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The Forum > Article Comments > No one model for new global economy > Comments

No one model for new global economy : Comments

By Yoichi Funabashi, published 2/4/2009

The US, Japan and China should build a tripartite vision, not a new Bretton Woods.

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It was only a few months ago that the Chinese economy overtook the German one as the third largest in the world. It seems to me this plan leaves out Europe entirely.

The cutoff line seems rather arbitrary. Granted, China's economy is emerging quickly. Japans has been in stagnation, in the same way Germany's has been. I really think that at least one representative from Europe would need to be included and I'd think that would be Germany.
Posted by TurnRightThenLeft, Thursday, 2 April 2009 11:34:06 AM
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I can’t understand why anyone would want to 'reboot' Bretton Woods.

Bretton Woods was the process by which governments ‘went off the gold standard’, in other words, finally and shamelessly declared that they weren’t going to pay their debts, but just endlessly print worthless paper and pass it off on their unwilling or ignorant subjects.

Ultimately, money can be based on gold, or politicians’ promises. That’s the real choice facing the world right now.

All the political machinations, the 'platforms', 'consultations' and 're-alignments', are nothing but attempts to keep the system of massive official fraud going.

Printing paper is a simple racket of dishonestly skimming money from everyone who uses money. It confers no net social benefit whatsoever. Why is this not centre stage of the policy debate? Why are we just discussing how governments can keep the racket going longer?

Underlying all monetary policy are two basic facts:
1. There is no reason why governments should have the monopoly power to print paper and call it money in the first place. It is nothing but an engine of state exploitation, privilege and abuse which the ignorant, lacking an understanding of monetary theory, then blame on ‘neo-liberalism', private property, and markets!
2. Governments' attempts to continue to stitch together a new money ‘system’ cannot work because ultimately nothing but gold can stop governments from endlessly inflating the currency and causing the collapse of the monetary system as they in the process of doing now.

The reason governments never mention these facts, nor consider gold, is because gold provides the ordinary people with the power to control monetary policy, and curb the endless expansion of the warfare/welfare state, by simply withdrawing their gold from the bank.

Why the G20 won’t work: it can’t work:
http://www.lewrockwell.com/north/north700.htm
Posted by Wing Ah Ling, Thursday, 2 April 2009 1:08:17 PM
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I agree with Wing Ah Ling that the Breton Woods agreement should not be rebooted as proposed in the article by Yoichi Funabashi. I also agree with the view of Wing Ah Ling that the G20 proposals cannot work. They are simply putting band aids on a system that failed. A former Federal Reserve Bank President Dr. Jerry Gordon said here we cannot go back to where we were. You can listen to him at http://photos.state.gov/libraries/newzealand/19965/audioFiles/dr_jerry_jordan.m3u

One point that I differ with Wing Ah Ling is his suggestion that we go back to the gold standard. I believe in the Hayekian thesis that there should be de-nationalisation of money with competing currencies. My arguments that market forces would select kilo-watt hours of electricity from renewable energy sources as an inflation proof global unit of account are presented in my article on “Money, Markets and Climate Change” posted at http://ssrn.com/abstract=1322210.

A summary of a sequel to this paper is posted by Online Opinions at http://forum.onlineopinion.com.au/thread.asp?article=8660 .
Posted by Shann Turnbull, Friday, 3 April 2009 7:04:32 PM
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Shann
Interesting idea that kilowatt hours would replace gold as money in the unhampered market. I don't believe it would, but if that's what the people of the world freely chose as money, then I too would be in favour of it.
Posted by Jardine K. Jardine, Friday, 3 April 2009 8:33:19 PM
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ah again, the austriams want to rewrite history. wing ah ling you obviously have not studied any history.

The Bretton Woods agreement in its original form was based on full convertibility of US$ to gold. All other currencies were fixed to the value of the $US.Thus there was implied convertibility for them. They had to ensure their economic policies maintained their currency to a predetermined range or formally devalue/revalue their currency.

Hence greater certainty in International Trade. The greatest sustained period of growth occurred under the Bretton Woods arrangements.

It was the onset of the Vietnam War which forced Nixon to abandon full convertibility to Gold.

Speculation on currency movements diverts capital from productive investments. Thus we have casino capitalism. Political leaders rely on monetary policy to fix problems as it is done by faceless bureacrats that do not have to face elections.

Asset bubbles within domestic economies must be dealt with by fiscal policy not monetary policies.

The G20 reforms are just staving off the next asset bubble. The disequilibrium in current accounts of the United States and China is structural not cyclical and thus major reforms are needed. This will not occur whilst lazy policymakers rely on market forces in the currency markets to correct the disequilibrium.

To the Austrians look at PPP or a simple proxy the Big Mac Index. Simply a Big Mac should cost the same in all countries after currency conversion.

As of 30/1/09 the Australian dollar was 38% undervalued against the US$, the Swiss franc overvalued by 58% and the Euro by 24%.

The deregulated currency market is a failure and causing fundamental disequilibrium in international trade. We must fix thus first or the catastrophy will keep on snowballing
Posted by slasher, Sunday, 5 April 2009 5:36:03 PM
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"The deregulated currency market is a failure"

Reality check: the currency market is not deregulated. Your entire argument has just collapsed, because it is not based on fact.

Your argument can only make sense if the price of money is not affected by the supply, which is controlled by government policy. (And it the price of money is not controlled by monetary policy, then there's no reason why such government control should not be abolished.)

You are fantasising about a world in which economic problems can be made to disappear by the non-existent superior wisdom and capacity of government. The current economic crisis is the result of its attempts to do this.

Re-jigging the central planning of society's money supply, with a continuing licence for governments to print money to fund wars and privileges for political favourites, *cannot* fix the problem, no matter how much the unweaned may squall for the tit.

The G20 cannot fix the problem with more forced redistributions.

You have failed to learn the lesson of the disastrous socialist experiments of the 20th century. There is no magic point of government wisdom that is short of total government control, but greater than the amount of interventionism we have now. It is this dopey infantile belief in getting something for nothing that is causing the entire problem
Posted by Jardine K. Jardine, Sunday, 5 April 2009 6:31:20 PM
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