Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
The Eurozone countries have between them over 10,000 tonnes of gold reserves.
There is talk in financial circles that the Eurozone may decide soon to use their bullion to back up the euro, either by redefining the debt-based fiat system and using bullion to voucher for their currency, or by issuing gold-bonds with a low yield, so-by reducing future interest rates payable by the State.
One tonne of gold is currently valued at about $62 million (US dollars), so 10,000 tonnes is worth over $600 billion.
The European Central Bank possesses a further 500 tonnes of gold, then there are the gold reserves of individual European banks, all adding to the initial 10,000 tonnes.
By comparison, Britain has about 310 tonnes of gold reserves, worth around $18 billion.
However, should 1 euro be worth more than 1 pound sterling as a result of a gold-backed euro - or euro bond, this would be beneficial for the UK economy. In fact, extremely beneficial.
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
only if the uk went and started useing the euros,but saying that put me for 50 euro bonds if it ever happens.
Guest 745- Registered: 27 Mar 2012
- Posts: 3,370
Or using gold to back up the return of individual country's currencies
Roomer is the Germans have stockpiled the mark ready for the collapse of the euro
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
the germans usually know what is going to happen in advance, they will have contingency plans in place.
Guest 698- Registered: 28 May 2010
- Posts: 8,664
Last year De la Rue issued a 'no comment' when asked about rumours they had won a contract to provide Greece with the kit to print lots of drachmae.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Ross Miller
- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,706
There are enormous issues with governments moving to any form of "gold standard" hence the fact that it was moved away from and all money is now fiat currency
Some links for your education and edification
http://en.wikipedia.org/wiki/Gold_standard
http://www.econlib.org/library/Enc/GoldStandard.html
http://www.investopedia.com/terms/f/fiatmoney.asp
http://en.wikipedia.org/wiki/Fiat_money
http://dailyreckoning.com/fiat-currency/ - a good history of fiat money and its issues
As an aside the amounts you quote Alex are a drop in the ocean in comparison to western nations current borrowings
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
Yes indeed, Ross, the borrowings of the Eurozone countries by far exceed the value of $600 billion.
But the same paper notes and metal coins are used in the economy many times over and for different transactions simultaneously.
Therefore, as $600 b. equals 450 billion euro, 450 b. gold-backed euro would cover state budgets in the region of trillions of euro. A gold euro would rise on the exchange market and could possibly equal 10 current euro.
So the national debts in Eurozone countries could be converted at a ratio of 1:10 into new (gold-backed) euro.
And there is also the possibility of a combination of gold standard and fiat currency, whereby the initial sum of a new euro in circulation could exceed 450 billion.
That said, the US dollar could go the same way, as America has over 8,000 tonnes of gold stock.
The USA could back the dollar both with gold and strategic reserves of oil and gas, of which they have huge amounts deposited in salt rock-fields both underground on land, and under the seabed near the coast.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
The Gold standard may be coming back any time soon:
In fact, gold is now worth over $1,600 an ounce. During the gold standard, it was worth £35 an ounce.
This means, it would make sense to use gold to back a currency.
From "Before it's news":
"Bloomberg's Trish Regan and Adam Johnson interviewed TCW Group's Komal Sri-Kumar and Bank of New York Mellon's Michael Woolfolk about the risks from currency wars on Bloomberg Television's 'Street Smart.' "
"Trish Regan asks whether there is a danger that "we have massive inflation worldwide for years to come?"
The answer is yes and both agree that inflation is a real risk as is a loss of credibility by central banks.
Komal Sri-Kumar is asked what the solution is and is asked about his Op-Ed in The Financial Times in which he calls for a return to a gold standard."
"He replies that a gold standard today would be no different to "how good it was from 1945 to 1971.
It worked, the world was in prosperity, there was economic growth and there was clearly certainty in terms of what exchange rates were."
"Bank of New York Mellon's Michael Woolfolk says that you could back the dollar with gold as 'the value of gold would have to be astronomically high to back the money supply'."
A gold-backed euro will hopefully lead to a devalued pound, this way our economy would get back on track.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
The gold standard will not return. It is nonsense to suggest it will, the numbers do not add up.
Guest 698- Registered: 28 May 2010
- Posts: 8,664
The gold standard cannot work where there are free markets in either currencies or gold. It would lock countries together in a straitjacket of fixed exchange rates which is the reason the Euro is an abject failure.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
the euro works for me,cant see why we cant have it ourselves.
Guest 653- Registered: 13 Mar 2008
- Posts: 10,540
Your blind-faith in a failed currency is quite amazing Brian. I'm surprised it works for you when it doesn't work for the countries that have it.
Roger
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
It works for some countries Roger. Germany for instance, the weaker Euro currencies are weighing it down so German goods are cheap to sell outside the Eurozone. The opposite is true for the weaker countries, they are less competitive because the currency is too strong for their economies so their goods are too expensive, hence their problems which, of course, have been made worse by the massive deficit spending by their governments. This just proves that such a currency union without a political union does not work.
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
roger,its not blind faith on my behalf,its the goverments failure to commit.
barryw,ye who have blind faith in every think uk,thats this countrys failure.unwilling to adapt and justyfy it.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Failing to commit to that failing currency mmmmmm, how sensible and in fact one of the few things Brown did right.
Guest 745- Registered: 27 Mar 2012
- Posts: 3,370
The euro is dead Brian it's the stupidity of the none elected that's resulting in mass Unemployment in the southern countries
This will usher in extreme left and right, in them nation's political union is unattainable
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
The Eurozone recession is deepening. Latest figures now should that Germany, the main beneficiary of currency union, is in trouble with poor GDP figures, a 0.6% fall in Q4. How much longer can this farce carry on.
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
you eurosceptics are getting worse.it would be better if all 27 countrys where singing from the same song sheet,instead of all this in fighting you eurosceptics are causing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
So explain it then Brian. How are Eurosceptic actually making the Eurozone problems worse? We are not setting the Euro exchange rate, we are not controlling the budgets of the weaker countries, we are not involved in dictating to them their fiscal policy. So please explain yourself.
How also would joining the struggling and failing Euro actually help the UK? To be placed in the straight jacket of a fixed exchange rate would place all the burden of our recession onto other limited economic options. Our floating currency has help protect a lot of British jobs after all.
So do explain how what you mean and how every serious economist disagrees with you. Even the pro-Euro ones are staying very quiet keeping their heads down after all.
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
barry,you have hit the nail on the head,we the uk arnt doing nothing to help only to hinder and bicker over a few quid etc.
