Summary: Implementing Real Convertibility of Existing National Currencies Is a Realistic Alternative to a “Great Reset”

Introduction

As discussed in earlier chapters, the idea of stabilizing the real value of a currency by making it convertible into a range of primary commodities other than gold and silver is not new: it has a history of well over a century, having been discussed by 19th century western economists. Moreover, a significant number of well-regarded western economists, including Fisher, Graham, Hart, Tinbergen, Kaldor, as well as the two “giants” of 20th century academic economics, Keynes and Hayek, have all strongly endorsed the idea – and a number of economists continue to vigorously promote it today. However, although not a few of these advocates worked hard over many years trying to design a practical means of implementing the idea, none of their efforts were successful. Above all, the various proposals did not offer sufficient benefits to outweigh the major costs and uncertainties that would be involved in creating the new international institution that they recommended was needed. Despite this, many people in the political world continue to press for an international solution, or more often nowadays a “global” solution, although as explained above, this is not attainable today due to its serious flaws, unless such a plan was enforced by a hegemonic power.

The authors hope that we have convinced readers that, in contrast to those efforts, the Grondona system offers a genuinely practical means whereby many different countries can independently stabilize the real value of their national currency in terms of primary commodities, to the extent that they choose, without the need for a new international institution, nor any international negotiations, agreements or regulations at all. This is especially desirable today in view of the currently heightened economic uncertainty and geo-political difficulties as the world economy faces a new era, no longer centered on the US dollar, but of which many details still remain to be decided.

Grondona did not develop his system in order to provide a new basis for the world economy: for most of the time when he was writing, the Bretton Woods system still apparently provided a stable foundation for the world economy – although the Soviet Union and the countries which it dominated were not participants. However, the fundamental problem now facing governments around the world has been triggered and aggravated by the absence of any remaining element of real convertibility of the US dollar or other major currencies. The end of gold convertibility in 1971 ended the era of near-hegemony of the US dollar, which changed from being “as good as gold” to being merely fiat currency subject to endless depreciation. With no successor currency in sight today, the logical solution is a “multi-polar” system with no single dominant currency, which is in effect gradually coming to reality. However, for such a system to be stable and long-lasting, there needs to be less volatility in financial markets, and less vulnerability of foreign-exchange markets to shocks and/or manipulation by large operators.

It is precisely such improved multi-polar economic stability that the Grondona system is uniquely able to provide. Although Grondona advocated that it should be pioneered by a major commodity-importing country such as the UK, the OECD countries’ governments today are politically dominated by “globalists”, and so are not likely to take such an initiative. So it is a great strength of his system that it also empowers governments of smaller economies, which have less international influence, to implement it. In addition, the synergistic benefits of mutual exchange-rate stabilization which the system offers to implementing countries would help to strengthen the collective defence of a group of implementing countries against stronger economic actors, both governments and giant corporations.

The main contribution of the present book is to have explained this, and to have provided evidence to justify further attention to the Grondona system, in the form of simulations of how it could have operated in five different countries, Japan having a major economy, the other four having much smaller economies. These simulations have shown how the direct stabilizing effects of the system’s operation are exerted on the country’s commodity trade, by adding substantial, strictly counter-cyclical stock-holding capacity to existing market operations, enhanced by counter-cyclical variation in the national money supply. Such a stabilizing influence on commodity prices and trade flows is fundamentally desirable, particularly for smaller countries and businesses, for which market price volatility is costly and destabilizing.