How the dollar's collapse will lead to a new gold standard

Justice Litle (cf. The Daily Reckoning) has written an article with the above title.

"Sound money naysayers argue that a gold standard cannot work in today's modern global economy. They declare the gold straitjacket too fiscally restrictive. They warn that there is not enough gold in the world to properly grease the wheels of commerce. But the naysayers wrongly assume that a gold-based system cannot contain leverage.

...Governments cannot be trusted to apply leverage responsibly, but private entities could - under the watchful eye of investors and deposit holders, who would have a personal interest in maintaining vigilance and bear direct financial responsibility for any failure. Remove the moral hazard of a federally subsidized blank check to cover losses and you immediately reintroduce private-party vigilance."

Dr. Eckart Woertz has a very different view. He describes the return of the gold standard as 'the ultimate mirage of the Western gold bugs.'

"It seems like capitalism cannot expand in the real world anymore because geographically, it colonized all the non-commodified virgin lands a long time ago, and the inward expansion of new products and new markets got stuck in a stillborn microelectronic Kondratieff cycle. New products and markets still emerge, but do not absorb enough labor anymore because of the huge rationalization potentials the microelectronic revolution has set free. That leaves as the last frontier of growth the deceivingly limitless realm of numbers and financial engineering. If you think that's bad, be sure the deflationary shock of a gold standard would be worse.

...The gold bug's state of mind - affirming capitalism by evoking a harmonious picture of peaceful market communities and the whole 'honest money for honest work' charade - alludes to a past that never was and a future that will never be. The only thing that saved capitalism after 1929 was state intervention and monetary expansion, and the only thing that saved it after 1971 was even more monetary expansion and the advent of a brave new world of financial engineering. So let's hope that the music will continue to play for a while, because it will be difficult to grab a chair once it stops. And be careful what you wish for - or which gold bug is ready to tell the last GM worker to go home without knowing how to feed his family?"