Myth 13: A Gold Standard Needs to be International, and the Rest of the World Won’t Come Along

Selgin (2012) makes an important point when he notes that:

the historical gold standard that … performed so well was an international gold standard, and [its] advantages .. were to a large extent advantages due to belonging to a very large monetary network. Consequently, a gold standard that is limited to a single country, and even to a very large country, cannot be expected to offer the same advantages as a multi-country gold standard or set of gold standards.

I have already argued above that the strongest case for reinstating the gold standard is for an international gold standard.  Getting other nations to join in the reinstatement is therefore a genuine problem (see also White 2008).  But this is not a reason for rejecting the case for an international gold standard.  It is rather a reason for taking the argument to other countries while developing it at home.  China and much of Latin America already link to or shadow the US dollar.  So the most important places to take the argument are the Eurozone, Japan, and Great Britain.

The leading nations did have come together to reconstruct the international monetary system in 1944, at the conference in Bretton Woods, New Hampshire.  Such a gathering can happen again once dissatisfaction with the post-Bretton Woods system of completely unanchored currencies becomes deep and widespread enough.  The influential leader of the UK delegation at Bretton Woods was John Maynard Keynes, who famously considered the gold standard “a barbarous relic” and was determined to minimize its role to widen the scope for discretionary central bank policy-making (see White 2012c, ch. 11).  The challenge for those who favor restoration of an international gold standard will be to insure that the delegates to the new conference have a better understanding.

 

Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

In Memoriam
Professor Jacques Rueff
(1896-1978)

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