“The problem I think we have now is how to get off the architecture of Bretton Woods two, which was configured by dollar supremacy, and away from the bipolar situation of euro up dollar down/ dollar up euro down which characterises our current position, without at the same time giving in to Chinese demagogy about the creation of a new world order.”
Down worry, problem solved. Medvedev has the solution in his pocked; http://www.bloomberg.com/apps/news?pid=20601087&sid=aeFVNYQpByU4
Ron.

Sorry, yes I know, but it was the problem of trying to get back onto it that caused all the difficulty (at least that is my view).

Basically, I don’t want to get into all this, since I personally see these as the problems of another age, one that I am glad is gone, and don’t especially want to get back to. But I appreciate you could take a different view.

The problem I think we have now is how to get off the architecture of Bretton Woods two, which was configured by dollar supremacy, and away from the bipolar situation of euro up dollar down/ dollar up euro down which characterises our current position, without at the same time giving in to Chinese demagogy about the creation of a new world order.

Since I see no easy answer to this, I think we won’t be emerging from our current difficulties for quite some time.

“it will be impossible for them to obey the rules that go with this system, because greed, egoism, stupidity and all other kinds of bad human quality’s will do their work.”

agreed, but then I find it hard to see this:

“even more important it will be to maintain a powerful supervision to see to it that those rules would be obeyed.”

since won’t just those rules be being operated by those selfsame humans with the associated greed, egoism and stupidity you just mentioned.

That is why I have effectively given up on thinking about problems on this level, since I think they are insoluble, and focus more on macro economic problems, and real economies, where monetary factors are important, but secondary.

“Of course, being brought up in the UK in the 1950s it was obvious to me that the biggest single obstacle to the UK getting out of the economic slump it effectively entered in 1918 only to leave with the advent of WW11 was this very gold standard you are now advocating.”

The U.K. did not have a gold standard between 1914 and 1925.
The golden standard limits the availability of credit. Therefore within this economic system it is not easy for a country to find enough credit to pay for a military build-up that joining a world-scale war demands (maybe this is showing just an other good quality of the gold standard). This was exactly the reason that the UK government in 1914 decided to leave the gold standard and replace it with a system of fiat currency.

I don’t claim the golden standard to be the perfect economic system. To look for the perfect economic system is as searching for the Holy Grail. Humans are not perfect and therefore it will be hard for them to come up with an perfect system. And even if they do so, it will be impossible for them to obey the rules that go with this system, because greed, egoism, stupidity and all other kinds of bad human quality’s will do their work. All this said, I do think that it is important to choose a good economic system. But even more important it will be to maintain a powerful supervision to see to it that those rules would be obeyed.
Ron.

“Our real problem is economic catastrophe (going over to humanitarian catastrophe) and total social and political failure.”

I know. I fully appreciate this part, and you truly have my sympathy. But I also argue we need to did a little deeper and try to understand all the processes at work here. What if China suddenly became a new Latvia, it would not be funny, as I am sure you would agree. Which is why we need to get to the bottom of things. Please be patient and bear with me.

while generally agreeing that the fall of birth rates in CEE (don’t forget the Deutsche Demokratische Republik – after Westernisation the birth rate decresed significantly) is a long-term problem Numero 1 for CEE. But there is always a quantity you are operating with and using as an argument ultra non plus which in reality is not so ubiquitious one – “pay for the health care and pensions for all the elderly”. In CEE costs for that can be reduced (dismalised) as necessary, reducing the access to health care for elderly (going on now in Latvia in extreme form), reducing the pensions (going on in most CEE). The political power of elderly is in reality without impact as on governemntal management level they are absent, and the parliamentary traditions in CEE are weak and historically interrupted.

Another remark – in Latvia with its 300 years of multicultural society tradition it is not a source of big fears that turkish people can migrate here if there will be enough jobs for all. We are by far not so parochial as Germans, Swedes or Finns. Our real problem is economic catastrophe (going over to humanitarian catastrophe) and total social and political failure.

I doubt that Turkey will be a migrant origin country to any great extent. The whole East European situation is exceptional, and quite unique really. Europe did not fill with Spaniards after Spain entered the EU, and my guess is that the Spanish experience will be repeated with Turkey. Turkey is already a very large migrant receiving country, which few of the CEE (except Russia) where. I think economic growth will be far too dynamic for people to be leaving in any large numbers. Generally I am a Turkey optimist, and basically for demographic reasons, plus the extended period of EU dialogue and institutional reform which precedes membership.

Eastern Europe is at the centre of the current global crisis due to their inherently unstable demographics.

“and a negative demographic perspective in 50 years”

I don’t know where you get the “in 50 years” bit. Latvia’s population suffered a seismic shock in the mid 1990′s, and population has been falling since. Obviously each of us is entitled to his opinion, but as I keep trying to argue, my analysis is that the magnitude of the boom bust is due to the severity of the demographic shock. It is as simple as that. Of course you have a banking crisis, you were borrowing like mad against a future you aren’t going to have. That is what was unsustainable.

Sorry, I didn’t mean to be sarcastic, just a little humourous. The serious point is that the kind of credit constraint which would be implied by a system based on gold would more or less by definition slow down economic growth rates (since it would be deflationary) and this may well slow down the rate of technological change. All of this is a hypothesis, since obviously the whole thing is immensly complex.

On the other hand, if we go back to the nineteenth century, having the gold standard didn’t stop bubbles, although arguably it made it more difficult to then get out of them, although that is simply an opinion.

Of course, being brought up in the UK in the 1950s it was obvious to me that the biggest single obstacle to the UK getting out of the economic slump it effectively entered in 1918 only to leave with the advent of WW11 was this very gold standard you are now advocating.

But basically, I am congenitally against any radical change when it comes to economics. We need to move forward, but we need to move forward at a measured pace. I don’t go for the recent Chinese plans to create a new world order to replace the dollar either, although we do need to move away from the current see-saw between euro and USD.

In the same way, while I was not in favour of the creation of the euro, the last thing I would want to see now would be its imminent disappearance. You have to work with what you have, and try and imporove it. My biggest fear with the euro is that it simply blows up in all our faces under its own pressure. Now that I would not like to see.

However, a pretty inexperienced and incompetent government as Latvia’s is, facing a banking doomsday at their doors, and a negative demographic perspective in 50 years (the present is better as in most WE countries), will weight these priorities at a ratio 1000000:1, will continue its thinking on a logarithmic scale.

“The core problem of Latvia is the banking crisis. Latvia has punished its economy, old people, hip implants and toothless mouths, children and fetuses in order to save its banks. Finito. There is nothing to discuss beoynd this point.”

Well basically I don’t agree. The core of Latvia (and the CEE’s) problem is the demographic issue, and how to pay for the health care and pensions for all the elderly who are about to come online as young people leave, or stay and don’t have children. The banking crisis is but a symptom of the underlying imbalance, an important symptom, but a symptom nonetheless.