The long term interest rates I'd chalk up to China and other Asian countries willing to finance our current account deficit (the middle east with their windfall profits are also purchasing some US treasuries as well).
This not only has negated the "Crowding Out Effect" that should have been caused by the tremendous government deficits, but has flooded the economy with long term loanable money, keeping the interest rates down.
Gold standard I have not much contemplated. As far as my thinking goes is that it is the ultimate back up or inevitability that when there is an emergency or crisis and a collapse of the world's largest economies occur. For whatever reason, different cultures in the world always ended up having gold as their medium of exchange, and that's without coordination. Gold naturally became "natural" currency. Thus, as long as economies can keep control of their currencies and keep the production of wealth up, counter counterfeiting, and have sound financial systems, fiat money will effectively work and be a functional currency.
But once a crisis hits or the financial system becomes defunct, gold will become the currency simply by default.
Attempts to peg or back up a fiat currency with gold reserves, I have no opinion simply because I haven't much thought about it.
Hey Jensen,
ReplyDeleteThe long term interest rates I'd chalk up to China and other Asian countries willing to finance our current account deficit (the middle east with their windfall profits are also purchasing some US treasuries as well).
This not only has negated the "Crowding Out Effect" that should have been caused by the tremendous government deficits, but has flooded the economy with long term loanable money, keeping the interest rates down.
Gold standard I have not much contemplated. As far as my thinking goes is that it is the ultimate back up or inevitability that when there is an emergency or crisis and a collapse of the world's largest economies occur. For whatever reason, different cultures in the world always ended up having gold as their medium of exchange, and that's without coordination. Gold naturally became "natural" currency. Thus, as long as economies can keep control of their currencies and keep the production of wealth up, counter counterfeiting, and have sound financial systems, fiat money will effectively work and be a functional currency.
But once a crisis hits or the financial system becomes defunct, gold will become the currency simply by default.
Attempts to peg or back up a fiat currency with gold reserves, I have no opinion simply because I haven't much thought about it.