"Welcome to Austrian Economics Online. I'm your host, Boni.
Today, I'm going to talk about the topic that you're most concerned about — gold.
Everyone knows that gold is wealth. The Divine Shield that we use daily is issued with gold as the base. It can be said that gold is closely related to our lives. No one can live without it.
In the past month, the price of gold has risen by 7% on the Vienna gold exchange, which is the highest in the past two years.
Now, I'm joined by economist Professor Brigitte Foss to explain the impact of the rise in gold prices. "
"Beep, beep, beep …"
Host: "Hello, Professor Brigitte Foss. Can you hear me?"
…
Brigitte Foss: "Yes."
Host: "Professor Brigitte Foss, everyone is very concerned about the recent rise in gold prices.
Can you talk about the impact of the rise in gold prices on the world economy? "
Brigitte Foss: "Yes, host."
"We all know that gold is a rare metal. It's usually used as a currency or standard. Its price has always been very stable. Even if there are fluctuations, it's not much.
In the past month, the price of gold has risen by 7%. It's both unexpected and within expectations.
You might say that I'm contradicting myself and not logical at all, but it's not contradictory at all.
What's unexpected is that as a currency, the value of gold itself doesn't change. Under normal circumstances, even if there were fluctuations, it wouldn't have risen by so much.
However, in addition to being a currency, gold is also a commodity. Since it's a commodity, its price is determined by the market. It's normal for it to rise in a short period of time.
"Putting aside the halo of being a currency, let's analyze gold as a commodity. You'll understand why the price is rising.
In the Vienna gold exchange, the price of gold wasn't the only one rising. Almost at the same time, in the London gold exchange, the price of gold also rose.
The direct reason for this rise was that two months ago, more than a dozen gold mining giants, including the South African Mining Group and the British Dawes Gold Group, announced equipment maintenance and reduced gold production.
This decision directly reduced the amount of gold circulating in the global gold market by 20 tons last month. The market was in short supply, so the price naturally rose.
The equipment maintenance was temporary. The gold mining giants also wanted to make money. It wouldn't be long before their production recovered.
However, it wasn't certain that the price of gold would return to normal immediately. As time went on, the gold standard had become the mainstream.
In recent years, the world economy had developed rapidly, and the demand for money had also increased.
Everyone's demand for gold, which was the standard currency, was also increasing day by day. However, the amount of gold mined did not increase at the same rate.
In order to meet the demand for money in the market, countries constantly increased the leverage. The nominal exchange rate with gold did not change, but in reality, the risk of issuing more money had appeared.
This was one of the reasons why the exchange rate between gold and many countries' currencies had risen. The main reason was that the various countries had issued too many currencies, which brought about inflation.
We don't have to worry about that. The exchange rate for Divine Shields and Gold is still stable.
Here, I suggest that unless there is an urgent need, it is best not to hold a large amount of foreign currency.
Because no one knew when the money in your hands would become waste paper.
Judging from the current situation, many countries in Europe have devalued their currencies. If the governments of these countries don't stop the excessive issuance of money, it will cause a disaster sooner or later. "
Host: "Professor Brigitte Foss, you just mentioned that some countries have insufficient gold reserves, which leads to inflation.
So, how should these countries deal with this crisis? "
Brigitte Foss said, "The simplest way is to use the new copy method.
Don't get me wrong, the new copy method I proposed is not the traditional gold and silver double standard system, but a more advanced secondary standard system.
For most countries, gold is not something that can be collected in a short period of time. Everyone wants to maintain the gold standard system, so what should they do?
After some research, I found that the new copy method can solve this problem perfectly.
Simply put, it is to use a reliable international currency to replace gold as the standard currency.
This is equivalent to using one unit of gold as the standard currency twice, issuing two units of currency, and ensuring that normal payments are made. I call this secondary standard system: the new copy method. "
…
Franz didn't know when it started, but he also had the habit of listening to the radio, even though he knew that it was bullsh * t.
The so-called rise in gold prices was actually caused by the two gold producers, Britain and Austria, artificially manipulating the gold price to fight against the currencies of other countries.
The so-called gold production capacity, wasn't that up to the gold mining countries?
In order to increase the competitiveness of their own currencies, Britain and Austria had been controlling gold exports and artificially creating trouble for their competitors.
For gold-standard countries, not having enough gold reserves would be fatal.
The demand for currency in the market wouldn't decrease because of a lack of gold reserves, so they had no choice but to increase the currency's leverage.
This was what Britain and Austria wanted. The higher the leverage, the higher the risk. It wasn't obvious when the economy was developing well, but once there was an accident, the economy would collapse. They had no ability to resist the risk.
Britain and Austria fought fiercely for currency hegemony, but it didn't stop them from working together to control the gold price and attack their competitors first.
It could be said that from the beginning, the gold standard was a huge trap that the British set for the rest of the world. This trap was an overt plot. Even if everyone knew that there was a risk, they had to jump in.
No matter what, gold was still relatively stable. Even if it was manipulated, they couldn't have too much fun! If they went too far, it would also affect the interests of Britain and Austria.
It wasn't that no country wanted to get out of this trap, but they all failed. Reality proved that countries that played with the silver standard ended up in a worse situation.
In the mid to late 19th century, silver had been depreciating. This fluctuation was much greater than gold.
Britain and Austria were both gold standard countries. They would stabilize the gold price for their own interests. The so-called market fluctuation was just an obstacle to other countries' currencies.
This range was usually only a few points, and it wouldn't last forever. Usually, the market would return to normal after a few months.
Simply put, as long as the governments bought gold, the gold price would immediately rise. When everyone stopped buying gold, the market would return to normal.
This increase was targeted. If one used British pounds or God's Shield to buy gold, there wouldn't be such a problem.
If one wanted to import gold, they had to use God's Shield or British pounds as the gold standard. They could also achieve their goal and save on the gold purchase tax.
In essence, this was a method to promote the hegemony of currency, but it was a little more subtle.
…
After listening to the broadcast, Franz hung up. "Frederick The Great, go and ask how far the development of the radio is. Such interesting news should be shared with the world."
Before the radio was developed, there was no way to talk about wireless broadcasting. Now, Franz was listening to wired broadcasting. This technology was born with the birth of the telephone.
To put it simply, it was to connect many telephone lines together and receive information from the same source.
This kind of advanced technology wasn't something ordinary people could enjoy. To listen to the radio, one needed at least a telephone and a high broadcasting fee.
Currently, there were less than 20 cities in the world with radio, and there were less than 50,000 radio subscribers.
Austria was at the forefront of the industrial revolution and started broadcasting relatively early. Currently, Vienna had more than 5,000 paying subscribers and was the city with the highest radio coverage in the world.
This number was already close to the limit. To increase the radio coverage, wireless broadcasting was the only way.
With a limited audience, the radio programs naturally couldn't be rich and colorful. Other than the news, there were only popular current affairs reviews, a few songs, and a few jokes. This was considered entertainment.
The only advantage was that there were probably no advertisements. It wasn't that the radio company didn't want to charge advertising fees, but there were too few subscribers and they couldn't charge much.
Moreover, the customers they served now were all high-end users. No one was short of money. What everyone wanted was high-end service.
Frederick The Great shrugged and replied, "No need, Father. I just went to see it yesterday. Progress is very slow. The transmission distance is still at 1,200 yards (about 1,097 meters), and there can't be any obstacles in between. "
There was no other way. It was Franz's fault for having a bad memory. He had long forgotten the principles of radio. Now, it was up to the scientists to do whatever they wanted.
"1,200 yards" was far from what Franz had expected. It wasn't even enough to be used as a walkie-talkie, let alone a wireless telegraph.
Franz sighed and said, "Then forget it. Let them do the experiment slowly! Scientific research is all about luck. There's no point in rushing it. "
This was for Frederick The Great as well as himself.
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