Robert J. Samuelson: Here is why returning to the gold standard would be a disaster
The arithmetic would be daunting, writes Julian Jessop of Capital Economics to clients. The United States holds gold reserves of 261 million ounces, the world's largest. The monetary base — cash in circulation plus banks' deposits at the Federal Reserve — is nearly $2.7 trillion. Backing all that money with gold would require a gold price of about $10,000 an ounce compared with today's price of roughly $1,600. This sort of change would rattle global financial markets.
It's hard to imagine a more sure-fire way of creating uncertainty and destroying confidence. If evidence of an incipient surge of inflation were obvious, gold's appeal might be somewhat understandable. But there's no such evidence. In 1980, there was a similar clamor for restoring gold's old role. A presidential commission was appointed — and recommended against it. History may repeat itself: A new gold standard would be so impractical that it could not overcome its own contradictions.
Robert J. Samuelson is a Washington Post columnist.
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