Hi Charles,
At 18:59 04/02/02 +1100, you wrote:
(CB)
<<<<
You commented in part in this post that no-one has yet countered your
argument that
(KH)
"the mechanistic aspect will not be sufficiently analysable or understood
until we have a currency system that has constant purchasing-parity across
all countries. This can be either one world-wide currency of known and
constant value (that is, a dependable human unit and also a truly
scientific unit of measurement) or the frictionless exchange of individual
currencies (that is, national currencies not being interfered with by
politicians or central banks"
(CB)
I have not replied before to the rest of this thread, but I would like to
comment on this particular point. While it may be true that such a
currency is needed, it is inconceiveable that such a currency could exist
in isolation. The true value in the world simply cannot be captured in
any one currency.
>>>>
It could, quite easily, by means of equating the value of the currency to a
specific basket of resources (staple foods, for example) or almost anything
which people believe in. It would then be up to the issuing bank to ensure
that the currency maintained this value by dint of having sufficient assets
in reserve -- that is, 100% of any credit issued. In effect, such a bank
would have the same role as a central bank is supposed to have now (unlike
ordinary retail banks which depend on a central bank to rescue them if
there's a run).
(CB)
<<<<
A system of parallel currencies, perhaps with a "frictionless" one at the
top - such as proposed in various places by Bernard Lietaer is conceivable,
but only if we can develop the necessary community currencies to make it
really work.
>>>>
I don't understand what you mean by "community currencies". At the moment,
and ever since the world turned to generalised floating exchange rates in
March 1973, we have a system whereby national currencies are sliding and
slithering against one another in arbitrary fashion according to how much
confidence speculators have in the policies of the respective governments.
This is what Leland Yeager (Prof Emeritus at University of Virginia) says
about this:
" . . . we should be clear about just what is absurd in the existing
system. It is not the free determination of prices on the foreign exchange
market (rates are not *freely* flexible anyway). The absurdity consists in
what those prices are the prices of. They are the prices of national fiat
money quoted in each other, each lacking any defined value. At bottom, the
unit of account in the United States is whatever value the supply of and
demand for cash balances fleetingly accord to a piece of paper, the dollar
bill. The value of each money responds to conjectures about the intentions
of the government issuing it and about that government's ability to carry
through on good intentions. These conjectures are understably subject to
sharp change." ("The International Monetary System in Retrospect", essay in
"Money and the Nation State")
This wouldn't be so bad if there were one or two strong currencies around
to act as pivots. Until fairly recently there were three strong currencies
-- the dollar, the yen and the deutschmark. But the second is on a slide,
probably long term, and the third is now subsumed in a euro which has been
steadily getting weaker ever since it was created. What happens now if the
American economy doesn't pick itself up soon? Despite some optimistic
comments in the last week or so, it's still the case that consumer debts
are very high, business profits are low, Bush is making threats against
four Islamic countries and the biggest business scandal in history, Enron,
is now being investigated. The American economy might be in recession for a
long time yet.
What if speculators move against the dollar in these circumstances? The
dollar could oscillate considerably in the coming years with all the other
currencies bouncing about even more so as a consequence. There's no other
large-scale currency that could stabilise the situation: the ruble has been
out of the count for years, the renminbi is an internal currency and not
exchangeable.
Sooner or later, national currencies would settle down and no doubt the
dollar would remain as the major trading currency as now, but there might
be a heavy price to pay for all this during the interim with many countries
going to the wall. My guess is that if the American economy doesn't pick up
smartly in the next two or three months -- and, like Steve Kurtz on FW
list, I doubt that it will -- then the finance ministers of the OECD are
going to have to organise a new "Bretton Woods" very quickly.
And I wouldn't be at all surprised if a gold or other value-based standard
is adopted -- as Bretton Woods was previously until President Nixon
suddenly reneged on it. In desperate circumstances currencies become real
(in many areas of Afghanistan grain is now the only currency). So we might
find that the American dollar becomes a real anchor, whatever the
condition of the American economy, rather than a pivot which itself is
slithering about.
Keith
P.S. I was intending to reply to your other thoughtful posting ("Work vs
employment") today but your reply above caused this to jump the queue.
__________________________________________________________
�Writers used to write because they had something to say; now they write in
order to discover if they have something to say.� John D. Barrow
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Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED]
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