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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Commentary Of The Month
September 1, 2005
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By Jude Wanniski

"Money, remember, is not only a medium of exchange to facilitate trade. It is, even more importantly, a unit of account that enables domestic and international producers to draw contracts over time. The superior money is one that holds its value in real terms over the lives of contracts short and long. When a currency fluctuates against gold over time, the costs of doing business increase as interest rates must climb to cover the risk.

"In the United States, my own work shows that between 1945 and 1971, when the dollar was fixed to gold at $35 oz under the 1944 Bretton Woods arrangement, the real economy in the US grew by 4% per year. From 1971 when the dollar was floated to 2004, real growth of the US economy has managed only a pitiful 0.3% per year.

New Bretton Woods

"Unless these inefficiencies are removed with a new "Bretton Woods arrangement," as Mundell calls it, Beijing, at some point, may decide that the costs of importing inflations and possibly new deflations outweigh the benefits of its imprecise currency zone. The intermediate step it has now taken moves it toward a fixed yuan/gold price. You might easily imagine the implications of this development.

"China’s economy is not yet big enough or secure enough to take on an international banking role, but at current growth rates relative to the US, it could rival the US economy in several years. With a convertible currency in the near future, it could take the next step toward fixing the yuan/gold price instead of importing its monetary policy from one or several other nations.

"It would be natural for Japan to break away from its currency zone with the US and join China's, as its trade with China continues to exceed its trade with the US.

"Malaysia's Mohammed Mahathir had dreamt of pulling Islamic nations out of their dependence on the dollar by joining in a fixed rate system among them, behind a gold dinar. As his success has been limited, it may be that China will get there first. Not this year or even next, but sooner than later."

Jude Wanniski is a former associate editor of The Wall Street Journal, expert on supply-side economics and founder of Polyconomics, which helps to interpret the impact of political events on financial markets.