Why is a Gold Standard Better?
I've heard many libertarian economists say this... is it because the system tends to regulate itself without government intervention I assume? Then why did the world revert from the gold standard then by the early seventies? Is it because it is difficult to maintain?
Answer:
If every unit of money is backed by gold in a growing economy, money would become more valuable with time ie deflation. After Friedman's work on the monetary causes of the depression in the 1930's almost all economist agreed the deflation was a bad thing. Although Libertarians would like no government intervention I think most now favor a 3% a year growth rule. However since exactly what money is in a world of credit it is hard to define what it is that should grow at 3%.
The gold standard as it was practiced allowed governments to set exchange rates by deciding their currency value in gold. Most economist including Libertarians believe that market forces should set exchange rates.
It failed because the US was unwilling to devalue the $ in spite of the inflation that had been occurring for several years. As a consequence we ran out of gold, and since the $ was used as a reserve currency for the world, it would have caused a world wide crisis.
If you are talking about gold to back up money,the government made to much money.Back in the early over seas country's were demanding gold for payment or exchange of paper money this about got rid of our gold
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Answer:
If every unit of money is backed by gold in a growing economy, money would become more valuable with time ie deflation. After Friedman's work on the monetary causes of the depression in the 1930's almost all economist agreed the deflation was a bad thing. Although Libertarians would like no government intervention I think most now favor a 3% a year growth rule. However since exactly what money is in a world of credit it is hard to define what it is that should grow at 3%.
The gold standard as it was practiced allowed governments to set exchange rates by deciding their currency value in gold. Most economist including Libertarians believe that market forces should set exchange rates.
It failed because the US was unwilling to devalue the $ in spite of the inflation that had been occurring for several years. As a consequence we ran out of gold, and since the $ was used as a reserve currency for the world, it would have caused a world wide crisis.
If you are talking about gold to back up money,the government made to much money.Back in the early over seas country's were demanding gold for payment or exchange of paper money this about got rid of our gold
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