Lawrence White «Past, Present, and the Future of Money»

"Do we have enough gold to go back to the gold standard? The answer is yes, we do!" - Lawrence White

Lawrence White was interviewed about the Gold Standard, QE, monetary policy, and cryptocurrencies. 50 years ago, Richard Nixon abolished the gold standard, because the federal reserve system of the US no longer respected its obligation to redeem the Dollar for gold at 35$ an ounce. Too much money had been printed to be consistent with the exchange rate. We would have enough gold today, to go back to the gold standard, but there is no political support for it. The high rates of monetary expansion did not lead to high inflation so far, because people tended to hold their money. According to Prof. White, the money injected should be withdrawn. The future of our currencies depend on the respective central banks and how moderate their monetary policies are. Although Bitcoin is fascinating, it is not an alternative medium of exchange because of its volatile purchasing power. However, we know that Bitcoin will max out at 21 million units, so its value will not be diluted by big issues. Bitcoin will be a medium of investment.

The questions are asked by Simon Sarevski.

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[louiswoodhill]

The U.S. would not need any gold at all to implement a gold standard--the Fed could just target the COMEX price of gold. Unfortunately, there is no way to determine the "correct" price, or if there even *is* a price that would remain "correct" as the system gained credibility. A gold standard would instantly convert gold from "a historically good investment" to something that "pays no interest, offers no hope of capital gain, costs money to store, and could be sold now and bought back at any time in the future at the same price." There are about 160, 000 metric tons of gold in private hands. At what price would private parties voluntarily continue to hold all of that gold under a gold standard? I have no idea, and neither does anyone else. And, because the new gold standard would not have 100% credibility on day one, the "correct" real price of gold would likely decline as confidence grew, forcing the Fed to inflate (perhaps by a huge amount) to maintain the peg.