What's The Path To The Gold Standard?

It's the path to severely restricted economic growth. There is only so much physical gold in the world. Therefore there is only so much "money" on the planet. The population keeps increasing. The number of goods and services to purchase keeps increasing. In order to make the gold standard work the world would have to decide on a fair exchange rate for gold. How much is an ounce of gold worth? Then the next logical step, in order to keep the money supply in tune with the increasing number of people buying things and the increasing amount of goods to purchase would be to have a government agency determine the exchange rate of gold. Once you do that, you basically have a de facto Federal Reserve in that there would be a government agency in charge of the money supply.

Another problem with the gold standard is also related to the finite supply of it, and thus the finite supply of money. Supposing a country, say China, decided to hoard gold. They started buying up gold reserves and kept this a government policy for years, maybe even decades. At some point they would have sucked up the lions share of gold and then they could dictate how much money was available and by extension how much money was worth. I definitely prefer the United States being in that position with the US dollar as the world's most trusted currency.

 

Kind of a lengthy read. Do they discuss the meteorite problem? Supposing a meteorite rich in gold fell onto any particular country. That country could be either an instant economic superpower or the country benefiting from it could pull away from all others.

Or the mining of asteroids problem?

 

As much as I dislike inflation eating in to the buying power of my savings, I'm pretty sure that I would dislike a system doomed to deflation any better.

 

What does the book propose to solve the problem of a fixed money supply and an increasing population and increasing set of goods and services?