Adonis Diaries

Posts Tagged ‘Sovereign funds

Gold-paper currencies? Any alternative to regain confidence in fluctuating paper money?

Note: Re-edit of “For regaining confidence in Capitalism: What is “Gold-paper currencies”? December 1, 2008

For a sustainable growth: Gold-paper currencies? (October 28, 2008)

For regaining confidence in Capitalism or any financial system.

I have this gut feeling that, if one major superpower does not adopt for a period a gold currency, then confidence in paper money or investment gimmicks is not going to fly for a longer time.

In these uncertain financial crisis and economic deflation, I suggest a psychological incentive for people to recover some sense of value to the currencies they are handling in their trade.

My idea is to issue hard currencies that are an alloy containing the quantity of gold commensurate to the large denominations.

This currency would be almost as thin as paper money and could not be forged, unless the amount of gold is the same as the officially issued currencies.

This project should be feasible: Gold can be made as thin as needed, and if we find a cheap metal or plastic that can add resistance and flexibility to the currency to be folded, and handled as paper money, then everybody would be satisfied.

At first, the gold paper-like money could be distributed at a rate of say 1% higher over its real value to recover the upfront expenses, in addition to the increase in market value of gold, averaged once a week.

These extra expenses would not discourage the use of paper money for those who could not afford the extra cost of gold currencies.

The higher denomination currencies would be large to keep the same thickness as the other smaller denominations.

As the value of gold would certainly keep increasing, the government would, at interval, retrieve the older currencies from the market and replace them with smaller size currencies containing the market value of the amount of gold in the alloy.

This idea is logical because the gold-paper currencies would require less gold as its value increases.

Travelers could then exchange their State own gold-paper money abroad and register them at any bank for Interpol investigations in case of thefts and get exactly the same money value of the respective States.

Obviously, all governments that signed in to this system would have to submit to international control when issuing gold-paper money for credibility and quality reasons.

I believe that with real gold-paper money then the businesses of currency speculations and rate of exchanges should wane and quickly disappear.

What might remain is currency trade or the accumulation of gold in rich sovereign funds.

The governments would quickly learn to issue enough gold-paper currency to satisfy internal commerce.

The superpowers and regional powers would exercise political and military “incentives” on weaker and unstable States to issue more gold-paper currency than needed for inner commerce, but then they would have to deliver real gold and good value products to retrieve the surpluses.

The US Administrations do not have real value money or real value economy to hoard gold and will not be able to do so for many decades to come.

Only China, India, and Russia (large producer of gold) and the rich oil-producing States with small populations would be the major players in currency trade of gold-paper money.

There are several policies that governments would revisit to manage this new system.

Governments might issues a composite “weight/balance” of the amount of gold-paper and regular paper money that should satisfy internal commerce.

Either the gold-paper money would concentrate in the hands of the rich and thus reduce commerce to regular money with industries specialized in high quality and luxury products for the rich and industries focusing on lower quality and basic products for the masses.

Or the little people would not desist from the gold-paper and use them as personal saving account in their homes and thus deflation would hit the economy due to the lack of currency circulation.

Consequently, governments would have choices to either limit the amount of gold-paper in circulation to encourage circulation of money or eliminate regular paper currencies to force the masses into liberating their hoarded gold-paper.

The same pitfalls and recurrences of the present monetary system would be exhibited but the remedies would be more straightforward to comprehend by the common people.

Furthermore, an interesting phenomenon will emerge: cultures where mostly little people horde the gold-papers and cultures where gold-papers are concentrated in the class of the rich.

Well, if there is civilization clashes then this division between the two types of cultures would set the foundations for a new sociology science where the manipulation of hard money is the first principle.

This system would require many fine tuning but the advantages must far exceed the disadvantages for smaller and weaker States. 

Countries with real value-added economies would not be affected by any mischievous financial embezzlement schemes in destabilizing their financial status because the middle classes would have re-learned the value of hard money and desist from speculative schemes for some times.

This re-learning process of the value of real hard money is the fundamental benefit of the new system so that financial history would repeat its cycle of development for the century.

In any case a genuine International Monetary Control and Management Fund would be instituted to focus on the circulation of money within and among States and help in the synchronization of real commerce.

The crux of this gold-paper currency system is to stabilize growth to a sustainable level for human kind.

Since gold is limited on Earth and its production has reached a limit, then wild GNP rate of increases would slow down.

And redundant and irrelevant consumer products would make room for basic products essentials for the survival of mankind.

The new economical strategies would focus on cutting cost, cutting waste, re-cycling and vigorously researching for substitute renewable energies for the benefit of all States.

 

Circulating premium Gold-paper currencies (Jan. 24, 2010)

            Classical economists would like you to believe that the crux to overcoming the latest global financial crash is to restitute “confidence” in the monetary system.  If that is the case then let us start by issuing worthy paper currencies.  I suggest printing a category of premium “gold paper currencies” that can be exchanged in any State without undergoing any devaluation because of the intrinsic value of gold it contains.

In these uncertain financial crisis and economical deflation I suggest a psychological incentive for people to recover some sense of value to their currencies.  My idea is to issue hard currencies that are an alloy containing the quantity of gold commensurate to the large denominations.  This currency would be almost as thin as paper money and could not be forged unless the amount of gold is the same as the officially issued currencies. It should be feasible because gold can be made as thin as needed; then if we find a cheap metal or plastic that can add resistance and flexibility to the currency to be folded and handled as paper money then everybody would be satisfied.

            At first, the gold paper-like money could be distributed at a rate of say 1% increase over its real value to recover the upfront expenses in addition to the increase in market value of gold, averaged once a week; these extra expenses would not discourage the use of paper money for those who could not afford the extra cost of gold currencies.  The higher denomination currencies would be larger to keep the same thinness as the other smaller denominations. 

As the value of gold would certainly keep increasing then the government would at interval retrieve the older currencies from the market and replace them, at no further extra cost, with smaller size currencies containing the market value of the amount of gold in the alloy; this is logical because the gold-paper currencies would require less gold as its value increases.  Travelers could then exchange their State own gold-paper money abroad and register them at any bank for Interpol investigations in case of thefts and get exactly the same money value of the respective States. Obviously, all governments that signed in to this system would have to submit to international control when issuing gold-paper money for credibility and quality reasons.

            I believe that with real gold-paper money then the businesses of currency speculations and rate of exchanges should wane and quickly disappear.  Sovereign funds and Central Banks would accumulate gold to satisfy circulation among the favored clients.  The governments would quickly learn to issue enough gold-paper currency to satisfy internal commerce. The superpowers and regional powers would exercise political and military “incentives” on weaker and unstable States to issue more gold-paper currency than needed for inner commerce but then they would have to deliver real gold and good value products to retrieve the surpluses.  The US Administrations do not have real value money or real value economy to horde gold and will not be able to do so for many decades to come; only China, India and the rich oil producing States with small populations would be the major players in currency trade of gold-paper money.

            There are several policies that governments would revisit to manage this new system.  Governments might issues a composite weight of the amount of gold-paper and regular paper money that should satisfy internal commerce.  Either the gold-paper money would concentrate in the hands of the rich and thus reducing commerce to regular money with industries specialized in high quality and luxury products for the rich and industries focusing on lower quality and basic products for the masses; or the little people would not desist from the gold-paper and use them as personal saving account in their homes and thus deflation would hit the economy due to the lack of currency circulation.  Consequently, governments would have choices to either limit the amount of gold-paper in circulation to encourage circulation of regular traditional money or eliminate regular paper currencies to force the masses into liberating their horded gold-paper. 

The same pitfalls and recurrences of the present monetary system would be exhibited but the remedies would be more straightforward to comprehend by the common people. Furthermore, an interesting phenomenon will emerge: cultures where mostly little people horde the gold-papers and cultures where gold-papers are concentrated in the class of the rich.  Well, if there is civilization clashes then this division between the two types of cultures would set the foundations for a new sociology science where the manipulation of hard money is the first principle.

            This system would require many fine tuning but the advantages must far exceed the disadvantages for smaller and weaker States.  Countries with real value-added economies would not be affected by any mischievous financial embezzlement schemes in destabilizing their financial status: the middle classes would have re-learned the value of hard money and desist from speculative schemes for some times.  This re-learning process of the value of real hard money is the fundamental benefit of the new system so that financial history would repeat its cycle of development into this century.  In any case a genuine International Monetary Control and Management Fund would be instituted to focus on the circulation of money within and among States and help in the synchronization of real commerce.

            The crux of this gold-paper currency system is to stabilize growth to a sustainable level for human kind.  Since gold is limited on Earth and its production has reached a limit then wild GNP rate of increases would slow down; redundant and irrelevant consumer products would make room for basic products essentials for the survival of mankind.  The new economical strategies would focus on cutting cost, cutting waste, re-cycling, and vigorously researching for substitute renewable energies for the benefit of all States.

Note: I hope Lebanon will be the first State to initiate gold paper currencies: Lebanon has a sound Central bank with plenty of gold in reserve.  Lebanon will get an unexpected boost as an inventive State.

Power: Not a Point of View (March 9, 2009)

Iran is planning to build 20 atomic power sites to generate electricity

Russia has aided finishing the first power station for a cost exceeding one billion dollars. Iran is not only the fourth exporter of oil but has also huge reserves in oil and gas. And yet, Iran spends enormous amount of hard cash money to import oil products and gasoline from overseas refineries.

The Iranians are building a second atomic power generator, almost alone and strong with the expertise they acquired.  The Iranian officials said that oil is a precious commodity that should not be wasted to generating dirty power

The developed nations have oil reserves but prefer to purchase oil at a reduced price in order to save their oil resources for their chemical and pharmaceutical industries for later generations. (Actually, chemical industries rely almost exclusively on oil products.)

The Arab Gulf States have established “sovereign funds” for the next generations but they all have vanished during the latest economic and financial recession.  What is left are highways and built stones.

I am exaggerating on purpose. This piece is meant to be a wake-up call. It is time to invest of the human potentials, social institutions, and political reforms.

Lebanon used to export electricity to Syria and Jordan in the 30’s during the French mandate. Presently, and 80 years later, and 65 years after its “independence”, Lebanon import electricity from Syria, Jordan, and Egypt. The populations of all these States have quadrupled in 80 years while Lebanon barely doubled, due to massive immigration, and we could not even double our power production. 

Our neighboring States have reached sort of power sufficiency and exporting surplus electricity to Lebanon. Lebanon has plenty of water and rivers but we failed to invest properly on our natural resources and hydraulic potentials. 

Not only we have not enough electricity, and none of it is hydraulically generated, but we have no running water.  We receive water twice a week for a few hours and we have to filtrate and purify what we receive.

The Lebanese family has to pay twice for electrical power and for water by supplementing their needs from the scalpers of private providers. The main culprits are those “Christian” Maronite political parties who claimed that the power of Lebanon resides in its military weakness.  Implicitly, those sectarian political parties meant that Lebanon should not challenge the dicta of Israel regarding our planning of our water resources.

Mind you that Israel purpose is to divert all our rivers toward its own Zionist State.

Electricity is a kind of power and oil and gas are essentials for locomotion and mechanization and industries.  Nevertheless, nations are judged developed according to the level of their research institutions. 

You might start the “egg or chicken” priority of security and stability first, but this is not the case.  When States invest on almost everything except knowledge base and research institutions, then you should not hope for stability and security. 

Developed nations respect States that focus their energies and resources on knowledge, literacy, and technologies and are willing to protect them from neighboring bullies.

Developed nations respect States that generate highly educated and well trained citizens regardless of size, origin, and natural resources.

Power is the level and quality of education, an education targeting the needs of the population and neighboring markets.

Power is no longer a point of view.


adonis49

adonis49

adonis49

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