IDEAS home Printed from https://ideas.repec.org/p/mtl/montde/2010-13.html
   My bibliography  Save this paper

The myth of demonetarization of gold : can it happen again?

Author

Listed:
  • LORANGER, Jean-Guy

Abstract

The aim of this paper is to discuss the crisis of the international financial system and the necessity of reforming it by new anchor or benchmark for the international currency, a money-commodity. The need for understanding the definition of a numéraire is a first necessity. Although most economists reject any connection between money and a particular commodity (gold) – because of the existence of legal tender money in every country – it will be shown that it is equivalent to reduce the real space to an abstract number (usually assumed 1) in order to postulate that money is neutral. This is sheer nonsense. It will also be shown that the concept of fiat money or state money does not preclude the existence of commodity money. This paper is divided in four sections. The first section analyses the definition and meaning of a numéraire for the international currency and the justification for a variable standard of value. In the second section, the market value of the US dollar is analysed by looking at new forms of value -the derivative products- the dollar as a safe haven, and the role of SDRs in reforming the international monetary system. In the third and fourth sections, empirical evidence concerning the most recent period of the financial crisis is presented and an econometric model is specified to fit those data. After estimating many different specifications of the model –linear stepwise regression, simultaneous regression with GMM estimator, error correction model- the main econometric result is that there is a one to one correspondence between the price of gold and the value of the US dollar. Indeed, the variance of the price of gold is mainly explained by the Euro exchange rate defined with respect to the US dollar, the inflation rate and negatively influenced by the Dow Jones index and the interest rate.

Suggested Citation

  • LORANGER, Jean-Guy, 2010. "The myth of demonetarization of gold : can it happen again?," Cahiers de recherche 2010-13, Universite de Montreal, Departement de sciences economiques.
    • Handle: RePEc:mtl:montde:2010-13
    as

    Download full text from publisher

    File URL: https://papyrus.bib.umontreal.ca/xmlui/handle/1866/4798
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Mico Mrkaic, 2010. "Data Dissemination Standards and the Statistical Quality of the IMF’s World Economic Outlook Forecasts," IMF Working Papers 2010/203, International Monetary Fund.
    2. Dick Bryan & Michael Rafferty, 2006. "Capitalism with Derivatives," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-50154-6.
    3. Bell, Stephanie, 2001. "The Role of the State and the Hierarchy of Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(2), pages 149-163, March.
    4. Knapp, Georg Friedrich, 1924. "The State Theory of Money," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number knapp1924.
    5. Hyman P. Minsky, 1982. "Can “It” Happen Again? A Reprise," Challenge, Taylor & Francis Journals, vol. 25(3), pages 5-13, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. LORANGER, Jean-Guy, 2012. "Did Gold Remain Relevant in the Post-1971 International Monetary System?," Cahiers de recherche 2012-05, Universite de Montreal, Departement de sciences economiques.
    2. repec:hal:wpspec:info:hdl:2441/4vc7skecu3q7u7s984pi2eaan is not listed on IDEAS
    3. L. Randall Wray, 2012. "Keynes after 75 Years: Rethinking Money as a Public Monopoly," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 15, Edward Elgar Publishing.
    4. Alberto ZAZZARO, 2002. "How Heterodox is the Heterodoxy of the Monetary Circuit Theory? The Nature of Money and the Microeconomy of the Circuit," Working Papers 163, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    5. Zdravka Todorova, 2013. "Connecting social provisioning and functional finance in a post-Keynesian–Institutional analysis of the public sector," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(1), pages 61-75.
    6. Thomas Cate (ed.), 2012. "Keynes’s General Theory," Books, Edward Elgar Publishing, number 3855.
    7. Alla Semenova & L. Randall Wray, 2015. "The Rise of Money and Class Society: The Contributions of John F. Henry," Economics Working Paper Archive wp_832, Levy Economics Institute.
    8. Hodgson, Geoffrey M., 2013. "Observations on the legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 331-337.
    9. Bill Lucarelli, 2011. "The Economics of Financial Turbulence," Books, Edward Elgar Publishing, number 14252.
    10. Pitrou, Cyril, 2015. "Graph representation of balance sheets: from exogenous to endogenous money," MPRA Paper 63662, University Library of Munich, Germany.
    11. Geoffrey Hodgson, 2002. "The Evolution of Institutions: An Agenda for Future Theoretical Research," Constitutional Political Economy, Springer, vol. 13(2), pages 111-127, June.
    12. Eric Tymoigne, 2017. "On the Centrality of Redemption: Linking the State and Credit Theories of Money through a Financial Approach to Money," Economics Working Paper Archive wp_890, Levy Economics Institute.
    13. Koddenbrock, Kai, 2017. "What money does: An inquiry into the backbone of capitalist political economy," MPIfG Discussion Paper 17/9, Max Planck Institute for the Study of Societies.
    14. Jérôme Sgard, 2010. "Money Reconstructed: Argentina and Brazil after Hyperinflation," Sciences Po publications info:hdl:2441/4vc7skecu3q, Sciences Po.
    15. repec:hal:spmain:info:hdl:2441/4vc7skecu3q7u7s984pi2eaan is not listed on IDEAS
    16. Jussi Ahokas, 2012. "Geographies of Monetary Economy and the European economic crisis," ERSA conference papers ersa12p437, European Regional Science Association.
    17. Alexander W. Salter & William J. Luther, 2014. "Synthesizing State and Spontaneous Order Theories of Money," Advances in Austrian Economics, in: Entangled Political Economy, volume 18, pages 161-178, Emerald Group Publishing Limited.
    18. L. Randall Wray, 2010. "Money," Economics Working Paper Archive wp_647, Levy Economics Institute.
    19. Reynold F. Nesiba, 2013. "Do Institutionalists and post-Keynesians share a common approach to Modern Monetary Theory (MMT)?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(1), pages 44-60.
    20. repec:spo:wpecon:info:hdl:2441/4vc7skecu3q7u7s984pi2eaan is not listed on IDEAS
    21. Vladan Hodulák & Oldřich Krpec, 2015. "Francouzsko-Německé monetární vztahy - pnutí v základech eurozóny [Franco-German Monetary Relations - Tensions Built Into the Eurozone Core]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(4), pages 413-435.
    22. Aloys L. Prinz & Hanno Beck, 2021. "Modern Monetary Theory: A Solid Theoretical Foundation of Economic Policy?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(2), pages 173-186, June.
    23. Pavlina R. Tcherneva, 2016. "Money, Power, and Monetary Regimes," Economics Working Paper Archive wp_861, Levy Economics Institute.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mtl:montde:2010-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sharon BREWER (email available below). General contact details of provider: https://edirc.repec.org/data/demtlca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.