Gold as A Geostratic Asset: The Once And Future King?
The comments below are an edited and abridged synopsis of an article by Jose Miguel Alonso-Trabanco
Alonso-Trabanco explains why gold has provided unmatched monetary stability throughout history and why, just as America’s gold reserves played a decisive role in the rise of the US dollar as the reserve currency, the yellow metal is one of the few competitors that could challenge the global supremacy of the US currency.
It is too early to tell if gold can replace the dollar within the next few decades, but it is clear that its attributes enhance its prospects. After all, it has become once more an attractive asset for national states, companies and individuals.
In the debate about the future of monetary hegemony, it has been argued that a global financial order based on gold could lead to an international system more stable in terms of geopolitical tension or military conflict. The late Swiss banker Ferdinand Lips explained that, since gold is an asset whose value is determined by its natural scarcity, it promotes fiscal responsibility and sound monetary policies, which would limit the possibility of resorting to endless credit and perpetual debt in order to artificially inflate military budgets and, consequently, war expenditures.
If gold reassumes a central role in worldwide financial markets as a result of a multilateral consensus negotiated amongst the greatest powers—this could happen in the aftermath of a new major financial crisis of international proportions—some players would be better positioned than others. In this scenario, perhaps the golden rule would apply. In other words, the players that control the largest gold holdings would have the chance to define the essential rules in the structural rearrangement of global financial governance.