In scientific usage, a theory does not mean an unsubstantiated guess or hunch, as it can in everyday speech. A theory is a logically self-consistent model or framework for describing the behavior of a related set of natural or social phenomena. It originates from or is supported by rigorous observations in the natural world.
In science, a theory is a testable model of the manner of interaction of a set of natural phenomena. A theory is capable of predicting future occurrences, and capable of being tested through experiment or otherwise verified through empirical observation.
In science, the word theory refers to a comprehensive explanation of an important feature of nature that is supported by many facts gathered over time. Theories also allow scientists to make predictions about as yet unobserved phenomena. (Paraphrased from Wikipedia)
Economics is a social science!
For the theory of FreeGold, the experiment is well underway. The future has arrived, so keep your eyes peeled for empirical evidence. Some of it is already out there.
One way you can tell that a theory might be correct is by viewing it from every possible angle. If it remains logically self-consistent from different angles there is a high probability that it is correct.
Here is a great article that speaks to me, as Another would say. It provides another angle from which to evaluate FreeGold. Don't focus on an official gold standard which may never happen again. But think instead about a natural gold standard. And think about whether or not a truly free floating gold price could affect the same controls on interest rates as an official gold standard. Perhaps it would act more like a fire alarm than an outright ban on playing with fire.
For more FreeGold theory, please read Ender's comments.
Additions:
"Oil" exchanging dollars for Euros
China fears dollar dumping
US Mint suspends gold Buffalos because of depleted inventory
Russian President tells gold mines, "Produce faster!"
The "Strong Dollar Policy" may have run out of ammunition.
So true it's almost not funny. I said almost.
FOFOA
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Currency Swaps
Posted by Sam on USA Gold
From http://www.the-privateer.com
The US Fed Plays “Let’s Make A (Swap) Deal”:
Over the week of September 15-19, the US Fed was again caught on the hop because of its tiny holdings of foreign exchange reserves. Once again, it had to trot out the threadbare excuse that it was only engaged in “currency swaps” with other central banks to gain the actual foreign currencies which it holds in quantities woefully insufficient to defend the value of the US Dollar.
The “New” Swap Agreement:
The new global swap agreement unveiled on September 18 comes as part of a Fed package that almost quadrupled - to $US 247 Billion - the amount of US Dollars sent to other central banks in a coordinated global bid to ease the worst global financial market crisis since the 1920s. The ECB will get a $US 55 Billion increase in US Dollars. The Swiss National Bank will get $US 15 Billion on top of an earlier $US 12 Billion program. The Bank of Japan, Bank of England and Bank of Canada set up new swap programs with the Fed in which Japan gets $US 60 Billion, England $US 50 Billion and Canada $US 10 Billion.
There can be little doubt that these nations already have all the US Dollars that they want.
Once these “swaps” are done, the New York Fed will stand with these currencies in hand. When foreigners, and increasingly Americans, want to escape from the US monetary and credit debacle and sell their US Dollars on the currency market in the US, the New York Fed then stands ready with the foreign currencies in hand to buy the US Dollars being sold with the “swapped” currencies it now holds.
The Last US Fig Leaf:
These currency “swaps” and their implications have barely been noticed in the dramas going on inside the USA. But these facts are of the utmost importance. Had the US not made a deal on these swaps, a tidal wave sell-off in US Dollars would have caused the international value of the US Dollar to nosedive in dramatic style. Having almost nothing in the way of foreign reserves, the US would not have been able to defend its currency. Even if the US had stood with significant holdings of foreign exchange reserves (say $US 500 Billion) a sell-off requiring the use of $US 247 Billion (the size as this latest swap) would have covered the world in headlines to the effect that the US had lost half of its foreign exchange reserves in a week. Here lies the REAL global issue. A genuine reserve country needs to hold little or nothing in the way of other nations’ currencies. Being a reserve currency nation means that the nation’s currency is itself a reserve. Not being a reserve currency nation means that such a nation is forced by international necessity to hold another nation’s currency as its own reserve behind its national currency. The thing that the US wants most to avoid is having to hold any other nation’s money as a form of reserves behind the US Dollar. Doing that would signal that the US Dollar was no longer an international reserve currency! These “swap agreements” enable the US to sidestep the issue of its absent foreign exchange reserves. The facade is maintained. But all swaps reverse in time. When that happens, the US New York Fed will have to go to the currency floors and buy the amounts of foreign currency stated earlier. It will have to buy them with US Dollars in order to repay the “counter-parties” to these swap agreements.
Between September 11 and 22, the US Dollar lost nearly 6 percent against the Euro. Gold, on September 22, was above $US 900. The US Dollar global rally is over. It is all downhill from here.
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