Thank you for your newsletter! I read every issue with great curiosity. Right now, I’m particularly interested in questions regarding the potential partial reintroduction of the gold standard.
How realistic is a partial reintroduction of the gold standard in the U.S. under the current administration?
- What economic and political factors support or oppose this move?
What would be the impacts of a return to the gold standard on the global economy and financial markets?
What role do countries like Russia and China, which have significantly increased their gold reserves, play in this scenario?
- How might these countries benefit from a return to the gold standard?
What signs or developments should we monitor to detect a potential return to the gold standard?
- Are there specific political or economic indicators that could signal such a change?
When could such a change realistically be implemented, and what steps would be necessary?
Hey Stefan, thank you - I appreciate it! I do not think the reintroduction of the gold standard is feasible in the US. Under the gold standard, fiat currency is fixed vs gold, i.e., you can trade your US dollar vs gold at a fixed rate. This only works if the US government owns enough gold. If it creates too much debt or in other words there are too many US dollars, the system does not work. After World War II, under the Bretton Woods Agreement, the U.S. dollar was convertible to gold, but only for foreign governments and central banks at a fixed rate of $35 per ounce of gold. Right now, the US owns gold worth around 750 billion USD. Sounds like a lot, but it isn’t compared to the US government’s debt of around 36 trillion USD. A quarter of the US government debt is held by foreign investors. If the debt is repaid to foreign investors and they want to convert their US dollars in gold, the US government would not own enough.
I pretty much agree with the US inflation picture, but just curious why not playing it via long US2y futures/options?
I really enjoyed your aussie thesis, it makes a lot of sense. I've been playing a bullish view on China and Iron Ore (and BRL stabilization) through a long in Vale Do Rio Doce ($VALE), would love to share my thesis with you if that could be of interest.
Hey Valentino, thanks! I am less confident in my view on the short-end and more confident in my view on the US dollar. I don’t want to put on three different bets that are all highly correlated. One or two trades to play this view are enough. And sure, happy to hear the thesis!
Thank you for your newsletter! I read every issue with great curiosity. Right now, I’m particularly interested in questions regarding the potential partial reintroduction of the gold standard.
How realistic is a partial reintroduction of the gold standard in the U.S. under the current administration?
- What economic and political factors support or oppose this move?
What would be the impacts of a return to the gold standard on the global economy and financial markets?
What role do countries like Russia and China, which have significantly increased their gold reserves, play in this scenario?
- How might these countries benefit from a return to the gold standard?
What signs or developments should we monitor to detect a potential return to the gold standard?
- Are there specific political or economic indicators that could signal such a change?
When could such a change realistically be implemented, and what steps would be necessary?
Hey Stefan, thank you - I appreciate it! I do not think the reintroduction of the gold standard is feasible in the US. Under the gold standard, fiat currency is fixed vs gold, i.e., you can trade your US dollar vs gold at a fixed rate. This only works if the US government owns enough gold. If it creates too much debt or in other words there are too many US dollars, the system does not work. After World War II, under the Bretton Woods Agreement, the U.S. dollar was convertible to gold, but only for foreign governments and central banks at a fixed rate of $35 per ounce of gold. Right now, the US owns gold worth around 750 billion USD. Sounds like a lot, but it isn’t compared to the US government’s debt of around 36 trillion USD. A quarter of the US government debt is held by foreign investors. If the debt is repaid to foreign investors and they want to convert their US dollars in gold, the US government would not own enough.
Dear Mr. RepoInsight,
Great article, thank you for sharing.
I pretty much agree with the US inflation picture, but just curious why not playing it via long US2y futures/options?
I really enjoyed your aussie thesis, it makes a lot of sense. I've been playing a bullish view on China and Iron Ore (and BRL stabilization) through a long in Vale Do Rio Doce ($VALE), would love to share my thesis with you if that could be of interest.
Thanks again!
Best,
Valentino
Hey Valentino, thanks! I am less confident in my view on the short-end and more confident in my view on the US dollar. I don’t want to put on three different bets that are all highly correlated. One or two trades to play this view are enough. And sure, happy to hear the thesis!