[LINK] We live in interesting times.... Or - is the goldstandard really extinct.

Tom Koltai tomk at unwired.com.au
Mon Oct 20 16:13:29 EST 2008


Jim et al,

Regulation is fine thing, if we want to build a more top-heavy govt
infrustructure. My own slightly cynical experience is that Regulation is
written by lawyers with deliberate loopholes so that other lawyers can
find the loopholes.

If we were operating on the gold standard, you could gamble with other
peoples money, but it would be an iou (call warrant) drawn against an
actual gold deposit certificate.
And unlike derivatives which allow for the accumulation (read
securitisation) of the forward interest (eg [Ex]Lehman Brothers Modus
Operandi) there is only one gold certificate, so if you lose your
gamble, eventually the winner will call on the iou.

In 1976, when the US departed from the Gold Standard, derivatives were
born by the simple method of you going to your bank and applying for a
mortgage.
Until 1976, the bank could only issue mortgages against the gold it had
in reserve or failing that - the gold the reserve bank had in reserve.

A consequence of the departure from the gold standard is that the price
of gold is trading approxiuately 1600(USD) per ounce under its real
value.

These days, each and every mortgage instrument (avge mortgage 2004-2007
= 178,000) equals .00083 % inflation on the cpi. In other words, every
50,000 mortgages = 4% CPI. 
Therefore, whilst I am not against mortgages per se, I am against the
concept of securitising the (future value)or basically the cause of the
cpi index rise and calling it capital to justify higher lending.

The sub-prime mortgage crisis was caused by calculating the forward
property values too far into the future. Basically a Derivative on top
of a derivative.
Realth wealth can only be made by manufacture/construction. Any system
that allows for the markets to calculate security based on a probable
future value is bound to lose. 
Australia is a resource rich country, We can afford to reinvest in the
gold standard to protect the Australian Dollar. 
It wouldn't be that hard to do - e.g. 30% of all gold mined in the
country to be lodged with the reserve bank in lieu of taxes. The
Australian dollar would be balanced within two years - never again to
crash because of derivatives. 

Just for the record, I am also against the "trickledown or trickle up
effect ala Clarke and Dawe ;-)

Tom



-----Original Message-----
From: link-bounces at mailman1.anu.edu.au
[mailto:link-bounces at mailman1.anu.edu.au] On Behalf Of Birch Jim
Sent: Monday, 20 October 2008 2:03 PM
To: link at anu.edu.au
Subject: Re: [LINK] We live in interesting times.... Or - is the
goldstandard really extinct.


Tom

I don't see how reverting to the gold standard would prevent greedy
people from gambling with other people's money.

Regulation might slow them down.

Jim
     

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