Quote: (03-01-2017 01:13 PM)Kid Twist Wrote:
Quote: (03-01-2017 01:03 PM)Hypno Wrote:
Quote: (02-28-2017 05:04 PM)Kid Twist Wrote:
I just was reading about the Triffin Dilemma, and was surprised to have never heard of it before. The reason I'm surprised is because in all my reading no one ever mentioned that this in fact was the reason why Nixon took the USA off the gold standard, as the Bretton Woods system could no longer work = outright fiat era.
this is a popular exaggeration by Kenysians.
Nixon took the U.S. off the gold standard because foreigners, especially France, were redeeming dollars for gold, and our gold was leaving the country (permanently). They were doing this because the U.S. had fixed the price of gold at $35, and was even manipulating the free market price of gold to maintain that price, but did not fix the quantity of dollars. As we printed more dollars, people understood the dollar was worth less and so got rid of their dollars for gold.
As for why I say its an exaggeration, this is spelled out in a book called Age of Inflation by a French economist, Jacques Rueff. Thankfully, the book is available in English. Rueff was the person who advised De Gaulle and later Pompidou to redeem dollars for gold. In the book he explains that the problem was the U.S.' deficits and the low fixed price of gold. He also demonstrates that the U.S. could have solved the problem by fixing the price higher, say at $70, and by doing so would have been able to redeem all of the debt held by foreigners. If that sounds radical, realize that FDR first confiscated all gold held by americans and then changed its value from $20 to $25 in 1933; it wasn't until 1975 that Americans could own gold again (apart from jewelry).
You are correct to say that the country with the reserve currency is likely to run trade deficits, but that is not the same as budget deficits and certainly doesn't mean that you can't have gold-backed money at some price (e.g. $70 rather than $35).
Interesting. That's why I posted. But --- the trade deficits go hand in hand with budget ones, even if they don't have to, necessarily. That's because when you control the reserve and can get so much out of it, you as a gov't tend to OVERDO it. Then rich people get even richer. And manufacturing goes away. And some poorer countries get richer, because they are now the ones that make the goods (look at Mexico).
Would you have to constantly have meetings to set a fixed price of gold, however (one higher than the other "real" market)? Why would people even consider your fixed price when there is a real market? You can get back debt, but you lose big time gold, if your set price is that much higher as you stated.
There's always a price. Obviously they don't want to part with the gold. I wonder why ...
deficits - yes, a trade deficit tends to create a budget deficit, but that could be avoided with taxes, either internal or tariffs, or reduced spending. In the U.S.' case, there was no attempt to balance the budget; rather they exploded it with the war in Viet Nam and the Great Society welfare programs.
as for the price of gold, yes, it would adjust often if the U.S. didn't live within its budget. but that is different from saying that Bretton Woods dictated that a gold-backed dollar was impossible. It tends in that direction but that is not to say its impossible. The Kensians are just apologists for deficit spending, etc.