Return and Exchange Policy
So the exchange rate must move , of its own accord, to offset the tariff. Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. But in the absence of a global conference — something that would be anathema to Trump — the way to get there is the same as under the 19th-century gold standard.
Then, the leading power, Great Britain, unilaterally fixed the domestic currency price of gold. Other countries, seeing the advantages accruing to Britain, followed its example. Once multiple countries had pegged the domestic price of gold, the exchange rates between their currencies were effectively fixed.
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Behind this presumption, however, lie a number of logical non-sequiturs. First, other countries show little desire to stabilise their exchange rates, restored gold standard or not.
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They understand that different economic conditions justify the adoption of different monetary policies, which in turn requires exchange rates to move. Second, gold is no longer a stable anchor. Having the Fed peg the price of gold in dollars would do nothing to peg its relative price — that is, the price of gold relative to the prices of other goods and services.
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For the relative price of gold to double, as it did between and , consumer prices would have to fall by half, in a catastrophic deflation. The price of gold relative to CPI inflation was less volatile in the 19th century but this reflected the importance of gold mining.
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Either economic growth returns or—as some doomsayers predict—the year run of fiat currencies ends. To be sure, a return to the exact terms of the Bretton Woods Monetary Agreement is a near political impossibility because of the traumatic devaluation in the U. Dividing this monetary base by the approximate The conference featured panels on high frequency trading, the impact of social networks and other contrarian topics one would never hear at a gathering held by a mainstream retail brokerage.
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