparently make alternatives economically feasible.

Energy is the means by which economies function and all of the worlds significant economies operate on oil and oil products (yes coal is important in some areas). Since oil trades in Petro-dollars at a fairly stable level, does this not make the dollar the defacto standard?

We just freed the Iraqi's and Afghan's from oppressive regimes which serendipitously opened up control of some major oil reserves and transport pathways. Some even say these actions reinforce the Petro-Dollar and help stabilize it at less than $30/bbl.

When the world 'went off' the gold standard - what stepped in to fill the void?

TIA
ralph