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Market News Experts say that Europe and the United States have enough gold to return to the gold standard, which is economically feasible!

Experts say that Europe and the United States have enough gold to return to the gold standard, which is economically feasible!

Lawrence (Larry) White, a professor of economics at George Mason University, said the United States and Europe had enough gold to return to the classic gold standard. He further explained that the gold standard is feasible in today's world. An expert on the gold standard and free banking, he will publish a new book next year, Better Money: Gold, Fiat or Bitcoin? ".

2022-06-10
11094
Lawrence (Larry) White, a professor of economics at George Mason University, said the United States and Europe had enough gold to return to the classic gold standard. He further explained that the gold standard is feasible in today's world. An expert on the gold standard and free banking, he will publish a new book next year, Better Money: Gold, Fiat or Bitcoin? ".

Different Types of Gold Standard


He explained that there have been three gold standards in U.S. history: the classic gold standard before World War I, the gold standard between the two world wars, and the Bretton Woods system after World War II. He pointed out that the classic gold standard system is self-regulating, stable, and does not require a central bank. The latter two systems have problems in maintaining a gold peg.

He said: "The classic gold standard is a self-regulating system. During World War I, all major countries, with the exception of the United States, abandoned the gold standard and didn't really restore it the old-fashioned way. Between the two world wars During the period, some countries were on the gold standard, and some countries were abolishing the gold standard, and it was very confusing, so no one thought the gold standard would work automatically.”



The Bretton Woods system pegged major currencies to the dollar, which itself was pegged to gold at $35 an ounce. He called the Bretton Woods system a "very weak gold standard."

By contrast, under the classic gold standard, he said: "Funds flow in and out of the country, not centrally controlled. If there is greater demand, it flows in. If demand decreases or gold production increases, will flow out."

Monetary Policy


Keynesian economists generally believe that during recessions, central banks should "print money" to save the economy. In particular, central bankers have defended accommodative monetary policy in response to coronavirus lockdowns.

Because under the gold standard, currencies are pegged to gold, central banks cannot print money during recessions .

White echoed those concerns, saying: "The point of the gold standard is to limit money printing... In terms of the pandemic, as long as your banking system is able to issue more gold-denominated and convertible debt, there is a need for public hoarding of money when the When it gets bigger, they do that."

In such a system, a central bank is unnecessary, he added. " One of the biggest attractions of the gold standard is that it works through market forces, and we don't need a central bank . We don't need any form of central planner in the currency balance market or financial markets," he said.

Is there enough gold?


The classic gold standard requires that every dollar in circulation be backed by gold. Some analysts claim that a return to the gold standard is impossible because there is not enough gold.

White objected, saying: "I think a part of the gold system would work. It worked during the classic gold standard. Banks didn't have 100% reserve requirements... However, prudence requires them to hold enough gold to actually Satisfy the redemption demands placed on them.”

He went on to say that the U.S. and Europe have enough gold reserves to return to the gold standard.

However, he warned that while the gold standard is economically viable, it may not be politically viable .

“I’m not sure if this is politically feasible, and certainly no one supports it,” he said. “…But the banking system under the gold standard could be very similar to what it is today. The average user of currency checking accounts and paper money would be It works very much the same way. It's definitely consistent with all the latest payment technology, online payments, phone payments. These can be denominated in gold ownership."



Spot Gold Daily Chart
At 14:03 on June 10, GMT+8, spot gold was quoted at $1845.52/oz
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