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The Gold Market, Part 2

“Gold isn’t condensed fear, it’s condensed labour”

by James Orlin Grabbe, In Gold We Trust:

How Foreign Exchange Intervention Affects the Money Supply

In order to succeed, a regime of fixed exchange rates (and under Bretton Woods, rates for the major currencies were fixed in terms of their par values, which could not be casually altered) requires coordinated economic policies, particularly monetary policies. If two different currencies trade at a fixed exchange rate and one currency is undervalued with respect to the other, the undervalued currency will be in excess demand. By the end of the 1960s both the deutschemark and the yen had become undervalued with respect to the U.S. dollar. Therefore the countries concerned (Germany and Japan) had two choices: either increase the supplies of their currencies to meet the excess demand or adjust the par values of their currencies upward enough to eliminate the excess demand.

Read More @ InGoldWeTrust.com

Click Here For Part I

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