Friday, March 23, 2012

The Gold Standard Vs. A Competitive Monetary System

"James Turk and Alasdair Macleod discuss the pros and cons of the gold standard, the benefits of competition between different currencies and the historical role of gold in international monetary systems.

James Turk points out that he is actually not in favour of a classical gold standard as it grants excessive monetary authority to governments and central banks. He prefers free competition between currencies, and thinks that gold has proven itself as the best form of money over thousands of years. He says that gold will always be the ultimate standard for economic calculation.

Both men agree that money should not be a product of governments, as most modern monetary theories advocate, as well as influential people such as Warren Buffett. As a result of on-going debt monetisation and expansion of the money supply, James Turk ultimately expects an Argentinian style hyperinflation. Macleod argues that it will be almost impossible to raise interest rates to re-establish faith in the bond markets because the current debt levels are way too high already.

While James Turk is optimistic that a solution will eventually be found to our financial problems, he expects a serious crisis before gold is reintroduced in one form or another back into the monetary system. Therefore he advises that you should become your own central bank by buying gold and silver as a means of protecting your purchasing power. When buying precious metals one should make sure not to have counterparty risk which is why Turk and Macleod advise buying physical metal only.

In conclusion, James Turk points out the difference between price and value and argues that gold is still undervalued even though the price has risen for 11 years in a row. Talk of a gold bubble is therefore misguided. James is still expecting much higher prices in the future due to on-going money printing. Alasdair also talks about how little investor participation there is in the gold market in comparison with other assets, and points out the lack of speculative buying.

This video podcast was recorded on March 8 2012 following the Mises Europe gold standard conference in Brussels, Belgium."

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