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Would a Gold Standard Destroy the Canadian Dollar?

Calgary, Alberta CANADA, Nov 15, 2010 (Filing Services Canada via COMTEX) -- Enquirica Research Inc.

An interesting valuation methodology for gold is to determine what gold price is necessary for each unit of central bank paper to be backed by gold reserves. Here is that calculation for the US and Canada using M1 as the monetary numerator.

US: 8,133 tonnes, M1 - US$ 1.8 trillion = gold price of US$ 6,888/oz

Canada: 3.4 tonnes, M1 - C$ 500 billion = gold price of C$ 4,574,146/oz

Despite the market perception of Canadian dollar strength relative to the US dollar, the US has much higher, relative gold reserves.Therefore, a move to re-impose a gold standard (a fully gold backed currency) might have far greater consequences for the Canadian dollar than the US.The Canadian dollar would face an almost 100% devaluation in order to be backed by Canada's current gold reserves.

According to Enquirica, what western economies need is more capital not more money printing. There is no way to create capital other than through savings.Printing money does not create capital, and worse, the inflation it creates ultimately causes long lasting harm to the production structure of the economy.It follows that until the developed nations stop engaging in capital destroying activities and our capital base recovers, sustained real growth is unlikely to take place. A depleted and declining capital pool, combined with enormous expansion of the monetary base is creating a high probability of an extended period of stagflation in the west.

Enquirica Research is a Calgary based research firm focusing on independent analysis of alternative asset classes, exempt market securities and investment opportunities, primarily in western Canada. For full copy of the report register at www.enquirica.com