Ever since China brought up the subject of new reserve currency, there has been a lot of talk about returning to gold standard. Even some countries officially supported the idea, like Russia. I have not paid much attention to it, because I simply don’t think this is going to move beyond the stage of “talk” any time soon. Governments are not really interested in moving away from fiat money. They would argue that any such move would limit creation of credit to the amount of gold on hands, thus restricting any growth and economic expansion. What they don’t want to mention is that a step like this would force fiscal responsibility on governments, vastly limiting what our overgrown elective bodies can do.  US government is the prime example, seemingly creating money and credit out of thin air lately. Over the weekend I received an email from a friend, which contained parts of financial essay from 1960′s, supporting the gold standard. Title is “Gold and Economic Freedom”, author…. Alan Greenspan. The very same one who’s later policies as FED chairman are partly responsible for current problems.  
Here is what he wrote at the time.
“Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets . . . [but] in the absence of the gold standard . . . there is no safe store of value,” and
“Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”
 Interesting, isn’t it? Very strong opinions. Why didn’t he express them when he chaired FED? At any rate, nobody is really in a hurry to embrace the gold standard. For one, nobody has reserves large enough relative its monetary base. By some estimate, price of gold would have be anywhere from $6,000 to $12,000 per ounce, to stand behind just the major economies. Logistics of such transition would be overwhelming. My guess is that only a default of one or more of western democratic governments on their debt would truly make this discussion serious. For now we can happily(or not so) trade currencies and not worry about gold standard. Yet.
There are still some orders left from last week, for example AUD-CHF featured inForex goes mainstream. They are valid. I want to wait to see what Yen pairs are doing, before deciding on course of action there. At the moment I’ll add only one more order here.

I want to buy NZD-CAD it it moves above recent high. Buy order is at 0.6991, looking for 100 pips gain. I don’t know if the strength will come from NZD or weakness from CAD, but a move is expected here. A lot of currency pairs seem to be at “staging areas” not really indicating what is next for them. This being Sunday, though, opening gaps are possible, so trading opportunities could be present. I just have to wait for them to develop.

Mike K.