Forbes published this surprising piece by John Tamny. I sure hope he is right.
French economist Jacques Rueff once said “Tomorrow, to save man, we will give him a real currency.” For a world that has suffered nearly 40 years of economy-retarding currency instability, that tomorrow is very near.
If history is any kind of indicator, by 2013 we’ll return to money defined in terms of something real. No currency in history has lasted longer than 42 years after its intrinsic backing has been abandoned, and it was 39 years ago that President Nixon severed the dollar’s link to gold.
Over the ensuing decades the U.S. economy alone has suffered three dollar-driven oil “shocks,” more than three recessions and a contraction of its capital base thanks to a unit of account that has collapsed in value.
It’s time to give the world a real currency once again, and in the coming years the dollar will be redefined in terms of the most stable currency known to mankind–gold. And with the dollar still the world’s currency, central banks around the world–including China’s–will follow our responsible lead and peg their currencies to the newly stable dollar. Only then will the world economy achieve a reasonable facsimile of its growth potential.
The catalyst for such a momentous change will be the financial crisis of 2008, and more unrest ahead related to falling global currency values. Tired of the intermittent pain caused by monetary error, the citizens of the world will demand stable money.
The economic result of such a move promises to be profoundly good.
No longer fearful of their savings being destroyed by mercantilist governments, individuals all over the world will put money away with great comfort. Jobs will be plentiful because all jobs are the result of delayed consumption. Rather than worry about how they’ll find work, by 2015 the world’s citizens will reclassify their problems with the more pressing question being where they will choose to work.
Hedge fund traders and their counterparts in banking will find their ability to generate profits greatly reduced absent monetary chaos, but their loss will be the global economy’s gain. Indeed, with trading profits more difficult to amass, some of the greatest minds in the world will lend their brilliance to the productive economy. Past and present investor darlings Google, Microsoft and Intel will seem positively pedestrian once these accomplished minds unleash their brainpower on technology, transportation and health care.
OPEC, formerly an economic power thanks to soggy, undefined dollars driving up the nominal price of oil, will by 2020 have returned to its former, 1960s irrelevance once the greenback is stabilized. As for the Middle Eastern countries that use debased petrodollars to fund terrorism, they’ll find their ability to do so compromised once a fixed dollar sets the price of crude on a multi-year decline that will end with the commodity settling at a cheap and stable price.
Most important of all, stable money will foster an era of world peace. With gyrating currencies no longer slowing global exchange on the way to trading friction, the world’s division of labor will expand on the way to a self-interested avoidance of war.
The clock is ticking. Fiat money has never lasted long, and with good reason. Bad as things may seem now, future historians will write positively of today’s economic crackup for allowing our stable-currency rebirth. Hope springs eternal.