What is Gold standard and why we may never return to it?

Gold has been a currency, medium of exchange and savings option for  thousands of years. Throughout the world and especially in ancient India, Kings stored most of their wealth in the form of gold. Even now, we hear lot of stories about  tons of gold stored in  treasures beneath in many Temples.

When trading and economic activities increased, gold as a currency of exchange was not able to sustain the huge amount of transactions.  So paper currency was invented to replace the gold as a medium of exchange.

Now paper money is the common denominator of all economic transactions. Based on this paper money, the present banking system was developed and as a logical extension to banking, credit system was developed. The use of gold in the old banking system was through fixing the unit of currency reference to gold.

A country on the gold standard cannot increase the amount of money in circulation without also increasing its gold reserves. Otherwise, the exchange rate between gold and the currency has to be fixed on regular basis which will result in huge fluctuation in the price of gold. Public usually deposit gold with the banks and credit was extended relative to amount of gold deposit. It was argued then, the gold standard was the main reason for the Great Depression during 1930's. Later U.S abandoned the gold standard in 1933, and completely decoupled the link between dollar and gold in 1971.

Now and then, the return of gold standard is being discussed and recently during the 2008 financial crisis, revival of the gold standard was extensively discussed. It is argued that it is impossible. Why revival of gold standard is very unlikely?

Main reason is the size and complexity of the world economy. Just to back the paper currencies in circulation in the entire world, each country has to evaluate their gold reserves and fix its price based on money in circulations. For example, in case of major economy like U.S, with the approximately 261 million ounces of gold held by the U.S. government and about $2.7 trillion money in circulation, gold price has to rise to around $10,000 an ounce, up from about $1,241 as on today. Inflation will go out of control and the world economy will go into a tailspin.

The performance of the world economy will be purely depended on gold supplies. If there is a production related problem and new supply is stopped, economies will come to a halt. How to manage such a situation?

Unlike oil, gold has not much of an economic value, except jewelry. It can't power automobiles and generate electricity. Holding world economy, hostage to such a commodity and its availability, is asking for disaster.

Who will win FIFA world cup 2014, a prediction

Now, the FIFA football tournament has reached semi final stages. It is Germany vs. Brazil, the host of this most biggest and popular sports event and  Netherlands vs. Argentina. It is almost a month and we witnessed some of the best football moments. Except few Asian and African teams, all other matches were very close to predict and distinct feature of this tournament.

Even now, no team can be considered as certain favorite though many predict local team Brazil or Argentina to be the winner. Group matches were very close except the Netherlands vs. Spain, which Netherlands won convincing 5 - 1. Brazil struggled a lot before reaching the semi finals and definitely not a favorite to win the cup.

Another one point to note is that, lot of foul plays ignored by referees. Many injuries to players, even Brazilian striker Neymar is out of the tournament as of now. In such a situation, it is not easy to predict a winner. I have analyzed the four team's strengths and weaknesses  below, followed by my prediction on the winners.

Germany:

[su_table]

Strengths	Weaknesses
1. Strong defense	1. No star player
2. Best goalkeeper	2. Too depends on single striker technique
3. Well balanced side	3. Players lack pace
4. Tall players, yes very useful	4. More dependence on defense
5. No injuries	5. Best team not always win, not many world cup wins

[/su_table]

Brazil:

[su_table]

Strengths	Weaknesses
1. Favorite local conditions	1. Injuries
2. Young squad	2. No Neymar, a big disadvantage
3. Unique attacking style	3. less experienced players
4. Creative approach	4. Lot of fouls committed during group matches
5. Experienced coach	5. Pressure as favorites

[/su_table]

 Netherlands:

[su_table]

Strengths	Weaknesses
1. Experienced players	1. Performs poor under pressure
2. Team spirit is high	2. Lack of formidable strikers or no superstars
3. Strong offense	3. Comparatively weak defense
4. Never won a world cup, so eager to win	4. Unpredictable performance
5. Underdog, so less pressure	5. 5-3-2 formation risk

[/su_table]

 Argentina:

[su_table]

Strengths	Weaknesses
1. Messi and famous four	1. 1. Poor defense
2. Strongest attack	2. Fitness of Di Maria
3. Local conditions	3. Not a balanced side
4. Underdog, so less pressure	4. Messi performance at international matches
5. Coach tactics	5. Underachievement record

[/su_table]

I predict that Germany will defeat Brazil on the first semi final on Tomorrow, 8th of July.  On the second semi final on 09th of July, Argentina will beat Netherlands. In the play-off for the third place, Netherlands will beat Brazil.

In the final on Sunday, 13th of July, Germany will defeat Argentina. Yes, Germany will be the champion.

Kamaraj's birthday today, the king maker of 60's

Kamaraj was a congress leader of independence movement, based in Tamil Nadu. He was a king maker of 60's  influenced in the selection of  Lal Bahadur Shastri and Indira Gandhi. He was the chief minister during 1953 - 64. He was remembered for his simplicity and transforming the then Madras state into one of the leading state in education and literacy, trade and industry.

He brought school education to millions through free education, introduced mid day meal scheme for the first time in the country.  No village remained without a primary school and no panchayat without a high school. Huge investments in irrigation were initiated, dams built and large scale industrialization efforts were implemented. What he achieved with a cabinet of just eight ministers,  no Government ever achieved his performances in the country.

 

Below, I add some interesting facts about the great leader.

He was a bachelor throughout his life and considered family life as a road block to his service. Once his mother was requesting  to arrange 3000 rupees to buy a land near her small house, he categorically told her to  manage within her 120 rupees monthly allowance.  Another time a special water line provided to his house in the native town, when he was in Delhi, to help his old mother. He noticed it on his next visit and immediately chastised the local body for the priority given to his house while there were similar old women in many houses.

In 1949 when he was addressing a meeting at Friday there was a bustle in the meeting and the opposite threw tiny grade type crackers towards the stage. Then Kamaraj opened his shirt and showed his chest to them and challenged to shoot him if they have courage.

During 1927, Nehru came to Madras and was staying at the residence of a congress party leader. During the night, a loud noise disturbing his sleep.  Unable to sleep, Nehru went out to check the sound coming from the veranda of the house.  He saw a youth sleeping with heavy snore.  Nehru got angry. He asked the party leader to to drive the lad out of Madras or to shift his bed to the near by beach. Who was this youth? It was Kamaraj.

On his birth day, let us remember his golden days.