Have you seen a $100,000 bill?

The gold standard in the US was one contributing factor to the length of the Great Depression.

It would be cool to have one of those certificates. It's a great irony.

 

Except that it is true.

During WW1 nations had borrowed money from the US. In 1928 the Federal Reserve increased interest rates in an attempt to combat inflation. Those nations who had borrowed from the US had issues paying the debt. Exports slowed. Then there was the market crash (1929) and the bank failures of 1930 and 1931. The US was two years too late in abandoning the gold standard.

The structural flaws of the interwar gold standard, along with policy responses dictated by the gold standard's "rules of the game," made an international monetary contraction and deflation inevitable (Peter Temin, Lessons from the Great Depression).

Countries which abandoned the gold standard and the associated contractionary monetary policies recovered from the Depression more quickly than countries that remained on gold (Eichengreen and Sachs, Exchange rates and economic recovery in the 1930's).


The gold standard is no longer an economic possibility. It outgrew it's usefulness. And going back to a gold standard merely means economic collapse.

 

Here are a few articles for those thinking the gold standard is a good idea (for those under 60 years old....those over 60 probably will follow the actor, William Devane, for economic advice).

Why a gold standard is a very bad idea — Money, Banking and Financial Markets

7 reasons the gold standard is a terrible idea

Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts

 

But it is true.

There was a survey asking economic experts (not armchair economists) if we should go back to the gold standard.

No economic scholar believed the gold standard would be beneficial. It would help at times, but overall it would lead to economic disaster.




Gold Standard - Clark Center Forum

 

No. I'm not saying moving from the gold standard caused the Great Depression (if that is what I posted it was a misstatement).

I am saying that NOT moving from the gold standard kept us in the depression for two years.

The interesting fact here is that this is common knowledge taught in any grade school economic class and supported by every economist. No legitimate economist, to my knowledge, supports returning to the gold standard. It would be the death of the US in the global economy.

 

...on every score, the gold standard period was less stable. Prices were less stable; growth was less stable; and the financial system was less stable. Why?

We see six major reasons.

First, the gold standard is procyclical. When the economy booms, inflation typically rises. In the absence of a central bank to force the nominal interest rate up, the real interest rate falls, providing a further impetus to activity. . . .

Second, the gold standard has exchange rate implications. While we do not know for sure, we suspect that current U.S. advocates of a shift to gold are thinking of the case where the United States acts alone (rather than waiting to coordinate a global return to the gold standard). If so, the change would impose unnecessary risks on exporters and importers, their employees and their creditors. To see why, consider the consequences of a move in the global price of gold measured in some other currency, say British pounds. If the pound price of gold changed, but the dollar price of gold did not, the result would be a move in the real dollar-pound exchange rate. That is, unless the dollar prices of U.S. goods and the dollar wages of U.S. workers adjust instantly to offset gold price fluctuations, the real dollar exchange rate changes. In either case, the result would almost surely induce volatility of production, employment, and the debt burden.

More broadly, a gold standard suffers from some of the same problems as any fixed-exchange rate system. Not only can’t the exchange rate adjust to buffer external shocks, but the commitment invites speculative attacks because it lacks time consistency. Under a gold standard, the scale of the central bank’s liabilities—currency plus reserves—is determined by the gold it has in its vault. Imagine that, as a consequence of an extended downturn, people come to fear a currency devaluation. That is, they worry that the central bank will raise the dollar price of gold. In such a circumstance, it will be natural for investors to take their dollars to the central bank and exchange them for gold. The doubts that motivate such a run can be self-fulfilling: once the central bank starts to lose gold reserves, it can quickly be compelled to raise its dollar price, or to suspend redemption entirely. This is what happened in 1931 to the Bank of England, when it was driven off the gold standard. It happened again in 1992 (albeit with foreign currency reserves rather than gold) when Britain was compelled to abandon its fixed exchange rate.

Third, as historians have emphasized, the gold standard helped spread the Great Depression from the United States to the rest of the world. The gold standard was a global arrangement that formed the basis for a virtually universal fixed-exchange rate regime in which international transactions were settled in gold. This meant that a country with an external deficit—one whose imports exceed its exports—was required to pay the difference by transferring gold to countries with external surpluses. The loss of gold forced the deficit country’s central bank to shrink its balance sheet, reducing the quantity of money and credit in the economy, and driving domestic prices down. Put differently, under a gold standard, countries running external deficits face deflationary pressure. A surplus country’s central bank faced no such pressure, as it could choose whether to convert higher gold stocks into money or not. Put another way, a central bank can have too little gold, but it can never have too much.

Why a gold standard is a very bad idea — Money, Banking and Financial Markets

 

First, no....not nonsense (you have no right to express my opinion. You can only speak for yours).

Second, I am not a product of today's education system. We learned in grade school (late 70's to early 80's) about the negative and positive aspects of the gold standard. We also learned in college, as we took economics, how the gold standard prolonged the Great Depression and why it would not work in a world economy today (late 80's).

Third, you say my knowledge is lacking yet I have provided references from several economists.


Provide a legitimate reference from an actual economist that the gold standard would work better today.

The world vs you doesn't cut it.

Gold is too volatile to be a standard.

From the already cited reference - 'even if we include the Great Inflation of the 1970s, inflation over the past 43 years has been more stable than it was under the gold standard".

It is a fixed exchange rate system. It simply will not work.

You have no clue, Bro.

 

We have the look at inflation.

 

An explanation of your chart (it does not mean what you think it means).

Inflation Vs. Deflation: Which Is The Bigger Threat In 2022? | Investing.com