Zoellick Clarifies That He’s Not for a Gold Standard, He’s Just Mumbling Incoherently
We had a lot of excitement yesterday over World Bank President Robert Zoellick seeming to call for a return to a Bretton Woods-style global gold standard system. Today at the G-20 meeting, though, he clarifies that that’s not what he meant. However, he doesn’t seem to be able to explain what it is he is proposing:
Mr. Zoellick said he thinks the coming monetary system will include a number of reserve currencies, including the dollar, euro, yen and, increasingly, the yuan, though he says the dollar is likely to remain “dominant.” He’s deliberately sketchy on the role he envisions for gold, calling it a “reference point” and an “alternative monetary asset,” and not defining those terms in great detail.
His main point, he said, was to point out that the stupendous rise in gold is a signal that markets are uncertain about the stability of the current exchange system. But he said he wasn’t proposing to judge whether currencies are undervalued or overvalued by looking at their price in gold.
He said his comments produced a “huge amount of feedback.” People needed to “break away from old shiboliths,” that any mention of gold means a return to an inflexible gold standard, he urged.
I really don’t think Zoellick can blame outside observers for choosing to interpret him as making coherent, albeit misguided, comments rather than just offering up meaningless jibberish. What does this mean? Transitioning, over time, away from near-universal reliance on the dollar as a reserve currency is an important subject. But why mention gold in this context unless you have a real gold-related proposal?