Jack Walker

The Fallacy of Floating Exchange Rates

Lok,

You are certainly right about the speculative flows in the current market environment. There are many recommendations in the currency market to short the euro against the yen. The long yen trade could well be another trend following frenzy similar to the one that pushed crude oil to $147 last spring. While you are right to be questioning the economic disruption that is being caused by excessive speculative flows, the problem is separating desirable speculation that plays a role in market liquidity from the disruptive and mindless trend following that pushes asset prices to dangerous levels. How should this issue addressed?

Jack

James Grant Wants to Know: Who Will Buy Our Greenbacks?

Tom,

Thanks for bringing James Grant's artilce to our attention.

Here are two questions I would ask.

How would you compare the current situation with the 1930s when the US embarked upon a policy of massive fiscal stimulus and public works projects? If I recall correctly inflation was contained until the mid 60’s when the Vietnam war expenditures eventually forced the US to renounce the gold standard in the early 1970s. Was the difference due to the gold standard?

Secondly, as an investment class how did gold perform during the deflationary 1930s?

Jack

Fiat Money and a Profligate Congress: A Bad Combination

Thomas,

Thanks for bringing Lehrman & Muller's writings to our attention once again.

Even if a new gold standard was the right solution how could it be implemented short of a worldwide economic breakdown and chaos? It seems democracies are incapable of important structural changes without a crisis.

Jack