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Author Topic: Malaysia needles US with proposal for pan-Asian bullion-backed currency  (Read 2278 times)

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Offline Paul88Topic starter

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‘Gold is more stable’: Malaysia needles US with proposal for pan-Asian bullion-backed currency

Malaysian PM Mahathir Mohamad has floated the idea of creating a gold-backed common trading currency for all of East Asia, slamming regional currency exchange as “manipulative” and criticizing the US’s heavy-handed foreign policy.

“In the Far East, if you want to come together, we should start with a common trading currency, not to be used locally but for the purpose of settling of trade,” Mahathir said at the Nikkei Future of Asia conference in Japan, suggesting the currency be “based on gold because gold is much more stable” and warning that promoting any one country’s currency over others would result in conflict. Exchange rates would be based on the country’s economic performance and not subject to the volatility of forex markets.

“Currency trading is not something that is healthy because it is not about the performance of countries but about manipulation,” Mahathir added. The gold-backed currency would not be used within any one country, but would help protect regional trading from predatory speculators - and from the vicissitudes of the dollar, which he said unfairly held the rest of the world hostage.

https://www.rt.com/business/460698-malaysia-proposes-gold-forex-currency/



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Re: Malaysia needles US with proposal for pan-Asian bullion-backed currency
« Reply #1 on: August 05, 2019, 09:12:46 PM »
Mahathir’s Gold-backed Currency – Loose Talk or pan-Asian Plan?


While the non-stop flows of physical gold into countries such as China and India are a constant reminder to the world of the importance of gold to Asian societies, gold got a high-profile endorsement of another kind in Asia recently when Malaysia’s minister Dr. Mahathir bin Mohamad proposed a gold-backed regional currency for Asia.

Speaking in front of Asia’s leaders and media at the aptly named “International Conference on the Future of Asia” held in Tokyo on 30 May, the theme of this year’s conference was ‘Seeking a New Global Order – Overcoming the Chaos’, and Mahathir opened the conference with a keynote speech and dialogue session, losing no time in criticising the dangers of a US dominated unipolar world and the instability of the world’s reserve currency, the fiat US dollar.

It was in this context that Mahathir suggested a gold-based currency that could be used for international trade and investment between Asian economies, and that would serve as an alternative to dependency on the US dollar. For those not familiar with Mahathir, the 93 year-old was prime minister of Malaysia for 22 years between 1981 and 2003, and again became Malaysian prime minister in May 2018. Mahathir also served as Malaysia’s minister of finance from 1998 – 1999 and between 2001 – 2003.

Known for his criticisms of the IMF and the international currency markets, it was during the Asian financial crisis of 1997-1998 that Mahathir singled out currency speculators and traders, such as George Soros, as being responsible for the Malaysian ringgit’s weakness over that time, a period in which the Ringgit, which was floating and then pegged to the US dollar, lost much of its value. Mahathir also has a personal hatred of naked short sellers, and who would blame him.

Conclusion

There is something elegant about the principle of a gold-standard, where a country’s purchasing power is related to its performance, where countries that generate wealth will have a stronger exchange rate in terms of gold and therefore more purchasing power, where one country with an exorbitant privilege can’t abuse the system by endlessly borrowing in a fiat currency backed by military might.

A currency backed by gold is ring-fenced from the abuse of one particular monetary authority or government, since the gold that is backing it has no counterparty risk. A gold-backed currency is more stable that fiat currencies since gold is a store of value, an inflation hedge, and a preserver of wealth. Even Donald Trump, the current US president will say this in private or at least used to say this as recently as 2015, when Trump said:

“In some ways, I like the gold standard and there is something very nice about it … We used to have a very solid country because it was based on a gold standard for it. We do not have that anymore. There is something very nice about the concept of that. It would be very hard to do at this point and one of the problems is we do not have the gold. Other places have the gold.”

While a gold-backed currency does provide advantages to the current US dollar hegemony, is anyone brave enough to seriously try it at this time? Look at what happened to Libya and its leader when Gaddafi proposed the establishment of a pan-African dinar to be backed by gold.

https://www.bullionstar.com/blogs/ronan-manly/mahathirs-gold-backed-currency-loose-talk-or-pan-asian-plan/

Offline Paul88Topic starter

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Re: Malaysia needles US with proposal for pan-Asian bullion-backed currency
« Reply #2 on: August 29, 2019, 08:47:06 AM »
Further elaborations about Malaysia's PM proposal.
It's true that the word "cryptocurrency" doesn't appear. On the other hand, I think that such a project can be implemented only by use of the blockchain technology.


Malaysia's Mahathir Mohamed Goes For Gold

Just how could Dr. Mahathir implement his idea? He could start in Malaysia. The Malaysian ringgit would be changed from a fiat currency to a gold-backed ringgit that would trade at a fixed rate of “X” grams of fine gold per ringgit. A currency board system would ensure that the ringgit was fully backed by gold and redeemable on demand for gold at a fixed rate.

Currency boards have existed in more than 70 countries, including Malaysia. A number are in operation today, most notably in Hong Kong. A currency board is a monetary institution that only issues notes and coins. These monetary liabilities are freely convertible into a reserve currency (also called the anchor currency) at a fixed rate on demand. The reserve currency is a convertible foreign currency or a commodity, such as gold, chosen for its expected stability. For reserves, such a currency board holds low-risk, interest-earning securities and other assets payable in the reserve currency.

By law, a currency board is required to maintain a fixed exchange rate with the reserve currency and hold foreign reserves equal to 100% of the monetary base. This prevents the currency board from increasing or decreasing the monetary base at its own discretion. A currency board system is passive and automatic.


 

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