Bonfire of the Currencies: Jim Grant Calls for Return to a “True Gold Standard”


By Charlie Henneman, CFA

Jim Grant speaks at the 64th CFA Institute Annual ConferenceIn a witty session today entitled “Bonfire of the Currencies” at the 64th CFA Institute Annual Conference in Edinburgh, James Grant, founder and editor of Grant’s Interest Rate Observer, called for the return to a “true gold standard (that) favors no one nation, but synchronizes the balance of payments between all.”

Grant says that central bank policies such as the Fed’s quantitative easing are deliberately thwarting supply and demand. “Central bankers prefer the brute methods of command and control to the delicate simplicity of the price mechanism,” he said, and these policies have undermined confidence in paper currencies. He strongly criticized the Fed’s implied third mandate of buoying asset prices, and while he noted that central banks are experiencing “mission creep” on both sides of the Atlantic, “on my side it positively gallops.”

Asked what alternative policies he might prescribe to remedy the financial crisis, Grant said emphatically that reinstating individual responsibility for downside investment risk was essential. The credit crisis, he said, “was a scandal of mismanagement, the result of the so-called Greenspan put that socialized risk,” and this needs to change.

Jim Grant speaks at the 64th CFA Institute Annual ConferenceGrant suggested that the dollar might experience upside movement if faith in the euro continues to deteriorate due to Europe’s sovereign debt problems, but that in his opinion neither currency is a reliable long-term store of value — and that a return to a gold standard would “restore the price mechanism to its proper place.”

While acknowledging that a new gold standard may not be a realistic or popular proposition at this point in time — “if a tomato was thrown, it missed me completely,” he quipped — Grant suggested that a gold standard might indeed be seriously considered “when the full cost of the paper dollar standard is tallied.”

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0 Responses to Bonfire of the Currencies: Jim Grant Calls for Return to a “True Gold Standard”

  1. carlo says:

    Investment Grade Molybdenum

    Commodities are physical substances like grains, food and metals. An investment is the purchase of a financial product or other item of value with the expectation of favorable returns in the future.

    Well, I prefer metals for preservation of my wealth. The question is what metal would you pick to preserve your wealth? Now the next thing to keep in mind is not to be biased in any way. That is, to buy a certain metal because someone tells you to, or to buy a certain metal because it is on an upward price trend or buy a metal because you read an interesting article on it.

    #1 on my shopping list. I look at is a the ability of a metal to actually promote or enable life of plants and animals on this planet. This means that you can actually grow food with it or grow trees. You can actually use the metal by sprinkling the powderized form on your soil and let the microbes in the soil slowly break down the metal and make it available for the plants to consume. Hydroponic or Aeroponic growing of food uses about 17 life giving elements that are added to the water to give complete nutritional support for plants.

    Unfortunately, there are only 7 elements of the 17 needed for plants that are an actual “metal”. These are called transition metals. Transition metals are known for their ability to conduct electricity, their hardness, high density, malleability (a material that can be worked with or hammered into flat sheets), ductility (able to be produced into a thin wire).

    These 7 investment grade metals are Molybdenum, Cobalt, Copper, Zinc, Manganese, Iron, Nickel. Nickel is documented as a essential nutrient in some plants. Nickel is not used in some high-end hydroponic formulas.

    #2 on my shopping list. I now have 7 transition metals that are used in growing food and are capable of being in my metal portfolio. But, I only want one metal. I will now consider the amount of this metal available on Earth. The next step would be the abundance of the metal or scarcity of it. Here is a list of these 7 metals and the amount in parts per million in the Earth’s crust.

    Molybdenum 1 ppm Molybdenum is most valuable here because of scarcity

    Cobalt 25 ppm

    Copper 60 ppm

    Zinc 70 ppm

    Nickel 84 ppm

    Manganese 950 ppm
    Iron 56300 ppm

    #3 on my shopping list is the melting point. I want a metal that can withstand high working temperatures. There is something called metal “creep” and that is the expansion or deformation of metals when they start reaching temperatures near the melting point. I like metals that don’t creep or change shape in high temperature conditions eg: Jet engines, Furnaces or anywhere where safety is priority.

    Molybdenum has the highest melting point of any life giving metals. Molybdenum has the sixth highest melting point of any element on Earth, which is incredible!

    Molybdenum 4753 Degrees Fahrenheit Melting Point

    Iron 2800 Degrees Fahrenheit M.P.

    Cobalt 2723 Degrees Fahrenheit M.P.

    Nickel 2651 Degrees Fahrenheit M.P.

    Manganese 2275 Degrees Fahrenheit M.P.

    Copper 1984 Degrees Fahrenheit M.P.
    Zinc 787 Degrees Fahrenheit M.P.

    #4 on my shopping list. The metal is an investment so I Do Not want it to rust, oxidize or corrode. If this happens you can surely say goodbye to your investment. Molybdenum does not react with water or air at room temperature and will not corrode. Molybdenum will keep a beautiful lustre (silvery blue). Copper and iron are definitely OFF my shopping list in this category.

    Research this incredible metal for yourself, it has many uses.
    Carlo Biancardi (London, Ontario) April 2011

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