Money & Gold
It’s pretty interesting reading the various reactions and commentaries on the internet these days following the announcement of how the Fed will be implementing QE2 – I mean, how the Fed will be running the printing press, of course. There is absolutely a larger and more harsh reaction to this round of quantitative easing than the previous one.
Interestingly, some big names in the financial world are even making noise about returning to a gold standard. Coupled with this rhetoric in many cases are calls to end the US dollar as the reserve currency.
I believer we are living in very interesting times as Americans. There are many interesting developments that might play out in the coming years, and we will have a front row seat. For example, what happens if the dollar is no longer the reserve currency? What would replace it? How correlated is US military action with “currency wars”? How will China drive the discussion?
The US military power has been a major factor in ensuring the US dollar maintains reserve currency status, but a country like China will not play by the same rules. The US has no interest in engaging the Chinese militarily so China might be free to chart its own course with regards to its currency.
While I’m absolutely convinced that the fiat system currently in place is deteriorating, I’m not quite sure a traditional gold standard is the best solution – although, it is clearly better than the current system. I like Ron Paul’s approach which is to let money compete against each other. Allow an open market of “money.” Sort of a weird concept to understand, but it basically means people can determine what is money on their own. Of course, gold, silver and precious metals will be “go to” forms of money, but there might be others. Open markets. No central control No central bankers. Money backed by something. There’s your answer.