Is the Gold Standard That Great?

by Dual Income No Kids on January 29, 2009 · 0 comments

Hi All,

With the economy under pressure, there has been some chatter among political circles that perhaps a return to the gold standard would help. The idea is that a gold standard could help to rein in deficit spending and strengthen the dollar. A stronger dollar makes it a heck of a lot easier to build wealth.

Well, new research is out which throws some cold water on that idea. Evidently back in the day, the gold standard wasn’t all that helpful in reducing interest rates. What really matters is political stability.

From the article:

Another reason poor countries didn’t get better lending terms was the political risk involved. “The credibility gains through gold standard adoption may have been low in poor countries simply because political instability was high,” the authors write. “Where the political and social fabric of a country is still crisis-prone, its monetary regime is likely to be a second-order concern for the market.”

Click here for the rest of it.

Best,

James

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