Thursday, March 19, 2015

To Fix or Not To Fix

Hugo Salinas Price has an idea for Greece. Leave the EU and restore the Drachma on a "quasi-silver standard".

I generally get queezy when people (especially silverbugs) talk about "monetary authorities" manipulating the value of currencies in terms of monetary metals - since our history of this practice has led to the inevitable conclusion that anything other than a FREE MARKET for the metals will impair this blogger's preference for a naturally evolving freegold solution / transition.

But let's think about this for a moment. Prior to the naturally occurring "financial reset" (as some might call it) of Freegold or FreeSDR or whatever else the prevailing thought leaders come up with as a continuation strategy (some precarious journey counter to "naturally occurring"?) we are still in a paper-driven pricing paradigm which could lead to as much currency disaster for Greece's drachma as for the ruble, lira and other EM currencies of late.

Frankly, the EU could destroy the Drachma just out of spite (with a little help from its friends) just like monetary authorities could destroy literally any currency that gets its "value" from the current FX regime (intentionally or unintentially - which is a large part of the current problem).

Let us think about this more broadly in terms of recent dollar / euro / franc and other currency "value gaming" on the FX and related (FX impacting) inter-dependent markets.

Though it is against my constitution, a TEMPORARY silver or (more effectively, gold) standard for the drachma, or any of the EM currencies, PRECEDING a free-market reset might just create the tipping point to help bring about the collapse of the current debt-backed paper pricing and valuation system which much of the world is expressing extreme distaste for.

In other words. it might just be more effective to move away from the dollar by de-pegging from it (as recognized by the BIS, reported on by Reuters and written about by yours truly in prior posts) and re-pegging, TEMPORARILY to GOLD.

Let us extrapolate ...

Greece joins the Eurasion Union and Brics development banks / currency bloc / monetary infrastructure and issues a gold or silver Drachma fixed to its paper currency, as do others within the bloc.

China, Russia and India agree with other member sovereigns to say "screw the new pricing regime" and agree upon a TEMPORARY fix to gold within a hybrid commodity/FX framework, based on where they think the price should be in their currencies, completely irrelevant to the COMEX / LBMA / new "fixing" banks paper-driven pricing system.

The EM currency price will obviously be hgher than the dollar price (relative to current FX), so no one will be buying gold at that bloc's price with dollars, right? Impact on current FX market? Gold holdings of sovereigns? Debt-backed currencies? Gold-backed currencies? Irrelevant?

Something to think about, and to think completely through (hint: sharper minds than mine required).

The temporary "fix" stays in place until the current system either collapses or comes into line with the new gold/currency bloc pricing, and the new bloc authorities agree that, "We now have a global free market in gold" so "let the currency price now float freely".

A possible way to stimulate the inevitable? Inspired by a man named Price? Comments?

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