Saturday, September 5, 2009

The Gold Exchange Standard(2)

Despite the problems inherent in the gold exchange standards, there is currently a great deal of interest in the United States in returning to some type of gold standard. Congress created a 17-member Gold Commission in 1980 to "study and make recommendations concerning the role of gold in the domestic and international monetary systems." Chaired by the Secretary of the Treasury, the Gold Commission is charged with the responsibility of reviewing systems for linking the dollar‘s value to gold as a way of controlling monetary growth and stabilizing or eliminating inflation. At least two problems appear to stand in the way of a return to even a modified gold standard .first, while a dollar-gold link may stabilize prices in the long run; a gold standard is likely to produce substantial short-run swings in prices and domestic employment, some of which would be politically dangerous. Second, world production of gold is expected to be essentially flat or possibly even downward over at least the next two decades. The result, in all probability, would be a sharply inflated gold price and significant instability in the international payments system

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