Wednesday, May 6, 2009

The Myths About a Return to the Gold Standard

Aureus minted in 193 by Septimius Severus, to ...

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By John Tamny

The financial crisis of the past year has predictably generated all manner of suggestions about how to fix the problems before us. And while most solutions have missed the point along the lines of treating a cancer patient with a pacemaker, there’s a small but growing call for a return to the monetary stability wrought by a gold standard.

The cries for gold are surely exciting given the basic truth that had the dollar been stable this decade, there’s simply no way we’d be in the financial mess we’re in today. When money values gyrate, mistakes with regard to investment and trade are magnified and economic corrections always reveal themselves. A dollar defined in gold terms would not erase all economic mistakes, but it’s a certainty that they would be reduced exponentially.

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