Saturday, September 10, 2011

A Gold Standard For The Rest Of Us

I work for a Government I despise for ends I think criminal.
John Maynard Keynes, Letter to Duncan Grant, (15 December 1917)

The Oracle of Ottawa reels, albeit in retired bliss, when he watches the price of gold flash buy on the tape of his favorite business news channel. Eighteen hundred dollars an ounce! Sheer freakin' insanity. And when the gold-bugs start up and on how the world would be so much better off if we could bring back the old days and have the central bank gold standard again with all that good old solid money, I just cringe. It was that gold standard that caused, in my humble opinion, two world wars in the last century along with the demise of empires and countless millions of innocent people...

Gold - The barbarous relic or not?

The reality is, for all intents and purposes, we now have a global gold standard! If you check the Kitco company website you can see in near real time what it costs to buy an ounce of gold anywhere on Earth! The old gold standard has simply been turned inside out! Now, the price is set not by governments, but the market demands of the world. An ounce of gold can be turned into any currency on Earth, or a great majority of them. Feel any more secure? Didn't think so!

But, believe it or not, we have a lot of problems that are way more pressing and important in this globalized world of the present. All of us in the present "first world" are more than aware of the exit of nearly all our manufacturing industries and all most other high value, high wage businesses. We suffer dumping by third world countries on a daily basis! Steel, automobiles, and most all manufactured goods. But ponder this. What in reality is really being dumped on our shores? The answer is labour! What is being dumped on the first world shores by the third world is labour that has not been paid for in full!! This practice is also unsustainable in the long run. The millions of Chinese who are left under the bus when the they are finally used up and discarded with no pensions or social programs such as health care are going to make a pretty noisy crowd on the streets of China and else where!

Even the field...

Well how can we make this price of gold which seems to stick pretty close to the economic law of one price the world over work for ordinary people? To act as a gentle brake on the first world and an elevator for the third world? The Oracle of Ottawa believes he has an answer! One ounce of gold avoirdupois equals about 28.35 grams. At $1,800 per ounce, a gram of gold goes for about $63.50. Now ask yourself, how long does it take an auto worker in Detroit or Windsor Ontario to earn one gram of gold? A little over an hour and a half... Ya, that C.A.W. union card is damn nice to have isn't it? Now ask yourself how long does it take the auto worker in China to earn one gram of gold in his currency? Twenty hours? Thirty hours? Therefore what should the rate of import duty be on a Chinese car? Easy, I thought you would never ask!!?  1/20 = 0.05 + -1.00 = 0.95 x 100 = 95 %!! Now if the Chinese government wants that duty lowered, all that they will have to do is make sure that their autoworkers are paid for what their work is truly worth! When this starts to happen the duty will be lowered... This will also work well say between Canada and Germany. But the duty will only be about a few percent either way over the period of a year. But still this would be way fair to every one in the long run...

Enough is enough... Lets level the field...

The real magic here is that the currencies are out of the picture! At the very least this could be used by Big Labour as a measure of aggregate labour time, when they go to the government and make their case!! A car is a car the world over, no?

Gold; lets make it work for us!!

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