Plea for sanity from World Bank Chief

At last a glimmer of light appears in the dark tunnel of despair still madly under construction by the likes of Bonkers Helicopter Bernanke and his madly churning false money printing presses. The head of the World Bank, Robert Zoellick, in Singapore has called for an anchor, such as gold, to end the wild fluctuations in global currency markets of recent years. Read the AFP report from here. This blog has advocated such a fix as the only escape from greed-driven politicians over many years, some links to our earlier suggestions: Needed a New Bretton Woods Agreement, from which I would quote this paragraph: Fixing a value for the dollar requires no international agreement, it can be accomplished by the best brains and economists from across the parties, political spectrum and diverse interests of the nation. With modern vast number crunching computing power it could be as complex and regularly reviewed as any might wish or as simple and eternal as the value of gold or the wheat yield of land. Anything is possible - anything is essential. Brown and Bretton Woods, also from August 2008 from which I would quote the following: On the BBC Radio 4 Today programme this morning one of the lame-brained presenters , incapable of rational or logical reasoning after years of propagating New Labour's lies and spin, was trying to get his sorry apology for a brain around the reason why governments having thrown billions at the banks the latter still would not lend to one another at reasonable rates, the reason of course is clear - the bankers, being more savvy than politicians, are fully aware that such money does not exist, it is entirely a figment of Brown and other leaders imaginations, albeit lying within their power to make their fantasies seem real by the use of printing presses. While from March of that same year, just one of many down the years making the same point, I quote here in full: +++++

Tie the pound to the UK wheat yield!

I tried to post the following comment to the William Rees-Mogg column in this morning's the Times, linked here but repeat it below as it has not appeared: I date the start of these present problems back to 1971 and Nixon freeing the dollar from gold. Since that time currencies have merely moved against one another in a macabre manner apparently directed by government whim and market greed. No investor has anywhere realistic or reliable to currently protect this meaninless worth except in gold or commodities, the value of the latter being themselves doubtful due to the approaching macroeconomic slump. A Central Bank that now tied its currency to something tangible and of constant worth would attract sufficient sound investors to better weather the hurricane. Given that wheat has been the staple of the West I suggest the BoE consider fixing the pound to the value of the annual wheat yield in an acre of land in the Vale of Evesham.

posted by Martin at 12:54 PM +++++

Restoring economic stability

William Rees-Mogg in The Times today has an interesting article, here, on the present chaos referring back to the lessons of 1931, to which I posted the following comment with very limited space: "Fannie Mae was an attempt to cure the Great Depression and is arguably a spark for the greater one now developing. Fixed exchange rates cannot be defended following decades of incompetent governance. Restore stable monetary values against finite items such as land. That alone can offer security." I have commented often on this blog regarding Fannie Mae and more detailed thoughts on economic solutions to the present ongoing disaster in particular in the posting of 7th August, linked here, titled "Needed - A new Bretton Woods Agreement", from which comes this: Hard-working and comparatively vacation-starved US families who became used to watch their work rewards grow through their 401(k) pension schemes before the Clinton stock market bust have now watched with dismay as the alternative calculator of land and property values rapidly head south as accentuated by the plight of the formerly solid institutions of Fannie Mae and Freddie Mac. The crying need for a stable calculator for value for America's hard-working families could surely not be any clearer or yet more urgent than with the coming election. In spite of the WTO, Nixon's precedent of a temporary import surcharge will not be something to be easily ignored. George W Bush, whose Presidency already appears likely to be viewed by history as far more successful than contemporary pundits might ever have imagined now has the chance to leave a legacy of a secure and strengthened dollar as his overarching achievement for posterity. Fixing a value for the dollar requires no international agreement, it can be accomplished by the best brains and economists from across the parties, political spectrum and diverse interests of the nation. With modern vast number crunching computing power it could be as complex and regularly reviewed as any might wish or as simple and eternal as the value of gold or the wheat yield of land. Anything is possible - anything is essential. In spite of the posting's title what I was proposing was something quite different from the original Bretton Woods agreement and initially only involved the US Dollar, I quote again: Fixing a value for the dollar requires no international agreement, it can be accomplished by the best brains and economists from across the parties, political spectrum and diverse interests of the nation. With modern vast number crunching computing power it could be as complex and regularly reviewed as any might wish or as simple and eternal as the value of gold or the wheat yield of land. The same solution could be available for the Pound Sterling, but a fixed currency demands honest politicians, while the incoming Obama administration might offer Americans such a prospect, none such seem to exist in the UK!

Needed - A new Bretton Woods Agreement.

A year into the crisis and the FT is doing a review into what happened, linked here. All who believe in individual liberties and democracies have lived through a perilous year and while the recent 15 per cent fall in the oil and gold price with a slight recovery of the dollar might be a glimpse of light at the end of the tunnel, there seem many more and greater risks ahead. In a posting beneath this, made earlier in the week, I linked to a You Tube video of Republican President Richard Nixon's speech in 1971 when he scrapped the convertibility of the dollar to gold and imposed a ten per cent surcharge on imports. This bought a quarter a century of controlled depreciation of the dollar. Oil producers and other suppliers of basic commodities have now given notice that they will no longer accept ever greater quantities of potentially worthless paper in exchange for their precious and finite natural resources. Hard-working and comparatively vacation-starved US families who became used to watch their work rewards grow through their 401(k) pension schemes before the Clinton stock market bust have now watched with dismay as the alternative calculator of land and property values rapidly head south as accentuated by the plight of the formerly solid institutions of Fannie Mae and Freddie Mac. The crying need for a stable calculator for value for America's hard-working families could surely not be any clearer or yet more urgent than with the coming election. In spite of the WTO, Nixon's precedent of a temporary import surcharge will not be something to be easily ignored. George W Bush, whose Presidency already appears likely to be viewed by history as far more successful than contemporary pundits might ever have imagined now has the chance to leave a legacy of a secure and strengthened dollar as his overarching achievement for posterity. Fixing a value for the dollar requires no international agreement, it can be accomplished by the best brains and economists from across the parties, political spectrum and diverse interests of the nation. With modern vast number crunching computing power it could be as complex and regularly reviewed as any might wish or as simple and eternal as the value of gold or the wheat yield of land. Anything is possible - anything is essential. New Hampshire is the perfect setting in Fall for such a conclave. Lock them up in Bretton Woods if Bush might so wish, but I would suggest the recently refurbished Wentworth Hotel (golf and sailing on hand) on Newcastle Island near Portsmouth NH, there they may not just observe the splendour of natures change from green to red to gold, but also be reminded by the sea of their duty not just to the citizens of the US, but also to the world and the nearby presence of the US Navy Yard will recall the reality of US power in its nuclear submarines, aircraft carrier battle fleets and giant superiority in space technology. Restoring the power and strength of the dollar seems as nothing when recognising the true underlying power of the United States of America which, of course, is bedded in its democracy. The stunning discovery of water on Mars by US scientists just this summer surely must highlight once again the stupidity of leaving the dollar, the currency of such an innovative nation, to drift and dangle. Either or both Presidential candidates could endorse the consensus concept of this Economic Conclave, which should be compulsorily achieved by an end October deadline. Congress would then have the utmost legitimacy for implementation early next year. By the Autumn of 2010 other Central bankers could attend a second Bretton Woods Conference to fix their currencies against the new dollar bench-mark, whether they do so or not is irrelevant as the spendthrift and deceitful politicians of the world will once again have a benchmark via which they can be exposed.

How Nixon "Whupped" the West and Crowned China

My post in honour of the 100th anniversary of the birth of former US President Nixon's  first published by International Business Times is linked here. It was submitted as follows

How Nixon "Whupped" the West & Crowned China 

President Nixon would have celebrated his 100th birthday on 9th January. This milestone was marked on Sunday by the laying of a wreath on his grave at his birthplace in California. A local report of the occasion is linked here.

I heard Nixon's August 1971 radio broadcast in a limousine when leaving Tulsa airport, having just landed from Europe. I guessed at the time this would prove the end of the Western world as I had known it! Had I also known the consequences would take some forty plus years to finally arrive, then maybe I would not have worried so much in the interim. The YouTube version of that momentous moment may be seen here:

The section of the speech announcing the penal import taxes on the products of nations whose currencies had been strengthening as a result of speculation against the dollar, these days receives less attention than the cut in the dollar's tie to gold, but gives a clue to the longer term effects of the West's future trade versus that of China.

I was in Oklahoma to report on the progress in my employers' planned arrangements for the offshore loading at sea, direct from reservoir, of the first North Sea commercial oil discovery. Two tankers would alternate to allow continuing production without oil storage at the field. This plan involved considerable difficulties in the mooring of the ships, which it was partly my responsibility to overcome. What Nixon had delivered, I realised, was a setting loose of the West from its moorings, as though we had tried to load the vessels with no anchor to the seabed in the often storm-tossed waters of the North Sea!

While the western world has spent the intervening forty years agonising how to tie the value of their currencies to a substitute for the dollar (the latest fad being inflation), they have yet to realise that the essential is for it to be to something of value to mankind, such as a fair value for wheat! I have blogged often on this, particularly in August 2008 stressing the already then urgent need for action on a new Bretton Woods Agreement, linked here. The relationship between the US Dollar and the RMB, on the other hand, as befits such a crucial trading link, has during this same period been carefully managed by the governments of the two countries concerned.

Part of the then weakness of the US Dollar, which presented President Nixon with such nightmare dilemmas, was caused by growing energy imports, mainly in the form of OPEC oil. Yankee ingenuity has come to the rescue in the form of fracking, with oil imports at the end of last year falling to only half that of the levels reached when at their peak.

In view of these considerations it is perhaps surprising that the centenary of the birth of Richard Millhouse Nixon has so far this week been somewhat low key. Had he not opened up trade with China the present US prosperity, tied only to the failing economies of Western Europe and Japan, would, by now, have been very sorry indeed. I believe this will generally be accepted long before the centenary of ex-President Nixon’s death.