Thoughtful Article On Resurrection Of Gold

The piece is by Martin Hutchinson, in which he discusses the world moving closer to a gold standard. Not a full one, but a quasi-gold standard where gold reserves are built up and used to smooth out the currency price of gold. The example he gives, for the U.S., is: selling some gold when, say, the greenback price rises above $1000 and buying some when the price falls below $900.

The reason for doing so is that inflation doesn't seeem to have the same magic as it used to. Failing that move to a gold tie, the monetarists' monetary rule - limiting increases in a mixture of monetary aggregates to 2-4% annually- could also be used.


The trouble with his example, as hard-core goldbugs know, is any such gold-price targeting leaves a large majority of the currency unbacked by gold. That point doesn't defeat Mr. Hutchinson's plan, as it doesn't depend upon full gold backing, but the lack of backing may lead to a country's reserves being cleaned out entirely. The example of selling into $1000 gold does hint at it.