Economics Dictionary of ArgumentsHome
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| Gold standard: The gold standard is a monetary system where a country's currency value is directly linked to a specific amount of gold. Governments or central banks would guarantee to exchange their currency for gold at a fixed price. This system provided stability but limited flexibility in monetary policy. It was largely abandoned in the 20th century in favor of fiat currencies. See also Central bank, Monetary policy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Gold Standard - Dictionary of Arguments
Rothbard II 160 Gold standard/Rothbard: Apart from a few years during the continental paper period of the American Revolution, the South Sea and Mississippi bubbles of the early eighteenth century, the hyperinflated assignats during the French Revolution, or a few brief suspensions of specie payment, the world had always been on some form of gold or silver standard. All these episodes had been mercifully brief if catastrophic. But now, after a while, it began to dawn on the British public that the era of inflationary fiat paper would continue indefinitely. Great Britain suspended specie payments indefinitely so as to permit the Bank of England, and the banking system as a whole, to maintain and greatly expand the previously inflated system of fractional reserve banking. >Central Bank/Rothbard, >Inflation. Rothbard II 190 During the seventeenth and eighteenth centuries, England had been on a bimetallic standard, but the official rate consistently overvalued gold and undervalued silver in relation to the world market price. As a result, Britain had long been on a de facto gold standard. The discussion during the restriction period was complicated by the fact that during those two centuries, it was illegal for Britons to export British gold or silver coins, or bullion melted from such coin. It was legal to export foreign coin or bullion, but more important is the fact that substantial smuggling habitually nullified the export prohibition. >Bullionism, >Money. Rothbard II 228 Gold standard/inflation/Rothbard: The boom and crisis of 1825 dealt a traumatic lesson to thoughtful analysts of the monetary and economic scene. For these dramatic events demonstrated that the gold standard, important as it was as a check on monetary and banking inflation, was not enough: bank failures, and boom and bust cycles, could and would still occur. Something further, then, was needed to fulfil the promise of the bullionists; something more than the gold standard was needed to counter the ills of boom-and-bust and of fractional-reserve banking. The most concrete and immediate response to the panic of 1825 was a decision of the government to outlaw small denomination (…) bank notes, a measure that even the pro-bank credit Adam Smith had favoured. In that way, at least for these popular and widely used small denominations, the public would be using only specie as money. Scotland: Political pressure by Scottish Tories gained an exemption from these reforms for Scotland. In the first place, Scotland already had joint-stock banking and, more importantly, Scotland had long been a swamp of small-bank note inflationism. Even after resumption of the gold standard in 1821 , Scotland did not have a gold standard in practice. - - - Rothbard III 1017 Gold standard/Rothbard: When the government "goes off" the gold standard, central bank notes then become legal tender and virtually the standard money. It then cannot possibly fail, and this, of course, practically eliminates limitations on its credit expansion. >Credit expansion/Rothbard. External drain: So long as a country is in any sense "on the gold standard," the central bank and the banking system must worry about an external drain of specie should the inflation become too great. Internal drain: Under an unrestricted gold standard, it must also worry about an internal drain resulting from the demands of those who do not use the banks. A shift in public taste from deposits to notes will embarrass the commercial banks, though not the central bank. Assiduous propaganda on the conveniences of banking, however, has reduced the ranks of those not using banks to a few malcontents. As a result, the only limitation on credit expansion is now external. Government policy: Governments, of course, are always anxious to remove all checks on their powers of inducing monetary expansion. Money supply: One way of removing the external threat is to foster international cooperation, so that all governments and central banks expand their money supply at a uniform rate. Inflation: The "ideal" condition for unlimited inflation is, of course, a world fiat paper money, issued by a world central bank or other governmental authority. Fiat money: Pure fiat money on a national scale would serve almost as well, but there would then be the embarrassment of national moneys depreciating in terms of other moneys, and imports becoming much more expensive._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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