Britannia Radio

This, one assumes, is a long-term aim.  Gold has certainly stood the 
test of time - even when it was abandoned - but only over time not in 
the short term.

This idea has merit but the devil -  as always- is in the detail.   
It is not only the 'contents' of the basket of commodities but also 
their weighting which are likely to be the stumbling blocks.

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TELEGRAPH 30.3.09
Russia backs return to Gold Standard to solve financial crisis
Russia has become the first major country to call for a partial 
restoration of the Gold Standard to uphold discipline in the world 
financial system.

By Ambrose Evans-Pritchard

Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia 
would favour the inclusion of gold bullion in the basket-weighting of 
a new world currency based on Special Drawing Rights issued by the 
International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based 
reserve currency as an alternative to the US dollar at the G20 summit 
in London this week, although the world may not yet be ready for such 
a radical proposal.

Mr Dvorkevich said it was "logical" that the new currency should 
include the rouble and the yuan, adding that "we could also think 
about more effective use of gold in this system".

The Gold Standard was the anchor of world finance in the 19th Century 
but began breaking down during the First World War as governments 
engaged in unprecedented spending. It collapsed in the 1930s when the 
British Empire, the US, and France all abandoned their parities.

It was revived as part of fixed dollar system until US inflation 
caused by the Vietnam War and "Great Society" social spending forced 
President Richard Nixon to close the gold window in 1971.

The world's fiat paper currencies have lacked any external anchor 
ever since. It is widely argued that the financial excesses and 
extreme debt leverage of the last quarter century would have been 
impossible - or less likely - under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore 
so it has a clear interest in promoting the idea. The Kremlin has 
already instructed the central bank of gradually raise the gold share 
of foreign reserves to 10pc.

China's government has floated a variant of this idea, suggesting a 
currency based on 30 commodities along the lines of the "Bancor" 
proposed by John Maynard Keynes in 1944.