The Return To Good Money

Jeff Nielson
October 26, 2010

Once again I'm indebted to a reader for passing along a superlative concept and essay on a practical means of returning to "good money" (i.e. some sort of precious metals-based currency). While most precious metals commentators (including myself) strongly advocate the return to some sort of "GOLD STNDARD", devising a plausible process for moving away from the worthless paper we carry in our wallets today has proven problematic.

If we follow the path of "converting" fiat paper-currencies back to precious metals-backed money, we immediately see only two options. Either we get all of the world's major currencies to simultaneously convert their paper-currencies (an extremely unlikely event), or we must do this in some step-by-step process - which must begin with the world's "reserve currency" (currently the U.S. dollar).

In my own attempt to reconcile this enormous logistical issue, I previously proposed a two-stage process: first switching from the U.S. dollar to China's renminbi as the new reserve-currency, and then backing the renminbi with gold. My reasoning was that if the two changes were instituted (more or less) simultaneously that there would be an horrific plunge in the U.S. dollar - as a world full of U.S. dollar-holders all sought to rid themselves of their inferior paper in favor of gold-backed renminbi at the same time........read on