Putin cannily and diplomatically has praised the Euro, while noting that it has certain problems. At the same time, he repeated his call to downgrade the dollar in international finance. Putin wishes to boost trade and maintain good relations with Europe, and praising the Euro is part of that process. Does he really believe in fiat currencies? Hard to tell, but we know that Russia is boosting its gold reserves. At a minimum, it’s hedging its bets. I think that a number of the world’s politicians are gingerly trying to reconstruct Bretton Woods, but with a joint fiat currency basket jointly controlled by several governments, with the dollar being one among many. They see some role for gold in stabilizing this basket’s value, but they don’t want to create a firm linkage. Furthermore, their gold holdings are not large enough to accomplish that. This reconstruction goal is even more unattainable than a stable Euro in the face of national governments that pursue their own fiscal policies. It involves a degree of control or coordination of the policies of Russia, Japan, China, Brazil, the UK, the US, Germany, India, France, and probably OPEC countries. How likely is that? Consequently, as long as these governments maintain Keynesian fiscal (mis)management policies, they have no international finance solution that stabilizes exchange rates and price levels. Under these conditions, the fiat currencies will continue to be distinctly inferior long-run stores of value.

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