Editing Gold standard (section)

== Impact ==
A poll of 39 prominent U.S. economists conducted by the IGM Economic Experts Panel in 2012 found that none of them believed that returning to the gold standard would improve price-stability and employment outcomes. The specific statement with which the economists were asked to agree or disagree was: "If the U.S. replaced its discretionary monetary policy regime with a gold standard, defining a 'dollar' as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American." 40% of the economists disagreed, and 53% strongly disagreed with the statement; the rest did not respond to the question. The panel of polled economists included past Nobel Prize winners, former economic advisers to both Republican and Democratic presidents, and senior faculty from Harvard, Chicago, Stanford, MIT, and other well-known research universities.<ref name=":0">{{cite web |url=http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_cw1nNUYOXSAKwrq|title=Gold Standard|date=12 January 2012|publisher=[[IGM Forum]]|access-date=27 December 2015}}</ref> A 1995 study reported on survey results among economic historians showing that two-thirds of economic historians disagreed that the gold standard "was effective in stabilizing prices and moderating business-cycle fluctuations during the nineteenth century."<ref name=":8">{{Cite journal|last=Whaples|first=Robert|date=1995|title=Where Is There Consensus Among American Economic Historians? The Results of a Survey on Forty Propositions|journal=The Journal of Economic History |volume=55|issue=1|pages=139–154|doi=10.1017/S0022050700040602|jstor=2123771|s2cid=145691938 |issn=0022-0507}}</ref>

===Advantages===
According to economist [[Michael D. Bordo]], the gold standard has three benefits: "its record as a stable nominal anchor; its automaticity; and its role as a credible commitment mechanism":<ref name=":10">{{Cite book|url=https://www.cambridge.org/core/books/gold-standard-and-related-regimes/3AD22F72A4C16DA08DDF52B58AEC56DF|title=The Gold Standard and Related Regimes: Collected Essays|last=Bordo|first=Michael D.|date=May 1999|publisher=Cambridge University Press|language=en|doi=10.1017/cbo9780511559624|isbn=9780521550062|access-date=2020-03-28}}</ref>

* A gold standard does not allow some types of [[financial repression]].<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/fandd/2011/06/reinhart.htm |title=Financial Repression Redux |quote=Financial repression occurs when governments implement policies to channel to themselves funds that in a deregulated market environment would go elsewhere |publisher=International Monetary Fund |date=June 2011 |access-date=December 24, 2011}}</ref> Financial repression acts as a mechanism to transfer wealth from creditors to debtors, particularly the governments that practice it. Financial repression is most successful in reducing debt when accompanied by inflation and can be considered a form of [[taxation]].<ref>{{Cite book |title=This Time is Different |last1=Reinhart |first1=Carmen M. |last2=Rogoff |first2=Kenneth S. |publisher=Princeton University Press |year=2008 |page=143}}</ref><ref>{{Cite journal |jstor = 2117587|title = Government Revenue from Financial Repression|journal = The American Economic Review|volume = 83|issue = 4|pages = 953–963|last1 = Giovannini|first1 = Alberto|last2 = De Melo|first2 = Martha|year = 1993}}</ref> In 1966 [[Alan Greenspan]] wrote "[[Deficit spending]] is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."<ref>{{cite web |url=http://www.constitution.org/mon/greenspan_gold.htm |title=Gold and Economic Freedom |first=Alan |last=Greenspan |publisher=Constitution.org |year=1966 |access-date=December 24, 2011 |archive-date=September 25, 2010 |archive-url=https://web.archive.org/web/20100925231456/http://constitution.org/mon/greenspan_gold.htm |url-status=dead }}</ref>
* Long-term [[price stability]] has been described as one of the virtues of the gold standard,{{sfn|Bordo|2008}} but historical data shows that the magnitude of short run swings in prices were far higher under the gold standard.<ref>{{cite magazine|url=https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ |title=Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts |first=Matthew |last=O'Brien |magazine=The Atlantic |date=2012-08-26 |access-date=2013-04-19}}</ref><ref>{{Cite book|chapter-url=https://www.cambridge.org/core/books/gold-standard-and-related-regimes/gold-standard-as-a-commitment-mechanism/2E8AFBB653A1320325BA6A15741F3E7D|chapter=The Gold Standard as a Commitment Mechanism|last=Kydland|first=Finn E.|title=The Gold Standard and Related Regimes|date=1999|pages=195–237|publisher=Cambridge University Press|doi=10.1017/CBO9780511559624.008|isbn=9780521550062|language=en|access-date=2020-03-28}}</ref>{{sfn|Bordo|2008}}
*[[Currency crisis|Currency crises]] were less frequent under the gold standard than in periods without the gold standard.<ref name=":9" /> However, banking crises were more frequent.<ref name=":9" />
* The gold standard provides fixed international exchange rates between participating countries and thus reduces uncertainty in international trade. Historically, imbalances between price levels were offset by a balance-of-payment adjustment mechanism called the "[[price–specie flow mechanism]]".<ref name="mises">{{cite web|url=https://mises.org/books/goldstandard.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://mises.org/books/goldstandard.pdf |archive-date=2022-10-09 |url-status=live|title=Advantages of the Gold Standard|work=The Gold Standard: Perspectives in the Austrian School|date=27 January 1935 |publisher=The Ludwig von Mises Institute|access-date=9 January 2011}}</ref> Gold used to pay for imports reduces the money supply of importing nations, causing deflation, which makes them more competitive, while the importation of gold by net exporters serves to increase their money supply, causing inflation, making them less competitive.<ref>{{cite web |url=http://www.bankofengland.co.uk/publications/fsr/fs_paper13.pdf |title=Reform of the International Monetary and Financial System |publisher=Bank of England |quote=Countries with current account surpluses accumulated gold, while deficit countries saw their gold stocks diminish. This, in turn, contributed to upward pressure on domestic spending and prices in surplus countries and downward pressure on them in deficit countries, thereby leading to a change&nbsp;... that should, eventually, have reduced imbalances. |date=December 2011 |access-date=December 24, 2011 |archive-url=https://web.archive.org/web/20111218105433/http://www.bankofengland.co.uk/publications/fsr/fs_paper13.pdf |archive-date=December 18, 2011 |url-status=dead |df=mdy-all }}</ref>
* Hyper-inflation, a common correlator with government overthrows and economic failures, is more difficult when a gold standard exists. This is because hyper-inflation, by definition, is a loss in trust of failing fiat and those governments that create the fiat.

===Disadvantages===
[[File:Gold-nominal-constant-usd.svg|thumb|upright=1.4|right|Gold prices (US dollars per troy ounce) from 1914, in nominal US dollars and inflation adjusted US dollars]]
* The unequal distribution of gold deposits makes the gold standard more advantageous for those countries that produce gold.<ref>Goodman, George J. W. (1981). ''Paper Money''. pp. 165–66</ref> In 2010 the largest producers of gold, in order, were China, Australia, the U.S., South Africa, and Russia.<ref>{{cite web |first=Liezel |last=Hill |url=http://www.miningweekly.com/article/gold-mine-output-hit-record-in-2010-more-gains-likely-this-year-gfms-2011-01-13 |title=Gold mine output hit record in 2010, more gains likely this year – GFMS |publisher=Mining Weekly |date=January 13, 2011 |access-date=December 24, 2011 |archive-date=November 29, 2011 |archive-url=https://web.archive.org/web/20111129041110/http://www.miningweekly.com/article/gold-mine-output-hit-record-in-2010-more-gains-likely-this-year-gfms-2011-01-13 |url-status=dead }}</ref> The country with the largest unmined gold deposits is Australia.<ref>{{cite web|title=GOLD|url=http://minerals.usgs.gov/minerals/pubs/commodity/gold/mcs-2011-gold.pdf |archive-url=https://ghostarchive.org/archive/20221009/http://minerals.usgs.gov/minerals/pubs/commodity/gold/mcs-2011-gold.pdf |archive-date=2022-10-09 |url-status=live|work=U.S. Geological Survey, Mineral Commodity Summaries|publisher=U.S. Geological Survey|access-date=10 July 2012|date=January 2011 }}</ref>
* Some economists believe that the gold standard acts as a limit on economic growth. According to David Mayer, "As an economy's productive capacity grows, then so should its money supply. Because a gold standard requires that money be backed in the metal, then the scarcity of the metal constrains the ability of the economy to produce more capital and grow."<ref name=EverythingEc>Mayer, David A. (2010). [https://books.google.com/books?id=HObsDQAAQBAJ ''The Everything Economics Book''] {{Webarchive|url=https://web.archive.org/web/20230326164811/https://books.google.com/books?id=HObsDQAAQBAJ |date=2023-03-26 }}. {{ISBN|978-1-4405-0602-4}}. pp. 33–34.</ref>
* [[Mainstream economics|Mainstream economists]] believe that economic recessions can be largely mitigated by increasing the money supply during economic downturns.<ref name="Mankiw">{{Cite book |last=Mankiw |first=N. Gregory |title=Macroeconomics |publisher=Worth |year=2002 |edition=5th |pages=[https://archive.org/details/briefprincipleso00mank/page/238 238–255] |isbn=978-0-324-17190-7 |url=https://archive.org/details/briefprincipleso00mank/page/238 }}</ref> A gold standard means that the money supply would be determined by the gold supply and hence monetary policy could no longer be used to stabilize the economy.<ref name="Slate: Krugman">{{cite web |url=http://www.slate.com/id/1912/ |title=The Gold Bug Variations |last=Krugman |first=Paul |date=23 November 1996 |work=Slate |access-date=2009-02-13}}</ref>
* Although the gold standard brings long-run price stability, it is historically associated with high short-run price [[volatility (finance)|volatility]].{{sfn|Bordo|2008}}{{sfn|Bordo|Dittmar|Gavin|2003}} It has been argued by Schwartz, among others, that instability in short-term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt.{{sfn|Bordo|Dittmar|Gavin|2003}} Historically, discoveries of gold and rapid increases in gold production have caused volatility.<ref>{{Cite book |last=Eichengreen |first=Barry |title=Globalizing Capital: A History of the International Monetary System |date=2019 |publisher=Princeton University Press |isbn=978-0-691-19390-8 |edition=3rd |page=11 |doi=10.2307/j.ctvd58rxg |jstor=j.ctvd58rxg |s2cid=240840930}}</ref>
* Deflation punishes debtors.<ref>{{cite news |last=Keogh |first=Bryan |url=https://www.bloomberg.com/apps/news?pid=newsarchive&sid=am.gkYZFlB0A |title=Real Rate Shock Hits CEOs as Borrowing Costs Impede Recovery |quote='Deflation hurts borrowers and rewards savers,' said Drew Matus, senior economist at Banc of America Securities-Merrill Lynch in New York, in a telephone interview. 'If you do borrow right now, and we go through a period of deflation, your cost of borrowing just went through the roof.' |work=Bloomberg |date=May 13, 2009 |access-date=December 24, 2011}}</ref><ref>{{cite book|last1=Mauldin |first1=John |title=Endgame: The End of the Debt SuperCycle and How It Changes Everything |publisher=John Wiley |location=Hoboken, New Jersey |isbn=978-1-118-00457-9 |url={{google books|id=amaQ6ZNBpYoC|p=135|plainurl=yes}} |last2=Tepper |first2=Jonathan |date=2011-02-09}}</ref> Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may choose to save some of the additional wealth, reducing [[GDP]].<ref name="economist.com">{{cite magazine |title=The greater of two evils |url=http://www.economist.com/node/13610845 |magazine=The Economist |access-date=December 24, 2011 |date=May 7, 2009}}</ref>
* The money supply would essentially be determined by the rate of gold production. When gold stocks increase more rapidly than the economy, there is inflation and the reverse is also true.{{sfn|Bordo|2008}}<ref name="BradDeLong">{{cite web |url=http://www.j-bradford-delong.net/Politics/whynotthegoldstandard.html |title=Why Not the Gold Standard? |date=1996-08-10 |last=DeLong |first=Brad |author-link=J. Bradford DeLong |publisher=[[University of California, Berkeley]] |location=[[Berkeley, California]] |access-date=2008-09-25 |archive-url=https://web.archive.org/web/20101018035441/http://www.j-bradford-delong.net/politics/whynotthegoldstandard.html |archive-date=2010-10-18 |url-status=dead }}</ref> The consensus view is that the gold standard contributed to the severity and length of the Great Depression, as under the gold standard central banks could not expand credit at a fast enough rate to offset deflationary forces.<ref name="econjwatch.org">{{cite journal |last=Timberlake |first=Richard H. |year=2005 |title=Gold Standards and the Real Bills Doctrine in US Monetary Policy |journal=[[Econ Journal Watch]] |volume=2 |issue=2 |pages=196–233 |url=http://econjwatch.org/issues/volume-2-issue-2-august-2005}}</ref><ref name=Warburton>{{Cite book|last=Warburton |first=Clark |title=Depression, Inflation, and Monetary Policy: Selected Papers, 1945–1953 |year=1966 |publisher=[[Johns Hopkins University Press]] |location=[[Baltimore]] |oclc=736401 |pages=25–35 |chapter=The Monetary Disequilibrium Hypothesis}}</ref>{{sfn|Hamilton|2005}}
* Hamilton contended that the gold standard is susceptible to [[speculative attack]]s when a government's financial position appears weak. Conversely, this threat discourages governments from engaging in risky policy {{Crossreference|(see [[moral hazard]])}}. For example, the U.S. was forced to contract the money supply and raise interest rates in September 1931 to defend the dollar after speculators forced the UK off the gold standard.{{sfn|Hamilton|2005}}{{sfn|Hamilton|1988}}<ref>{{cite web|url=http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm |title=Remarks by Governor Ben S. Bernanke |quote=In September 1931, following a period of financial upheaval in Europe that created concerns about British investments on the Continent, speculators attacked the British pound, presenting pounds to the Bank of England and demanding gold in return. ... Unable to continue supporting the pound at its official value, Great Britain was forced to leave the gold standard, ... With the collapse of the pound, speculators turned their attention to the U.S. dollar |publisher=The Federal Reserve Board |date=March 2, 2004 |access-date=December 24, 2011}}</ref>
* Devaluing a currency under a gold standard would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation.<ref>{{Cite news |first=Megan |last=McArdle |author-link=Megan McArdle |title=There's gold in them thar standards! |url=http://meganmcardle.theatlantic.com/archives/2007/09/theres_gold_in_them_thar_stand.php |work=[[The Atlantic]] |date=2007-09-04 |access-date=2008-11-12 |archive-date=2010-01-13 |archive-url=https://web.archive.org/web/20100113083500/http://meganmcardle.theatlantic.com/archives/2007/09/theres_gold_in_them_thar_stand.php |url-status=dead }}</ref>
* Most economists favor a low, positive rate of inflation of around 2%. This reflects fear of deflationary shocks and the belief that active monetary policy can dampen fluctuations in output and unemployment. Inflation gives them room to tighten policy without inducing deflation.<ref name="econjournalwatch.org">Hummel, Jeffrey Rogers (January 2007). [http://econjwatch.org/articles/death-and-taxes-including-inflation-the-public-versus-economists "Death and Taxes, Including Inflation: The Public versus Economists"]. p. 56</ref>
* A gold standard provides practical constraints against the measures that central banks might otherwise use to respond to economic crises.<ref>{{Cite journal |first=Asli |last=Demirgüç-Kunt |author2=Enrica Detragiache |author-link2=Enrica Detragiache |date=April 2005 |title=Cross-Country Empirical Studies of Systemic Bank Distress: A Survey |journal=[[National Institute Economic Review]] |volume=192 |issue=1 |pages=68–83 |doi=10.1177/002795010519200108 |s2cid=153360324 |url=http://ner.sagepub.com/cgi/reprint/192/1/68 |access-date=2008-11-12 |oclc=90233776 |issn=0027-9501 |hdl=10986/8266 |hdl-access=free |archive-date=2009-05-31 |archive-url=https://web.archive.org/web/20090531220818/http://ner.sagepub.com/cgi/reprint/192/1/68 |url-status=dead }}</ref> Creation of new money reduces interest rates and thereby increases demand for new lower cost debt, raising the demand for money.<ref>{{cite web|url=http://www.econ.washington.edu/user/cnelson/Chap07.pdf |title=the quantity of money supplied by the Fed must be equal to the quantity demanded by money holders |access-date=2012-07-09 |url-status=dead |archive-url=https://web.archive.org/web/20120616230152/http://www.econ.washington.edu/user/cnelson/Chap07.pdf |archive-date=June 16, 2012 }}</ref>
*The late emergence of the gold standard may in part have been a consequence of its higher value than other metals, which made it unpractical for most laborers to use in everyday transactions (relative to less valuable silver coins).<ref>{{Cite book |last=Eichengreen |first=Barry |title=Globalizing Capital: A History of the International Monetary System |date=2019 |publisher=Princeton University Press |isbn=978-0-691-19390-8 |edition=3rd |pages=11–12 |doi=10.2307/j.ctvd58rxg |jstor=j.ctvd58rxg |s2cid=240840930}}</ref>