I agree with much of what Moon. and MPC say. I am not an economist. My mind is open to change and correction. Now to work.
From: Barron's; page M65 & M66; Dec. 31, 2007.
As of 12/26/07:
Gold Stock: $11,041,000,000 (@$833 per ounce?)
SDR's 2,200,000,000 ( ditto )
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Total $13,241,000,000 (plus Ft. Knox if any)
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Currency in circulation: $825,624,000,000
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Money Supply as of week ended 12/17/07:
M1 $1,361,200,000,000
M2 $7,460,200,000,000
Treasury Gross Public Debt as of 12/28/07(?): $9,139,300,000,000
(Hope that I have all these zeros right.)
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I know that many transactions would be settled by balance payments. Do you think that gold could support the above? Would our economy be what it is if not for a fiat currency? My bride reminds me that when she was working at Salomon Bros in 1989/90, gold was trading at ~$800/oz. in then current dollars. Then the market 'collapsed'. Those who held on, are just now reaping a profit.