Transfers of gold money effectively require adjustment of balance-of-payments deficits, reestablishing equilibrium among trading nations—the settlement of debt thereby eliminating a root cause of global imbalances. Under the true gold standard, balance-of-payments deficits could no longer be settled in newly issued national paper and credit monies, such as the dollar or euro. Instead, residual balance-of-payments deficits among nations would be settled with an impartial, non-national monetary standard—gold. The requirement to settle in gold promptly and efficiently rules out the exponential debt increases of flawed reserve currency systems and the gold-exchange standard. Under the true gold standard, without official reserve currencies, rebalancing of the world trading system is a function of an efficient international adjustment mechanism.
Moreover, it is in the American national interest to terminate the reserve currency role of the dollar, an insupportable burden borne by the United States since the end of World War II (even since the Genoa agreement of 1922). The U.S. taxpayer must no longer go further into debt in order to supply the world with dollar reserves denominated in U.S. debt. Terminating the “privilege” and the burden of the official reserve currency role of the dollar, combined with the restoration of dollar convertibility to gold brings gradually to an end the long era of extreme global trade imbalances, secular inflation, and currency depreciation. Furthermore, the reserves of monetary authorities, to be held only in gold and domestic currency claims, eliminates the exchange-rate risk to all national banking systems formerly dependent on official, foreign currency reserves.