bricki

Returning to a Gold Standard Is a Bad Idea

The replacement value of gold is continually rising as mines become exhausted. The world's economic activity grows far faster than the supply of gold can.

The result is that adoption of a gold standard means continuous deflation and the serious impediments to financial growth this entails. It would be a disaster to revert to a gold standard.

Prior to the Great Depression there were several major world wide depressions during the 19th century. These all had one thing in common - a shortage of money because the gold standard did not allow expansion of
the money supply fast enough to support the economic growth of the time.

Gold has no intrinsic value. Its use as currency is based merely on tradition and habit. In famines gold has no value - people will not sell food or the means of producing it. Gold is just like any other money, fiat or not - its value is dependent on the idea that at some future time you will be able exchange it for goods and services. If people lose interest or faith in gold, its value decreases. It has no guarantee of value any more than any other proxy for real goods and services.