Aidan. I love your capital letters. I think we have got to the nub of the matter. I believe we MUST have automatic controls. If we can get automatic controls then obviously we will not need your active ones. Why are the current active controls bound to fail ? The reason is that human beings are basically corrupt and self promoting and ANY system that puts this sort of power in the hands of a small group of people will inevitably create corruption. Perhaps we are very lucky that the level of corruption in the U.S. and the Western world is fairly low. But it is far higher in the rest of the world and the ROW will not continue for much longer allowing the printing of fiat money which they consider is a form of corruption. They will do their level best to defeat the western system and as they, in particular China, are now the manufacturers of the worlds goods, they create all the genuine wealth.

If we reform our system in time by installing proper AUTOMATIC controls then all might be well. If we fail then we will get the equivalent of the Fed Reserve of the Chinese central bank running the world. The only automatic controller is the old Gold Standard which was so successful in the 19th century. However we are currently relying on the integrity of the various central banks of the world and that sort of reliance has never worked in the past.

A return to the Gold Standard is the only reliable solution.

Lastly Gold will never run out as it isn’t consumed for anything. It may get harder and harder to mine but then the price will rise to compensate. Even your statement “if you look at the gold price in the last twenty years, you'll see that it hasn't tracked the cost of basic servioces at all. Even the US dollar is more stable than gold! Is wrong” Gold was $35 in 1971 and is now nearly A$ 1500. Some stability

Dickybird,
<<If we can get automatic controls then obviously we will not need your active ones>>
That's like saying "if we can get cruise control then obviously we will not need the accelerator and brake"!

Printing fiat money is not corruption at all; it is an important part of sensible economic management. Most countries that do it are actually too cautious, but China is an exception.

Who do you think creates more genuine wealth in the manufacture of iPads: Apple or Foxconn? And why?

Your policies would literally cause a holocaust by diverting resources away from the people who need them most. And for what? Wasting them acquiring gold to permanently manipulate the currency market!

<<Lastly Gold will never run out as it isn’t consumed for anything. It may get harder and harder to mine but then the price will rise to compensate. >>
But if you're on the gold standard, the price CAN'T rise to compensate!

Gold could run out if there's a run on gold. Unless you're referring to a hard gold standard, where there's no more currency than there is bullion; that situation would be far worse, as each boom would necessarily have to be followed by an equally large bust, and we would have destroyed our ability to react to that bust.

<<Gold was $35 in 1971 and is now nearly A$ 1500. Some stability>>
I said twenty years, not forty four! Inflation was high in the 1970s for two reasons: firstly the effects of currency deregulation after a long period of unnecessary regulation, and secondly the effects of OPEC restricting oil supply (which would have been just as bad had currencies retained the link to gold). It took time to stabilise the dollar (and other major currencies) but it's accomplished.

It is IMPOSSIBLE for the price of gold in 1971 to have any bearing whatsoever on the validity of my claim that gold hasn't tracked the cost of basic services at all in the last twenty years.

Aidan Cruise control is only a work in progress. When we get to the driverless car we won’t even be offered the brake and accelerator !

Printing money. You may well be right. I am just pointing out that it is too big an invitation to corruption. The innumerable totally inaccurate references to the Rothschilds in this blog are really only jealous ridiculous accusations of corruption.

Apple & Foxconn. Both are essential. The world is now one economy. Both the inventors and the producers are needed but Foxconn is producing continuing wealth while Apple has to reinvent annually. So Foxconn wins until perhaps everyone in the world has an Ipad

"Congress devalued the dollar (in terms of gold) in January 1934. This action raised the official price of gold by more than 65 percent (from $20.67 to $35 per troy ounce)". This is fact and an enormous percentage revaluation. So the price can rise. Perhaps this is the secret – what is needed for a successful Gold Standard is an automatic revaluation maybe annually. This is why the pundits are suggesting the correct gold price is from $2,000 to $40,000 to compensate for the latest QE.

Price of Gold in 1971. The price of gold in terms of the US$ was fixed up to 1971. After that it was at least theoretically free, so that is my reason for a starting point, not an arbitrary 20 years. In fact it has been manipulated since too although this is harder to do. But is that corruption showing its face again. I was an Owner builder in 1971 and I was paying $3 an hour for skilled workers. Now $30+. Stable dollar my foot! Gold in $ terms of course has increased far more. This is what I am saying – we are in a real pickle ! Perhaps the Gold Standard isn’t the solution but the present situation is far worse. I can’t think how you can accept the current situation with equanimity

Dickybird,

Driverless cars react to events. Fixed currencies do not.

Apple does the high value work of designing iPads. Foxconn has the relatively minor role of assembling them, and if Foxconn didn't do it, some other company would. In terms of value, it's contribution is nowhere near that of Apple; it's somewhere among the other component manufacturers.

<<Perhaps this is the secret – what is needed for a successful Gold Standard is an automatic revaluation maybe annually>>
Can you not see why that would amount to a multi trillion dollar government subsidy to the banks every year? Whereas the existing system brings nearly all the benefits of that yet costs nothing.

You use the 1971 starting point because it suits your argument to fudge the figures by including the turmoil of the 1970s! You look at the start and end price and ignore the extreme volatility of the gold price that has not been reflected in the cost of basic services.

An excellent longer exposition of the situation.

Unfortunately no solutions offered

http://bonnerandpartners.com/important-story-finance-gold-standard/

Aidan. Fixed currencies certainly do react. Tell that to the Germans, Zimbabweans and even the Argentines.

I was assuming Foxconn entirely manufactured Apple equipment and that Apple mainly designed it. I am not very up on Foxconn, I may be wrong

The Gold Standard with annual revaluation will provide a “multi trillion dollar government subsidy to the banks every year”. If it is designed wrongly it could easily do that. So more thought is definitely required to draft the legislation. But the existing system cannot survive. I hope you have read the reference above to Richard Duncan’s article

The problem is trying to find the proper values for both the $ and Gold is that there is so many corrupt attempts to vary both. Try the Big Mac index. Or try this article

http://www.finfacts.ie/Private/curency/goldmarketprice.htm

It too explains a lot of history