Although I have tried to educate myself on the subjects noted in the title, it is confusing beyond reason (footnote). One must wonder if anyone but a select few really understand these issues.
As my readers know I am a Republican. It was a Republican president (Richard Nixon in 1971 – not my favorite president) who took the USA off the gold standard. However, he did so on the advice of my all-time favorite economist, Milton Friedman.
The problem, as I see it, with floating currencies is that they are the measuring device of economies and yet they are, in part, measuring themselves. The measuring device should not be part of the what is being measured (40 years of scientific research has taught me that).
There are precise standards of measurement for:
- one second
- one inch
- one square foot
- one ounce
- etc., etc.
Imagine if one second varied from day to day. Could one confidently measure time? Imagine you are baking a cake and measuring cups varied from day to day. And then imagine you were told to toss the measuring cup into the batter. In essence that is what floating currencies of fiat money do every day to the valuations of EVERYTHING!
So I did a little research on currency trading (after reading The Scandal of Money, by George Gilder). The numbers are astronomical and shocking. (Of course, many economists believe the size of the trading volume is actually very good).
Let’s take a look (source of data – for those who do not know, Forex is the foreign currency exchange):
- $5.3 trillion dollars are traded every day in the forex market. That is more than one fourth of the US annual GDP traded EVERY DAY.
- Gross world product in 2018 is projected at $87.51 trillion. Forex annual trading volumes are measured in quadrillions of dollars (1000 trillion per quadrillion).
- Forex trading daily volume is about 53 times more than the New York stock exchange.
- The forex market is 12x larger than the futures market and 27x larger than the equities (stock) market.
- The US Dollar is the most traded currency, being part of almost 90% of global trades.
- Central Banks essentially create the various currencies and banks are far and away the largest traders in currency – ten banks do 77% of all this trading. (The bank computers to “guide” these trades are probably the largest single investment in computer hardware ever made.)
Importantly, these huge exchanges of money produce absolutely nothing.
Think about it.