Alex’s Notes: Dont be fooled by the headline,  a “gold standard” is not inclusion in a basket of goods, it is the actual STABLE MEASURE behind a piece of currency. Anything other than that is simply asking for more governmental “cooking the books”. Just look at what the basket of goods concept has done to inflation reporting.

The main idea with the “basket of currencies” is to try and find some stability in value, because if you dont have a stable measure then trade is disrupted, no one knows what something is truly worth anymore.

This goes back to something I read recently “Unjust weights and measures are an abomination unto the Lord”.

Using a basket of currencies, or a basket of goods, is a desperate, and foolish, attempt to try and link a stable measure to a fiat currency that is currently in its final stages (the US Dollar).

Why is the world so concerned about this? Because the USD is the worlds reserve currency, and all international trade is settled in it. Only, the unit of measure is broken.

Kind of like, if you were a carpenter and were trying to build a house with a measuring tape, only the inch size kept changing (or in monetary terms it kept devaluing).

The whole idea of using gold as a “backstop” so to speak, or a link to a currency unit, is that gold has always been a stable measure of value, or buying power. Yes its value fluctuates when compared to paper, but when compared to what it can buy, it has been the most stable currency in all of human history. That isnt an opinion, thats historical fact.

So when these guys are talking about a “basket of currencies”, what they are failing to grasp is that a basket of paper is no longer going to cut it, we have to see a revaluation of gold and silver for this to work, otherwise competitive devaluation will simply continue to erode all paper money systems until a revaluation is allowed to occur.

They can try and stave this off for as long as possible, but math doesnt lie. Its a mathematical impossibility for this to continue on the current track without a revaluation of gold and silver.

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Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.

By Ambrose Evans-Pritchard
Last Updated: 8:23AM BST 30 Mar 2009

Arkady Dvorkevich, the Kremlin’s chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was “logical” that the new currency should include the rouble and the yuan, adding that “we could also think about more effective use of gold in this system”.

The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.

It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and “Great Society” social spending forced President Richard Nixon to close the gold window in 1971.

The world’s fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible – or less likely – under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.

China’s government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the “Bancor” proposed by John Maynard Keynes in 1944.

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