There are a number of advertisements out on the internet that talk of the possibility of there some day being a new Bretton Woods style monetary conference perhaps being held at Mar a Lago. It is sometimes called a proposed "Mar a Lago Accord". Obviously, if such a thing did take place, it would have the full attention of this blog since watching for monetary system reform is the primary purpose here.
But is there evidence that such a meeting is being seriously considered or even already planned? This is where things get a bit murky. On the one hand, we can (and do below) cite some highly credible sources who have hinted at such a meeting taking place. On the other hand, no one in the Trump Administration has stated that a meeting like this is under consideration much less actually planned.
So, where does this idea come from? Below I have listed some links to credible sources where the possibility of some kind of monetary conference at Mar a Lago has been mentioned. However, please note that it is hard to tell if these references are talking about something actually seriously under consideration or just something that seems desirable given the problems and issues that exist in the present monetary system.
Further below the links, I have pasted in a very recent interview with Jim Rickards where he talks directly about this topic with his latest views on it based on what he has written about it in his new book Aftermath (starts around the 32 minute mark). I will just post the information and let readers draw their own conclusions on this question.
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Dr. Judy Shelton (from Wikipedia referencing her interview in the Financial Times 5-31-2019)
"In 2019, she said that she hoped for a new Bretton Woods-style conference where countries would agree to return to the gold standard, saying, "If it takes place at Mar-a-Lago that would be great." Mar-a-Lago is a club run by President Trump."
From the FT article:
"Her big dream is a new Bretton Woods-style conference -- "if it takes place at Mar a Lago that would be great" -- to reset the international monetary system . . . "
Dr. Judy Shelton - Fortune August 2016:
"I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that. But anything the U.S. does because we print the international reserve currency, unilateral action would almost instantly be accommodated by other countries."
Dr. Judy Shelton - GSI Exchange article May 2019 (quoting her in a previous Forbes article):
"When asked in a Forbes interview whether a new gold standard can be achieved unilaterally or if nations must convene to the standard, Shelton says “I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that.”
Jim Rickards (Mar a Lago comments start at about 32 min mark)
From the interview just above, my take is that Jim sees it as less likely that the present system will be reformed in an orderly way at something like a "Mar a Lago Accord" and more likely we will see a disorderly failure of the present system, perhaps making such a global monetary conference mandatory under more crisis like conditions. His comments on a Mar a Lago monetary conference start just around the 32 minute mark of the interview. These comments are consistent with what Jim has said in other interviews and also to me by email. In addition, I let Jim preview a draft of this article before posting it.
So you see why this question about a potential new monetary conference has arisen and why many people are watching for any signs of it (perhaps in the second term of a Trump Administration if he is re elected). It is interesting to note that most people (including Jim) now feel the odds of a major financial disruption before the 2020 elections are pretty low and that the Fed will do what Trump needs to try and stave off a recession. On the other hand, Democratic candidate Elizabeth Warren is saying she sees a good chance for a new crisis before the next election. Looking at her comments, it is clear now that if a new crisis emerges, Democrats will blame President Trump's tariffs and sanctions for the crisis. Meanwhile, President Trump will blame the Fed as we have mentioned here for some time. Who each side will blame for any economic problems is perhaps one of the easiest forecasts to make.
We will just continue to monitor events as usual here and report what actually happens.
We will just continue to monitor events as usual here and report what actually happens.
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Added notes: Here is an example of another article where you see this whole idea speculated about. This one appears in NewsMax (Nov 2018) by gold advocate Adam Baratta. This is pretty clearly just speculation (wishful thinking?) by the author. Here is the last paragraph of this article:
"All of this leaves us to ponder the ultimate big idea for Donald Trump. With the G-20 meetings upcoming, and the world’s leaders all set to meet in early 2019 in the United States, what better time for Trump to propose resetting the entire global monetary system with gold? Can you say Mar-a-Lago Accord?"
If you want to see what Jim Rickards is saying on a broad spectrum of current issues, you can take an hour to watch this even more in depth recent interview.
If you want to see what Jim Rickards is saying on a broad spectrum of current issues, you can take an hour to watch this even more in depth recent interview.
The problem with a gold standard is convertibility, and the fixing of the gold price relative to particular currencies. Of course once any price is 'fixed', it becomes almost immediately obsolete. Prices must fluctuate according to market forces, something that economists of a certain persuasion never cease to deny.
ReplyDeleteIf the currencies are not convertible into gold then there is no gold 'standard'. And if they are convertible, then holders of gold would have their holdings depleted by redemption using invariably overvalued currencies at arbitrary rates. And how is the 'value' of any particular currency determined except by market forces or the claim by the issuing State according to their own determination? The failed method was to arbitrarily set currency prices relative to each other and have them periodically fail (devaluation).
This is why the Bretton Woods gold standard between nations finally failed, after persistent price distortion, in 1971.
Of course there still is a 'gold standard' of sorts still in place; any nation in dire straits wishing to obtain loans, commercial or otherwise, must put up gold as collateral, gold being the settlement of last resort. The most recent example of this is the example of Venezuela, who defaulted on a loan owing to financiers and forfeited gold held in custody as collateral.
Your comments sound like the RIIA's paper on gold. Why would you fix the price of gold relative to currencies? Currencies should go back to the weights they started as. The minute people started stamping coins with numbers, it opened the door to debasement. Obviously the old weights they represented are far too large relative to the current depeleted values now, but for the sake of argument, if a pound was still a gold sovereign, prices of everything else would fluctuate around that numeraire. Jastram's book showed prices measured in gold are the most stable. If a currency represents a real weight of gold, payable on demand, it's a self-correcting system that served Britain well for 700 years and in terms of Newton's gold standard, prices were stable for 230 years despite there still being fractional reserves and credit. Gold standards are open to abuse, whereas simply using gold is simple, transparent and honest.
DeleteThere is only one real objection to using gold and that is governments can't abuse the public via it. They can't pay for unpopular wars and they haven't figured out how to tax deflation. Until we have liberty, a gold standard is diametrically opposed to the system because it prevents theft in a manner that as Keynes said "not one man in a million can diagnose". And because thanks to a century of inflation, people are in fact under the so called "money-illusion", and would think their wages dropping slowly is truly horrendous, despite their getting richer in real terms and their savings and earnings buying more than ever before. A study in the UK showed that 75% of people think the balance they hold with a bank is theirs and is sat there waiting for them. Only 25% of people realise they are an unsecured creditor. Since 1694, people have been deliberately miseducated about money and credit and since 1833 the two became one for most people.
You are correct. The Bretton Woods VERSION of the GS failed. A true GS is the Gold coin standard or gold currency standard or gold species standard, the oldest form of gold standard. It is also known as orthodox gold standard or traditional gold standard. This standard was prevalent in the U.K., France, Germany and the U.S.A. before the World War I. Gold coin standard is also regarded as full gold standard because under this standard full- bodies standard coins made of gold were circulated. Other forms of money are redeemable into gold. According to Crowther – “A currency system in which gold coins either form the whole circulation or else circulate equally with notes is known as the full-gold standard.” The market decides the price of gold, unless the govt always redeems gold on demand every single time. If they don't, it's not a GS.
DeleteI am not familiar with the RIIA's paper on gold.
DeleteWhen you say "Why would you fix the price of gold relative to currencies?", I assume 'you' refers to me as author of the comment rather than the collective 'you'.
In fact I argue that fixing the price of currencies relative to gold (or vice versa) may not be viable, though advocates of the return to a gold standard suggest that a new gold standard would imply that all national currencies would be somehow tied to the value of gold. Apart from the obvious fact that many or most nations do not have gold reserves sufficient to 'back' their currencies (for example, Canada has none, having sold the all 700+ tons at market lows when that was fashionable), if only a few nations adopted a gold standard, nations without gold would not be able to attribute any value to their currency and thus would not be able to acquire goods or trade using currency that could be redeemed for gold, unless of course they sold to gold-backed nations and acquired gold-backed currency from that direct trade. This would likely result in insufficient hard currency for their needs. In fact, today, nations with insufficient hard currency suffer from this deficiency, the most notable examples being Cuba, Venezuela, Zimbabwe, and North Korea, but there are many others.
Your critical observation about 'Why fix the price of gold to currencies ...' is negated by the later statement 'If a currency represents a real weight of gold, payable on demand, it's a self-correcting system that served Britain well for 700 years ...'. This is the point I make: if currencies are convertible, they're gold-backed, but if they're not convertible, they're not gold-backed - and they can't be convertible, or redeemed for gold, if the other currencies have no basis for their value except as is claimed by the nation issuing them - which is of course why most currencies, even now, have no value outside the issuing nation.
Robert
Thank you for the comments and great discussion.
ReplyDelete