Politics

Created 8/10/1996
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Why Not the Gold Standard?

Talking Points on the Likely Consequences of Re-Establishment of a Gold Standard:

Brad DeLong

U.C. Berkeley


Consequences for the Magnitude of Business Cycles:

Loss of control over economic policy. If the U.S. and a substantial number of other industrial economies adopted a gold standard, the U.S. would lose the ability to tune its economic policies to fit domestic conditions.

Recessionary bias. Under a gold standard, the burden of adjustment is always placed on the "weak currency" country.

The gold standard and the Great Depression. The current judgment of economic historians (see, for example, Barry J. Eichengreen, Golden Fetters) is that attachment to the gold standard played a major part in keeping governments from fighting the Great Depression, and was a major factor turning the recession of 1929-1931 into the Great Depression of 1931-1941.


Consequences for the Long-Run Average Rate of Inflation:

Average inflation determined by gold mining. Under a gold standard, the long-run trajectory of the price level is determined by the pace at which gold is mined in South Africa and Russia.


Why Do Some Still Advocate a Gold Standard?


Politics

Created 8/10/1996
Go to
Brad DeLong's Home Page


Associate Professor of Economics Brad De Long, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/



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