Hi Keith:
I like this post and the information you bring to awareness. It really is a
shell game until we find a way to determine value of a currency. The reason
it hasn't collapsed yet is perhaps, the fact that most people living today
grew up in the mindset that there was some definitive value like gold in Ft.
Knox that is 'real' value.
It certainly took me a lot of reading and thinking to clear out notions of
how a currency's value is established and I am still not sure I know. I
rather think, most have never thought about it.
Respectfully,
Thomas Lunde
on 2/4/02 9:39 AM, Keith Hudson at [EMAIL PROTECTED] wrote:
> 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
> _________________________________________________
> Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED]
> _________________________________________________
>
>
