Sunday, January 23, 2011

Is the World Bank President a Gold Bug?

World Bank president Robert B. Zoellick tells Newsweek, pre- the World Economic Forum in Davos, that:
I think gold is already being viewed as an alternative monetary asset because holders of money perceive uncertain prospects in all countries and currencies other than China, and the renminbi is not free for exchange and investment.
This is a hardcore remark about gold. Zoellick does temper this remark, though, by adding:
The antidote is for major economies to pursue sustainable, pro-growth policies based on structural reforms, open trade, and sound money. This is not the same as a gold standard, nor would I recommend a return to that standard or the old Bretton Woods system. We need to move toward flexible exchange rates and autonomous monetary policies for major economies in a new multipolar, international economy. This world economy is likely to evolve toward multiple reserve currencies, with the U.S. dollar still dominant, but not exclusive. This system will need norms of monetary and broader economic behavior with the IMF as a "referee," [and] gold might be an informational, not operational, tool to assess markets' confidence in underlying growth and monetary policies.
My take on his walkback from his initial comment is that what we have here in Zoellick is a man fascinated by gold who is begining to understand its importance, but a man who is also a leader of the top elitist bank.  Thus, he finds himself in something of a straight jacket. He can't just walk into global bankster meetings and advocate gold. It would be like handing Hitler a yarmulke, so he ends up with these half measures and a call for gold as some kind of "informational" unit.

But the key to gold is that it must be used in a fashion where central banks can't monkey with its free circulation as money. Once central banks enter the equation, providing additional input, money again becomes a tool of government for no good purpose. It would be heroic for Zoellick to state this clearly, but I'm not waiting for this or a second sun to appear anytime soon. He is flitting around the edges, but that's where I believe he will stay.

1 comment:

  1. Flexible exchange rates is code for competitive devaluation via mass money printing.