Gold-bugs are preferable to house-bugs

Sir I cannot understand all the uproar about Robert Zoellick, the World Bank president´s recent comments on gold, “The G20 must look beyond Bretton Woods” November 8.

Sincerely, what is the difference between “employing gold as an international reference point of market expectations” and all that recent rhetoric on the need to measure and avoid assets bubbles? Gold, being movable, should be a more adequate asset to transparently measure market expectations than houses. Gold is allowed to fluctuate up and down, while falling house prices are fought against as if it signifies the end of the world, even though, rationally… what´s wrong with lower house prices?

I much rather have gold-bugs than house-bugs.

We need liquidation and inflation and growth

Sir, Martin Wolf in “Central banks must target inflation” May 6 writes: “for clearing up the mess and designing a new approach to monetary policy... we have three alternatives: liquidation, inflation; or growth”, though he knows, of course, that we need all of them all: liquidation so that we stand on firm ground; inflation to grease the wheels; and a lot of hard and clever work at growth. 

Wolf also considers the possibility that our children “in despair...will even embrace... the absurdity of gold”. I do share Wolf’s feeling since they, and we, deserve more than that; in fact one of the most worrisome aspects of this crisis is how often one finds oneself on the side of those gold-bugs one has always considered being somewhat nuts. 

Now, what I do not agree with Wolf is when he writes of “inflation targeting”, as a holy gray, since one of the problem could be that the inflation was not adequately targeted. 

In a letter published by FT in May 2006 I wrote “inflation as they, our monetary authorities know it, is just obtained by looking at a basket of limited consumer goods chosen by bureaucrats and that although they might be highly relevant to the many have-nots, are highly irrelevant to measure the real loss of value of money. For instance, who on earth has decided for that the increase in the price of houses is not inflation? And so what should perhaps be argued is that really our monetary authorities have not been so successful fighting inflation as they claim they have been.” 

And then of course we have the financial regulations, and that Wolf does not even want to mention. Would a runner be a bad runner just because someone trips him up and he falls? In just the same way must a monetary policy be wrong, just because some financial regulations, risk weighted bank capital requirements, went haywire?

On trusting and hacking

Sir, Benn Steil’s “Digital gold and a flawed global order”, January 5, serves quite well in reminding us about not digging too deep into the reasons for this extraordinary trust that a generally very suspicious world has shown most of their politicians over the last few decades by being willing to accept their printed money against the sole backing of the imprint of a “In God we trust” and, to top it up, this in days were fever people seem to trust God, at least by church going standards. The other thing the article does is of course to alert us to the significant retooling those old Fort Knox plunders have to do in order to be able to hack themselves into the vaults of digital gold.

Steil gold trust