-->Where is that gold dinar?
By Jude Wanniski
Wednesday 24 November 2004, 17:37 Makka Time, 14:37 GMT
When Malaysian prime minister Mahathir Muhamad last November retired
from his 22 years in power at age 77, I had hoped he would devote his
energies to a monetary reform of the Islamic world built around a gold
dinar.
But after a few speeches and press releases on this subject, he has
disappeared, practically dropping out of sight.
With the dollar price of gold now soaring and the US dollar sinking
against the euro, the whole world could now make good use of Mahathir's
idea, but what happened to it?
US Federal Reserve Chairman Alan Greenspan last week shook the
financial and commodity markets with his comments at a banking
conference in Frankfurt, saying the dollar would continue to fall
against other currencies because of US trade deficits.
But if the United States had a gold dollar, this could not happen, and
Greenspan, who I have known personally for 32 years, knows this.
Because the dollar"floats", with no gold anchor, it has been launched
into a new inflationary cycle, one that threatens to drag all of Asia
into another inflation through the dollar's links to the Chinese and
Hong Kong currencies.
It is worthwhile thinking about Mahathir's inspiration as well as his
failure, and how another run at a gold dinar might work with a
different design.
Why am I interested? I've been trying for the last quarter century to
persuade my country to restore the gold dollar as the core of a new
international monetary system. But as turbulent as the world of
commerce has been with the floating US dollar, inflating and deflating
in random cycles, I've had no luck.
The power elite that dominates money and banking in the US seems
persuaded that a floating paper dollar is good for America even if it
causes difficulties for global commerce and the rest of the world.
With an Islamic gold dinar, I reasoned, the Islamic world would have
the best money in the world. The US would be forced to again fix the
dollar to gold and the euro and the yuan/yen bloc would join as well.
The reason is that the best money becomes a magnet for international
finance, because exporters and importers of every country in the world
can save the many hundreds of billions of dollar a year now spent
hedging against currency losses in the global trade.
When president Richard Nixon abandoned the Bretton Woods gold-exchange
standard on 15 August 1971, believing it would help the US at the
expense of the rest of the world, American banks were the biggest and
most profitable in the world.
That soon ended when the Japanese government kept the yen from
depreciating against gold as fast as the dollar was, which meant it
suddenly had"the better money". In 15 years, seven of the biggest
banks in the world were in Japan.
That heady experience for Japan ended when the US Treasury in 1989
threatened Tokyo with trade penalties unless it changed policies to
suit US interests.
Tokyo slowed the rise in the values of real property with a higher
effective capital gains tax that sent the Nikkei skidding from its peak
in 1990.
The Bank of Japan was forced to manage its currency to keep it close to
the dollar. This crippled the banks in the monetary deflation that
began in 1997, with gold falling from $385 an ounce to as low as $255
in 2001.
In the process, the dollar deflation also crushed the
commodity-producing countries of Asia.
It was against this background that Mahathir began thinking of
insulating the Islamic world from the predations of Wall Street
bankers.
He got the world's attention by blaming the Asian currency crisis on
American Jews, but in an open letter to the prime minister that I
posted on my website at the time, I noted that far more of my Jewish
clients on Wall Street lost money in the crisis than gained from it.
The problem all along has been a breakdown in economic theory in the
US, which led to Nixon's decision to break the dollar-gold link in
1971.
Mahathir was still in power in 2001 when he first announced the idea of
a gold dinar and said he hoped that by 2003 there would be at least a
dozen of the 57 countries in the Organisation of Islamic Conference
joining the system of his design.
The world press was led to believe Iran would join Malaysia in the
following year. None of this happened and the gold dinar has now become
something of a joke in financial circles. Why has the idea faded from
sight?
One of the problems Mahathir faced is that Washington had earlier used
its influence to get the International Monetary Fund to prohibit any
member state from re-instituting a gold-backed currency.
If all other currencies are forced to float freely from a gold anchor,
the US dollar will preserve its status as the world's primary reserve
currency.
Several Arab countries led by Saudi Arabia have instead been discussing
the idea of an Arab common market linked to the euro.
The euro at least has been more stable relative to gold than the
dollar, but it still fluctuates in ways that make commercial life
difficult for the less-developed countries that are in its trading
zone.
The mistake Mahathir made was in proposing a gold dinar that would only
be used to settle trade accounts by the participating nations. It would
not be available to ordinary people. There was to be no paper dinar
kept as"good as gold" by individual Islamic central banks, by adding
or subtracting liquidity to keep the dinar/gold exchange rate constant.
The mistake may have been in his belief that a nation-state actually
needs gold bullion in order to manage an Islamic gold standard. It does
not.
In fact, government banks would only need a nominal quantity of gold,
with trade imbalances resolved through the exchange of financial
assets - debt or equity, bonds or stock.
The idea of settling trade accounts with shipments of bullion is an
obsolete 19th-century idea and should be discarded from any plan.
The main reason gold is such a stabilising force is that there is so
little of it in the world, not more than 135,000 metric tonnes in all.
This is not even enough to build half the Washington Monument out of
pure gold. This is not only my idea.
Mr Greenspan said as much to the US Congress.
A modern gold standard would simply use the market price of gold as a
signal, adding to the dinar money supply when the dinar/gold price
showed the slightest drop and withdrawing from the dinar supply when
the market price showed the slightest increase.
This simple concept was the one used by Alexander Hamilton, America's
first treasury secretary, in persuading the US Congress to adopt a gold
standard. This was at a time when the new republic had no gold at all.
Mahathir's second mistake was in thinking a gold dinar could be tried
gradually, with two or three countries trying it out and others joining
in as it proved itself.
It would be much easier to arrange an Islamic Bretton Woods conference
of all 57 nations and arrange to have all, or almost all of them, agree
to fix their domestic currencies to each other. They would use the
market gold price as a signal to each on whether their central banks
should be adding or subtracting from dinar liquidity that business day.
One small economy or even several smaller economies cannot arrange a
gold standard by themselves because the US marketplace still dominates
international trade by the sheer volume of its exports and imports.
Individual Islamic nations are now forced to take the dollar's value
into account in managing their domestic currencies or their domestic
enterprises that rely upon trade could be whipsawed into distress and
bankruptcy.
In union there is strength, though, with the Islamic world now having
enough total weight in combination to be able to stand up to the
fluctuating dollar. And of course, the dollar would not fluctuate for
long before Washington decided to give up on its ability to manipulate
the dollar and join in its own stabilisation against gold.
It may be the time has passed for the Islamic world to take a lead in
such an initiative, however.
With Greenspan now signalling no responsibility for the falling dollar,
China may soon be forced to take the lead in breaking away from the
inflating dollar and all the headaches it brings.
If Beijing were to take the lead in fixing its currency to gold at an
appropriate, neutral level, Japan would soon cut loose from the weak
dollar and use the Chinese yuan as its guide. So too would all of Asia,
of course including Mahathir's Malaysia.
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-->"With an Islamic gold dinar, I reasoned, the Islamic world would have
the best money in the world. The US would be forced to again fix the
dollar to gold and the euro and the yuan/yen bloc would join as well.
The reason is that the best money becomes a magnet for international
finance, because exporters and importers of every country in the world
can save the many hundreds of billions of dollar a year now spent
hedging against currency losses in the global trade."
Da ist was dran, hab ich so (leider) noch nicht bedacht.
Die Juden an der Ostküste werden schon dafür sorgen, dass es immer was zum hedgen (rasieren anderer Hälse) gibt im Forexmarkt!
Die lassen sich das"jobben" nicht nehmen.
Alleine die Medienindustrie rund um die Wallstreet setzt 14 Milliarden USD um.
Wer soll die den alle am fressen halten, wenn ein Teil dieser Industrie (z.B. Derivate für Währungen) weg fällt?
So gesehen ist ein Teil der hier geführten Diskussion zu fundamental, meine eigenen Ideen vielleicht auch?
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