Five Steps to Fixing Greece’s Debt Problem
By Frank HollenbeckMises.org
March 5, 2015
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Step Five: Fix the New Drachma to Gold
Gold has many drawbacks, but gold’s primary advantage lies in the fact that it constrains current and future governments from using the printing presses to finance government expenditures. Once the tie to the euro is broken, Greece should then fix its new currency to gold. Even though Greece has no significant gold reserves, it can follow the example of Germany in 1923 when a broke Germany slowly returned to a gold standard by first fixing its money to non-gold commodities (i.e., rye bread in the German case).
By instituting true austerity and freeing the banking sector from the euro and the EU, Greece could go from being the example to avoid to the example to emulate in a relatively short period of time. With such a financial structure, Greece would benefit from long-term financial and economic stability. It would force Greece to make hard choices up front, thus avoiding later problems in the first place.
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I’d want some of them. Or any hard money currency tied to something!
As a non-enconmist, I’d assume that there would be a capital inflow with a hard money currency.
Akin to the Swiss Franc, that’s becoming a proxy for a strong fiat currency.
And, if Russia or China do it, then that is the end of the US dollar as the world’s reserve currency.
Whatever happened to the gold dinar?
Remember what happened to Saddam when he made noises about wanting to be paid in gold for his oil?
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