Editing Inflation (section)

=== Gold standard ===

{{Main|Gold standard}}
[[File:Two 20kr gold coins.png|thumb|right|upright=1.2|Two 20 [[Swedish krona|krona]] gold coins from the [[Scandinavian Monetary Union]], a historical example of an international gold standard]]

The gold standard is a monetary system in which a region's common medium of exchange is paper notes (or other monetary token) that are normally freely convertible into pre-set, fixed quantities of gold. The standard specifies how the gold backing would be implemented, including the amount of [[Bullion coin|specie]] per currency unit. The currency itself has no ''innate value'' but is accepted by traders because it can be redeemed for the equivalent value of the commodity (specie). A [[Silver certificate (United States)|U.S. silver certificate]], for example, could be redeemed for an actual piece of silver.

Under a gold standard, the long term rate of inflation (or deflation) would be determined by the growth rate of the supply of gold relative to total output.<ref>{{cite encyclopedia|last =Bordo|first =Michael D.|date =2002|url =http://www.econlib.org/library/Enc/GoldStandard.html|title =Gold Standard|encyclopedia =The Concise Encyclopedia of Economics|publisher =Library of Economics and Liberty|access-date =September 23, 2008|archive-date =October 5, 2010|archive-url =https://web.archive.org/web/20101005063134/http://www.econlib.org/library/Enc/GoldStandard.html|url-status =live}}</ref> Critics argue that this will cause arbitrary fluctuations in the inflation rate, and that monetary policy would essentially be determined by an intersection of however much new gold was produced by mining and changing demand for gold for practical uses.<ref>{{cite journal |last1=Barsky |first1=Robert B. |last2=DeLong |first2=J. Bradford |year=1991 |title=Forecasting Pre-World War I Inflation: The Fisher Effect and the Gold Standard |url=https://ideas.repec.org/a/tpr/qjecon/v106y1991i3p815-36.html |url-status=live |journal=Quarterly Journal of Economics |volume=106 |issue=3 |pages=815–836 |doi=10.2307/2937928 |jstor=2937928 |archive-url=https://web.archive.org/web/20150620163911/https://ideas.repec.org/a/tpr/qjecon/v106y1991i3p815-36.html |archive-date=June 20, 2015 |access-date=September 27, 2008}}</ref><ref>{{cite web |url=http://www.j-bradford-delong.net/Politics/whynotthegoldstandard.html |title=Why Not the Gold Standard? |last=DeLong |first=Brad |access-date=September 25, 2008 |archive-url=https://web.archive.org/web/20101018035441/http://www.j-bradford-delong.net/politics/whynotthegoldstandard.html |archive-date=October 18, 2010 |url-status=dead }}</ref> The gold standard was historically found to make it more difficult to stabilize employment levels and avoid recessions and was eventually abandoned everywhere.<ref name="Historical"/><ref>{{cite web |last=Abdel-Monem |first=Tarik |title=What is The Gold Standard? |url=http://www.uiowa.edu/ifdebook/faq/faq_docs/gold_standard.shtml |publisher=University of Iowa Center for The Center for International Finance and Development |url-status=dead |archive-url=https://web.archive.org/web/20091121143147/http://www.uiowa.edu/ifdebook/faq/faq_docs/gold_standard.shtml |archive-date=2009-11-21 }}</ref>