Major currencies throughout history have had periods of ascension, dominance and fall from grace.
"Sound as the pound" was a phrase coined, as it were, during the days of the British Empire. "The almighty dollar" might be the U.S. version of that sentiment, although it connotes a sense of the mercenary aspect of the American dream, along with the dollar's status as the world's reserve currency.
The dollar's position has for generations been thought unassailable, but the war of words against it has increased as other countries have started to realize what our central bank is actually up to and how it will affect them.
Q: How do you get out of Bretton Woods?
What his motive was I can't say, but as recently as Nov. 7, Robert Zoellick, the U.S.-born president of the World Bank, wrote an op-ed in the Financial Times that was a less-than-ringing endorsement of the dollar-denominated world most of us have known all our lives.Headlined "The G-20 must look beyond Bretton Woods II" (registration required), the article discussed the need for the world to develop a new currency regime, given the chaos caused by undisciplined monetary policies championed by the most irresponsible central bank that has ever governed the world's reserve currency.
The op-ed itself was so newsworthy that the Financial Times, which has in the past been a hater of gold, covered it on the front page of its print edition with the headline "Zoellick seeks gold standard debate."
A: Follow the yellow brick road
I have long maintained that at some point the world would run out of patience with the "confetti standard" and consider a monetary base involving gold. That's because, even though most of the "orthodox" money men who run the central banks around the world don't like it (due to its inflexibility), they will be driven toward gold by the inherently destabilizing policies of the Federal Reserve. It seems like that is an idea whose time may now be a lot closer than most would have thought.My expectation -- in fact, my hope -- has been that we see a good deal more debate about alternative monetary systems, and it actually did not take long for some of those hopes, at least, to be realized, albeit by the gold bears.
Where there isn't the will. . .
Just a day after running Zoellick's op-ed, the Financial Times returned to its roots with a handful of anti-gold stories.In a Nov. 8 editorial headlined "Gold digging at the World Bank," it said that it "is instructive to ask what useful role gold can play in today's world economy. The answer is probably none at all."
The FT quickly followed up that comment with this nonsense: "But if such political will can be found, there are better anchors than gold; until then, gold will not work."
. . . Gold is the way
I've read that several times, and it still doesn't make much sense, and it is somewhat shocking how badly the FT misses the point. If we had strong political will and sound financial leadership in every country in the world, or at least most of the major ones, we wouldn't be in the predicament we are in.But human nature, bureaucrats and politicians being what they are, we can't look to them to provide the fortitude needed to maintain truly sound currencies. Yet, even given that, the FT implies that gold wouldn't work. I guess it is completely oblivious to any successful economic periods in the world before 1971.
In addition to the editorial, there was a "serious" follow-up article regarding Zoellick's op-ed, headlined, "Zoellick's call on gold standard dismissed." The article devoted most of its ink to former Fed economist and gold bear Edwin Truman, who published an absurd suggestion in mid-October that the U.S. should sell all of its gold. Naturally, he was negative on the metal and called Zoellick's ideas about gold "inappropriate."
What it lacks in supply, it can make up in price
The FT concluded that article with a lame quotation from a UBS analyst, Edel Tully, who said, "Any reserve currency needs a supply that can grow as rapidly as global trade. Gold supply falls significantly short of this basic requirement."My problem with that is that no one knows in advance how fast world trade is supposed to grow.
The beauty of a gold-based monetary system is that while perhaps, in theory, world growth of gross domestic product might not be as brisk as it could be, due to the self-correcting feature of the gold standard, the world would be infinitely less likely to be forced to experience the debilitating financial problems now facing the Western world, which were created by the fiat money printers.
In any case, despite the anti-gold tendencies of the mainstream press, it is worthwhile to see the topic of a gold standard being debated. Sooner or later, smart people with constructive ideas might be heard, and perhaps that will help move the dialogue forward even further.
by the by, for those of you following along who actually want a solution: bretton woods III to create a super-IMF, build a basket of world currencies (yen, renminbi, dollar, deutschmark, etc.) AND the two (and only two) SUPER-COMMODITIES gold and oil, and then create pre-defined special drawing rights that are balanced and enforced to allow for handling future financial crises. that would work. the return to a gold standard is like saying let's go back to letting out blood with leeches to cure the plague - beyond ridiculous.
how lost are you? granted he writes some quality articles, but the guy has spent his entire career in sales, apparently has no financial degrees or certifications, and yet you trust him to opine about the science of economics? he is a conservative anti-keynesian who is ignoring the criminals who need to be brought to account by be-dazzling readers with quick-fix ideas that will never last.
A few of us in the world have the painful job of telling it like it is and not what the majority want to hear. 
if you guys and gals really want to make money with your investments long term you will read and re-read that last hava post. next, you need to form a relationship with a professional capable of navigating these turbulent waters by deftly entering, exiting, employing and shorting the various sectors mentioned.
good post observation, and very good points as well.
Just let them learn with a doze of reality and one day they'll be as wise as us. 