A Global Currency Reval Won't Be Easy

FX traders may not want it. Those rich in dollars and dollar-denominated assets may not want it, but who can doubt that those who are big lenders to the US would go for it.

The bush I'm beating around is the Great Global Currency Reval and Re-set that we keep hearing about. If and when such a thing happens it will occur soon after the global monetary system regurgitates massive toxic debt.

This will come as a shock to those who're expecting the event to mark a return to the gold standard. No doubt gold will still--and always--be considered a solid foundation of wealth, but I don't expect gold to be the single standard of wealth that it was from Adam Smith's day right up to Bretton Woods.

The process of revaluing global currencies is complex--much too complex to be gauged by gold alone. When the nations convene for revaluing and re-pegging each one should--and will--come to the table with minutely detailed inventories of existing national assets as well as projected annual wealth from undeveloped resources.

As an aside, I'm not even sure that when D-Day (Debt-Day) comes and gold prices start to rise, that they will rise as high as some theorize. Oh, I know how gold and silver are supposed to blast off when the next crisis explodes, but I'm not so sure that will happen.

Maybe for silver, but not for gold. Why? Because I'd bet that there are stacks, piles, mounds, and perhaps unimaginable tons of hoarded gold stashed away in dark, secret Chinese, Russian, Indian, Japanese, Indonesian, Turkish, Iranian, Iraqi, and Arabian places that will hit the market when the market starts looking like a free market again.

If I were overseeing the process (I haven't been employed to do so) I would want to take a good, hard look at each government's debt, and debt pattern and history. I would also want to rigorously examine per capita debt. And I'd want to see if and how the central banks of debtor nations encouraged debt.  I would not encourage nations that used debt to take advantage of other nations...and lenders, to expect a high re-val of their currency.

Okay, so gold alone won't be the backing for new currencies. What will (possibly) be additional forms of wealth that will testify to the value of the new currencies? Silver, platinum, palladium, base metals, and exotic metals--their ores, mines,  proven deposits, and surveys. Nations rich in agri (and aqua) culture will want their value factored in. Maritime nations will want their fleets and product considered as wealth. Got forests? Got cattle, goats, and sheep? Got industry? Got oil? Got universities? Got transportation? Got homes? Why not count all that as wealth? But what about the military...and armaments...and bombs? Are they assets or liabilities? What if a nation is wealthy in people? Do humans count as wealth? What about computers...or robots...or plasma TVs? Should anything that can be turned into money to be considered wealth?. Is everything that's taxed to be considered a form of national wealth? What about the weather? Can fair skies and moderate temperatures be counted as wealth?

Should private wealth be a factor in deciding the worth of a nation's currency? 

From asking these few questions we see how complex the job is--or could b--to determine what wealth is and isn't. Maybe the simple test would be counting and/or weighing wealth. Anything else lies on the subjective and intangible side.

Nations greatly burdened by debt, will, in making their case before the Reval Tribunal, plead for their debt sin not to be held against them. Of course, most nations will have some debt and will seek to minimize that while maximizing every possible asset. So, while the Great Global Reval/Re-set will have to happen to restore a level economic playing field, it cannot, and will not, be a reversion to the old gold standard. But, we'd better hope it's fair...and as good as gold.