Thissons Gold Blog

Gold is ridiculously undervalued at its current price of around $1500/ounce. My belief is that once the dominos start to fall, starting with the PIIGS nations, the ultimate result will be a recognition that the US is no better, and there will be a currency crisis.  In the event of such a crisis, the only thing that will be trusted to settle international trades will be gold, and I believe that the governments of the world will clamor to obtain it by any means for use in trade.  After confiscation fails to bring enough gold into their coffers, they will ultimately be forced to trade value to coax it from private hands, and gold will be recognized (and PRICED!) for what it is:  the only non-debt money with no counterparty risk.

This article discusses the “shadow price” of gold, how it was valued by nations during the Bretton Woods era, the implications for its future value in a return to gold-settled international trade, etc.

If you want a succinct summary, this post on ZeroHedge provides highlights:

This follows up on my prior post about “the heart of the problem.”

It shows how exporting countries are the flipside of the coin to debtor nations. It also describes how settling international trade in specie (gold) would cure such imbalances, creating localized inflation* in creditor nations and localized *deflation in debtor nations. In our fiat world, with currency interventions, this mechanism is absent.

*Note that in this context we are talking about price changes rather than a shift in the ratio of money&credit to goods.

This article explains the flawed policies that lead to global trade/debt imbalances.