An anonymous poster named "John Law", put this lengthy essay up recently concerning what he feels is an inevitable event in the coming future: the remonetization of precious metals, i.e. gold & silver most notably.

Remonetization has two prerequisites. One is a free public market in one or more monetizable commodities – such as gold and silver. The other is an unstable and mismanaged official currency – such as the US dollar.

In theory, reversing either of these factors could prevent remonetization. In practice this is probably impossible.

Before a remonetization event, the austerity measures necessary to fix the dollar are politically unlikely. Afterward they would be too late. And any preemptive deliberalization of the gold and silver markets would have to come with a remarkably convincing excuse to avoid triggering what it sought to prevent, especially since the US no longer dominates the global financial system.

The best way for the US and other countries to deal with this situation is to accept remonetization and manage it wisely. This will cause a lot of short-term pain for many people. But it will rebalance the global economy, and should lead to a new period of sustainable prosperity.

It's an interesting read if nothing else. I've long thought that a period of extreme inflation, similar to but potentially a lot worse than the inflation seen during the 1970's, was heading our way. But whether this reveals itself in the near term as what basically amounts to a panic run on gold and silver as the only standards people will look to if and when they lose faith in the dollar is not quite certain in my mind.

Dollar squeezeTo my way of thinking, if the dollar collapses, remonetization is a moot point. I would venture to say that the majority of gold is not nearly as well distributed as the dollar. This is a generality of course, but true none-the-less. If all of a sudden people can't use their bucks to buy a cup of coffee, two things will happen: 1) the coffee store will close and 2) the guy who wants the coffee will simply do without OR find another means of getting the coffee. In real terms, that method of getting the coffee is more likely to be an impromptu bartering system, rather than a rush to start weighing out specs of gold.

But, he does make some valid points and I for one am no economist. The state of the world economy though in relation to our growing debt, massive social program list and an increasingly violent foreign policy make me uneasy. Anyway, read the whole article…'s something to think about.


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Filed under Economy, Politics

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