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.