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.

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

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 .

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.

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

"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

Slasher

Alright then: the inevitable failure of the Bretton Woods agreement was the process which led governments to go off the gold standard.

“The Bretton Woods agreement in its original form was based on full convertibility of US$ to gold.”

No it wasn’t. US citizens couldn’t convert their dollars to gold.

“All other currencies were fixed to the value of the $US… They had to ensure their economic policies maintained their currency to a predetermined range…”

Yes. In other words, the BW agreement was nothing but a price-fixing arrangement.

“Hence greater certainty in International Trade.”

Wrong. Price-fixing has never ever worked in the entire history of the world, going back 4,000 years: http://www.mises.org/store/Forty-Centuries-of-Wage-and-Price-Controls-P566.aspx

If it did, there would be no such thing as economics. We would have discovered the magic pudding.

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

Don’t try to externalize the blame for governments inflating the currency to fund aggressive wars.

What forced Nixon to abandon convertibility to gold is that the Bretton Woods system was failing in its attempt to rig the price of money relative to gold. The citizens of Europe were selling their over-valued dollars into gold, the central banks of Europe were threatening to redeem their stocks of paper dollars into gold, and the US government did not have enough gold to make the whole anti-economic delusion work.

“Speculation on currency movements diverts capital from productive investments.”

Speculation on currency movements is productive investment for those doing the speculating. Don't try to externalise the blame for governments' fraud and failure.

“Thus we have casino capitalism.”

All the different fiat “currencies” are themselves nothing but attempts by the respective governments to defraud their subject populations by rigging the price of money, and conspiring with other states to rig the price of gold. They always fail, because they must fail.

“Political leaders rely on monetary policy to fix problems as it is done by faceless bureacrats that do not have to face elections.”

Well it’s obviously not working is it?

I wonder why?

Nothing to do with economics I suppose?

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

So inflating the currency, lowering interest rates – all these have nothing do with asset bubbles, is that what you’re saying?

Answer me this: if government policy presumptively has the knowledge, the capacity, and the virtue to fix these problems, then why are they happening in the first place?

“The G20 reforms are just staving off the next asset bubble.”

The G20 are clueless. Their culture of redistributionist magic puddying is what caused the whole problem in the first place.

“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.”

In fact there never has been, is not, and never will be, stability in the purchasing power of the monetary unit. There is no reason to think there should be. Life is change.

The unchangeable fact remains that attempting to achieve by force – the law – a stasis in purchasing power is, and always will be, vain. There is nothing anyone can do about it.

“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%.”

Says who? In terms of what? Hamburgers? Armchairs? Prove it.

“The deregulated currency market is a failure and causing fundamental disequilibrium in international trade.”

Define ‘disequilibrium’. Distinguish the extent to which it is caused by monetary policy.

Now show how government is going to
a) calculate
b) execute
c) maintain and
d) justify maintaining
the equilibrium position.

Don't evade it, don't appeal to absent authority, don't assume what is in issue. Just prove it.

You are fantasizing about a world in which knowledge of all the transactions in the world, as well as the subjective values of all the actors, are static and known to a central planning authority.

These assumptions are false; and it is government policy based on these assumptions that has caused the crisis.

Ah wing,

Simple mathematics, in our economy there are n equations describing equilibrium between supply and demand of goods and services but n+1 variables.

For a general equilibrium position to occur which has market clearing assuming full information etc, 1 variable must be fixed.

Quite simply market forces cannot work without at least one element of price fixing.

keynes suggested creating an international currency based on a weighted index of trade goods. This would enable an equilibrium point to exist across the economy.

My proposal is to have a four tiered international reserve currency ($US, Euro, Yen and Yuan) and all currencies fixed against these currencies with a tri metallic currency system not a fiat based monetary system.

Slasher
‘Simple mathematics’ does not supply either an ethical or a practical justification for governmental control of the money supply.

You can see, can’t you, that mere mathematics cannot provide a value judgment that people should be forcibly deprived of their liberty?

Well as to the practical economics, the short jumble of jargon you posted does not justify government intervention.

The concept of equilibrium describes a state when the market is at rest because neither buyer nor seller can benefit from further transactions. The market tends towards this equilibrium state in the absence of new market data emerging. But since new market data always are emerging, the state of equilibrium is only reached temporarily if at all.

But it doesn’t matter. Perfect knowledge etc. is not required for human action to function productively. All our food, clothing, shelter, transport etc. is produced anyway, and it is absurd to suggest that market forces don’t work. Our society, including the poorest, has the highest living standards in the history of the world because of them.

To suggest that government intervention is required because markets don’t reach an equilibrium state defined by perfect knowledge, is in effect to assert that unless people can demonstrate that they have perfection, they should be forcibly violated for the sake of an arrangement that is still more unproductive and imperfect.

If the original problem is that people do not have the perfection to decide which transactions to enter into, government cannot be argued to be any improvement, because it is made up of the same people with the same imperfections: and without the informational aid of market prices, profit and loss, to tell them which action is more and which less economical.

Just as the equilibrium state is not known to the buyers and sellers, neither is it known *or knowable* to government; and any event it is a state of *inaction*.

The fact that governments try to link their currency to gold shows that they are aware that their paper money is a fake, and that their systemic end is to defraud the people.