Bankruptcy

Russia and Ron Paul?

By mcbride

These two make for strange bedfellows indeed, but both are now calling for a return to a gold standard, to a greater or lesser degree.  Both China and Russia have called for a new paper currency and now Russia is acknowledging that adding a tie between the paper and gold would help stabilize the new currency. ?Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal?.It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and “Great Society” social spending forced President Richard Nixon to close the gold window in 1971.

The world’s fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible - or less likely - under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank to gradually raise the gold share of foreign reserves to 10pc.

China’s government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the “Bancor” proposed by John Maynard Keynes in 1944.? Link: http://www.telegraph.co.uk/finance/financetopics/g20-summit/5072484/Russia-backs-return-to-Gold-Standard-to-solve-financial-crisis.html

Michael

Full post as published by Texas Lawyer Blog on March 31, 2009 (boomark / email).