Although Ambrose Evans-Pritchard is an avowed Europhobe, and will tag on to almost anything he writes a message of doom for the Euro, I found his article in today's Telegraph very interesting.
I am not an economist that argues that the only real store of value is in precious metal, indeed I don't believe it and have often found those who advocate a return to the gold standard to be rather swivel eyed and fanatical.
The root of the disagreement depends on a view on inflation. "Hard fiat money" advocates believe that inflation is always and everywhere a destroyer of wealth. Yet, a certain low level of inflation is a lubricant for economic growth. zero inflation or deflation is almost always a sign of profound economic problems.
Nevertheless the idea that Evans-Pritchard puts forward- that the Dollar collapse could trigger what he calls "competitive devaluations" is a real threat. Essentially his view is the US Fed is seems to be trying to head off recession by exporting the problem overseas, and especially to the Euro zone.
My view is that Ben Bernanke can not pull off the difficult tightrope walk that will avoid a US recession, and by trying to reflate, he will simply inflate, thus leading to a further Dollar fall. I share Evans-Pritchard's view that the risk is ultimately more from uncontrolled inflation, if the the Fed actually adopts the policies that he suggests they will.
Better for the US to take the short run pain of even a deep recession than to destroy the Dollar as the reserve currency. Yet the market for gold suggests that no one believes that this will happen. The rocketing of the price of golds is a measure of the global fear in financial markets- a fear that may persist for some time. However I do not believe that this represents a victory for the hard fiat money advocates and were we to follow their prescriptions then any recession would risk becoming a global depression, with incalculable consequences.