How Russia Can Go To A Gold Ruble #5: Recent Events
After talking about broader principles for a while, and letting the present situation calm down a bit, let’s see how things have been shaping up in Russia. How Russia Can Go To A Gold Ruble series The ruble has had a splendid rise vs. gold, actually exceeding the 5000 rubles/gram goal expressed earlier. This translates into 155,517 rubles per troy oz., while the recent value was 125,601 rubles/oz., or 4,038 rubles/gram. As you can see, there was a broad plateau around 130,000 rubles/oz. so maybe they are taking advantage of the recent situation to return to somewhere around that previous plateau. Also, as we can see, there isn’t much of a close link for the ruble to gold at 5000/gram. This has been accompanied by a few official developments. MOSCOW (BLOOMBERG) – Russia is exploring whether to link the value of the rouble to gold and other commodities, Kremlin spokesman Dmitry Peskov said.“This question is now being discussed,” Mr Peskov told reporters on Friday (April 29).The idea was raised publicly by Security Council Secretary Nikolai Patrushev in an interview with a state-run newspaper this week, Mr Peskov said, offering no further details.Unprecedented sanctions on Russia’s central bank over the invasion of Ukraine deprived it of access to about half of its holdings, leaving it in possession of only gold and yuan.Before the war, President Vladimir Putin repeatedly argued that Russia needs to cut dependence on the dollar as a global reserve currency.Speaking with Rossiyskaya Gazeta, Mr Patrushev said experts are examining proposals to back the rouble’s value with gold and other goods as part of an alternative system of finance that guarantees a measure of sovereignty and reduces the link to the dollar. This is vague talk, which is fine for now. The important thing is that the ruble maintain
How Russia Can Go To A Gold Ruble #4: Common Modes of Failure
We’ve been looking at how Russia can go to a gold standard right now, perhaps at 5000 rubles per gram of gold. How Russia Can Go To A Gold Ruble Series There is evidence that the Central Bank of Russia has indeed begun to do this, with the ruble definitively reaching its 5000/gram parity late last week. We will not talk so much about current events today, but rather, the common ways in which central banks mess up bigtime — including the Central Bank of Russia in 2015, and also in 2008-9 before they got their heads on straight in February 2009. It is the same pattern we see in Thailand in 1998, and many other cases, including Britain in 1931 and also the United States in 1971. In other words, we will talk not only about how to achieve a gold parity momentarily, but to keep it permanently, over decades and even centuries. As I said last week, the basic method to manage a currency’s value is: To REDUCE the base money supply when the currency is weak, via asset sales; To INCREASE the base money supply when the currency is strong, via asset purchases. The basic problem emerges when there is the sale of some asset — typically foreign exchange reserves or gold bullion — to support the currency’s value, but the base money supply does not contract. This asset sale is “sterilized” by the purchase or acquisition of some other asset (or lending), which results in little change to the base money supply. For example, in 2008-9 we see: November 24, 2008: Russia’s Currency CrisisJanuary 16, 2022: What’s Wrong With Turkey #2: Making It Way Too Complicated Last week, we talked about the large reduction in Base Money in February 2009, the result of “brick wall” selling
How Russia Can Go To A Gold Ruble #3: Day To Day Activity
We’re looking at how Russia can, today, go to a gold ruble — to link the ruble’s value to gold. This is not so amazing, really. Today, more than half of all currencies worldwide have an official policy of being linked to the USD, EUR or some other regional currency such as the AUD. Unfortunately, many of these “currency pegs” are not managed very well, and the official policy does not quite match reality. But, at least that is the official policy. Countries that have such a policy should really go to a more formalized currency-board-like system. How Russia Can Go To A Gold Ruble series A “gold standard” is the same basic principle, but instead of linking to the USD or EUR, you link to gold. In other words, instead of using the USD or EUR as a “standard of value,” you use gold. This has, you could say, two aspects: First, an official policy or goal. Then, you need some mechanism or technique to actually accomplish the policy or reach the goal, effectively and reliably. You can’t just wish and hope. Not surprisingly, these methods, mechanism and techniques are quite a lot like existing currency boards today. Today, adopting gold as a standard of value would have some substantial consequences. The most significant consequence would be that the currency’s exchange rate would vary with other currencies, in the same manner that these currencies vary vs. gold. In other words, the RUB/USD or RUB/EUR exchange rate would look like the “price of gold in USD” or the “price of gold in EUR.” This could potentially be very disruptive of trade and investment. However, it is also true that, for a currency to serve as a meaningful alternative to the floating fiat USD or EUR, it also has to vary
How Russia Can Go To A Gold Ruble #2: Recent Central Bank Activity
We have been discussing how Russia could move to a gold-based ruble today. March 13, 2022: How Russia Can Go To A Gold Ruble In that item, I identified four points that suggest that Russia is in a particularly nice situation to make this move. Reason #1: The present situation stinks. The ruble has been woefully unreliable, impairing economic performance and prosperity. This is the kind of currency behavior you see in “emerging market” countries that never actually “emerge,” but simply grind around at a low level of prosperity. It is certainly not the kind of currency performance we expect of a Great Power, or any country that has aspirations to leadership. Stable Money is one part of the Magic Formula. Often, countries achieve this “stable money” by tying their currencies, tightly or loosely, to a major international currency like the dollar or euro. More than half of all countries today do this, including China. This has a major advantage of facilitating trade with all others within the “dollar bloc” or “euro bloc.” However, such a currency also cannot serve as a meaningful alternative to either the dollar or the euro. Also, it implies a certain level of subordination to US or EU leadership — in the case of the euro, rather formal subordination. Also, while the floating fiat USD has definitely been an impairment to US prosperity over the past several decades, it has been tolerable enough. People do not have a strong urge to overturn existing arrangements and set off on a new and seemingly risky path. In Russia, however, people may be ready to abandon their current failing model, and embrace something new. The alternative for Russia is some variant of its recent policy, which aims to stabilize the ruble loosely with the USD and EUR, with
How Russia Can Go To A Gold Ruble
For a long time, people have been wondering if Russia and China, along with some allies including perhaps some Middle Eastern states (Libya was one once) and Malaysia, could introduce a new currency bloc based on gold. Both Russia and China have been building up their official central bank gold bullion holdings. Some people think that China’s actual holdings are far higher than this, perhaps as high as 20,000 tons (10x the official level). Russia’s actual holdings are also suspected to be higher than the official levels. I myself have a little interest in this. My first book Gold: The Once and Future Money (2007) was published in both Russian and Chinese. This led to my participation in TV documentaries on monetary topics that were produced by China Central Television, the largest station and the state broadcaster, and Channel One, Russia’s largest TV channel and also the state broadcaster. In other words, the government TV stations in both China and Russia were educating the public about gold-based money. Here’s a 2019 story in Russia Today, the state-linked media channel: Russia bringing back the gold standard may kill US dollar & solve main problem of cryptocurrencies You don’t see this sort of thing in mainstream US media. Unfortunately, despite this promising talk, the actual management of the Russian ruble has been rather bad, declining from about 27/USD before 2008, to around 75/USD before the recent crisis. This does not exactly get me enthused that the Central Bank of Russia would be able to successfully manage a gold standard currency, even if they wanted to. Probably, they would be hesitant even to try. Russia, along with much of the rest of post-Soviet Eastern Europe, had an amazing explosion of economic growth in 2000-2008, which I interpreted as the outcome of the adoption
Audio 2022
I haven’t done much in my mostly-dormant audio hobby — except, of course, listening to music, which is fine. “Audio” means: getting good sound from machines. Audio Archives Here is where things stand at present: Headphones: Headphones are my “serious” listening choice. These are the Sennheiser HD600 — an old and still highly respected pair of cans, that still sounds better to me than some newer and more expensive headphones that are supposed to be better. But actually, they still have many fans today. It’s not just me. You can now get them from Massdrop (still manufactured by Sennheiser), for a very good price. Out of the hundreds of models of headphones out there, how many do you expect to see still on sale unchanged after twenty years? That’s a classic. I also have a pair of Audeze LCD 2, which are also good, for different reasons. My unchanging advice is: Get the Sennheisers, and then, if you find something you like better, great. But, don’t be disappointed if this never happens. This is driven, as before, by the Metrum Amethyst DAC, straight off the line outputs and through a pair of volume autoformers from Intact Audio. This is just an autoformer (transformer). There are no active electronic parts. Since the Metrum design also uses a direct connection from the DAC chip to the outputs (this is unusual), we are effectively listening to the DAC resistor ladder itself, with no intervening gain stages. This is very, very good. This year, there is a new product that deserves mention. This is the Pasithea DAC from Sonnet Audio. Sonnet was started by the founder and chief engineer of Metrum, to continue his investigations in the no-oversampling R2R topology. This DAC includes a volume control, and actually has an output impedance of 16
The Gold Standard, Retrospect and Prospect #6: International Monies and Digital Gold
We continue with The Gold Standard: Retrospect and Prospect, with Chapter 9, “International Monies: The Gold Standard, Currency Boards and Dollarization,” by Nicolas Cachanosky. This is a nice, straightforward paper that begins by making comparisons between the gold standard of the past, and countries today that link their currencies to an external standard of value, typically the dollar or euro, in the process giving up domestic macroeconomic manipulation ambitions. Consider the best case for an independent, central bank-managed fiat money. An independent, central bank-managed fiat money does not generally promote international trade by reducing exchange rate risk. Its value floats against other monies; or, at the very least, is pegged to some other money with the potential to deviate markedly. An independent, central bank-managed fiat money does not generally encourage fiscal discipline, either, since the government might always turn to the printing press in hard times. Hence, those who prefer an independent, central bank-managed fiat money over a gold standard today are effectively limited to arguing that (1) a gold standard would perform worse than its admirers insist or that (2) the supply of an independent, central bank-managed fiat money would be managed sufficiently better to make up for its shortcoming on the other two margins. If historical experience is any guide, the superiority of independent, central bank-managed fiat monies is far from clear. In Chapter 5, Thomas L. Hogan has shown that the Federal Reserve (Fed) reduced the stability and predictability of the price level in the United States, without noticeable improvements in real gross domestic product (GDP) growth or volatility. The Fed, in other words, has not obviously managed the supply of money more effectively than the gold standard—let alone managed it sufficiently better to warrant the shortcomings of an independent, central bank-managed fiat money noted above. This
The Gold Standard, Retrospect and Prospect #5: Is the Gold Standard Feasible?
We now come to Chapter 7 of The Gold Standard, Retrospect and Prospect, which is a paper by Bryan Cutsinger called, “Is the Gold Standard Feasible?” Since a “gold standard” means only that the currency’s value will be fixed to gold, this question amounts to: “Can we keep a currency stable vs. gold?” The answer, obviously, is yes. It is not that hard to stabilize a currency’s value, reliably. Currency boards do this today, and as I pointed out earlier, currency boards often do not actually hold any of the target currency as a reserve asset. For example, a euro currency board does not actually hold any euros, in the form of euro banknotes or deposits at the ECB. They hold only euro-denominated debt, and perhaps bank deposits. Before the issuance of euro banknotes in 2002, for a few years 1999-2001, the Eurozone central banks linked their currencies to a “euro” that was basically imaginary — and did this successfully. This would be comparable to a gold standard system that does not actually have any gold bullion. The common way to accomplish this in the past was to hold the debt denominated in a foreign gold-linked currency, or a “gold exchange standard.” As I pointed out in Gold: The Final Standard, this was already common practice by 1910. Only three major central banks — Britain, the US (distributed system) and France did not hold foreign reserves. The author remarks that “the type of gold standard I consider is similar to the classical gold standard that operated from 1879 to 1914,” and then does nothing of the sort. His proposals do seem to resemble the US’s National Bank system, which was something of an outlier already by that time, compared to Europe which was mostly already using central banks (near-monopoly currency
The Gold Standard, Retrospect and Prospect #4: Arguments Against the Gold Standard
Chapter 6 in The Gold Standard: Retrospect and Prospect is a paper by Lawrence White, “Arguments Against the Gold Standard.” This too is a worthy topic. I will try not to go too long with commentary here, since White lists 14 claims, each of which would make the good topic of a website item (and in most cases I have written about them). Plus, we have not only the claims themselves, but also White’s responses, which deserve comment. Perhaps we will return to this paper sometime, whenever I feel like I need something to talk about. Credible arguments against the gold standard really boil down to two: First, that gold did not serve its role as an adequately stable Standard of Value. There isn’t much evidence of this. It seems to have worked pretty well. Second, that having a Stable Standard of Value, in other words the Hard Money or Classical Paradigm, is not a desirable goal. In other words, arguments in favor of a Soft Money or Mercantilist money-manipulation inflationist doctrine. There isn’t much evidence anywhere that this produces any lasting advantages, but that doesn’t stop people from arguing on its behalf. That is pretty much the whole conversation that you need to have. Have I left anything out? When we look at the history of all of the world economy using the gold standard, it looks pretty good. The United States embraced the principle of the gold standard for nearly 200 years, from 1789 to 1971, and became the wealthiest and most prosperous country in the world. Britain used the gold standard for longer than that, and ended up not only being the birthplace of the Industrial Revolution, but also, master of the world’s largest empire. The last decade of the gold standard, the 1960s, was perhaps the
The Gold Standard, Retrospect and Prospect #3: How Good Was the Gold Standard?
We continue with The Gold Standard: Retrospect and Prospect. Chapter 5 is a paper entitled “How Good Was the Gold Standard?” by Thomas Hogan. January 23, 2022: The Gold Standard: Retrospect and ProspectJanuary 30, 2022: The Gold Standard, Retrospect and Prospect #2: The Price-Specie Flow Mechanism This is certainly a worthy topic. We have hundreds of years of experience using gold standard systems, so we should be able to get a pretty good idea of how well they worked. Apparently it worked pretty well, because people used these systems for hundreds of years, which is not what happens when something doesn’t work. When something doesn’t work, there are problems, and finally, new solutions. Somebody who uses some new and better system gets better results, and rises above their peers. But, that didn’t happen. The most successful countries were always those with the best gold standard discipline, including Britain, Germany, France and the United States (excepting the Civil War years). The least successful were those with floating or unreliable currencies, including Spain, Greece, and Portugal. Also, the people who used these systems all their lives were generally very happy with the results. Here, at the outset, let’s put down some ideas of what I would consider, if I was writing a paper like this. How good was the gold standard at what? What is the ideal? The answer, of course, is that we want gold to be Stable In Value. If the value of gold (as the standard of value) went up a lot, or it went down a lot, there would be problems. This is no different than the many countries today who use some type of “euro standard.” If the floating euro went up a lot, or went down a lot, there would be some kind of problem, generally
