FORMER MALAYSIAN prime minister Mahathir Mohamad has mooted the possibility of a fixed exchange rate regime in which currencies are fixed to Gold Bullion.
"A new 'Bretton Woods' should be convened with adequate representation from the poor countries," Mahathir wrote in the Financial Times this week, referring to the 1944 international conference at which was drafted the fixed exchange rate regime that operated from the end of World War Two until 1971.
Under the Bretton Woods system the US Dollar Gold Price was fixed at $35 for an ounce of Gold Bullion – the prewar level to which US president Franklin Roosevelt had raised it – while other currencies were pegged to the Dollar.
Mahathir – who was prime minister of Malaysia from 1981 to 2003 – argues that a currency based on Gold Bullion would reduce economic uncertainty, especially if it were accompanied with a ban on currency trading.
"[Policymakers]should consider a trading currency based on gold, against which all other currencies should be valued," he wrote.
"The fluctuation of the price of gold would be minimal. Business would be exposed to less uncertainty. Governments should fix the exchange rate based on gold or economic performances. There should be no trading in currencies."
In 2002, while he was still prime minister of Malaysia, Mahathir proposed the creation of a Gold Dinar for external trade purposes – a currency that would not exist in physical form and whose value would be defined in terms of Gold Bullion.
Mahathir caused controversy last year when he argued that the 9/11 terrorist attacks could have been staged.
In the United States meantime, Republican presidential candidate Ron Paul commented on evidence that suggests there may be growing support among Americans for fixing the value of money to Gold Bullion.
"Today there was a national poll that came out and they were talking about how many people supported the gold standard," he said after the result of the Iowa caucuses – in which Paul finished third – were announced.
"How long has it been since they've taken a national poll on the gold standard? And guess what? The majority of the American people believe we should have a gold standard and not a paper standard."
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