Post
Topic
Board Economics
Re: What if a Country go back to Gold (bitcoin) standard?
by
painlord2k
on 04/11/2014, 22:17:55 UTC
Read what happened when England went back to Gold Standard in 1925.  Results werent good and they went off it in 1931
I don't think the same apply. We are much more global now. The effects could be better or worse.

What's the reason to use gold standard?  Historically, countries went off gold standard because there wasn't enough gold to back the monetary demand.

What would probably happen is that boom & bust cycles would be extreme and you get things like Great Depression


England returned to the gold standard with the same exchange rate the pound had BEFORE the war. Unfortunately, to pay the costs of the war, England printed four times that quantity of notes.
This caused inflation and, obviously, who understand the situation converted as many notes as he could in gold and waited the endgame.

Countries went off the Gold Standard because there was not enough Gold to back the government expenditures and promises.
So, instead of cutting expenses, they printed fiat money. Easier, someone else would pay the costs of their decision a few years or decades down the road. Who care?

Had they allowed the Great Depression to go unchecked, it would have ended by 1931. They had just to compensate for the easy money and inflation of credit of the Roaring '20s (thank you Federal Reserve).
Instead the socialist government of FDR (he told his secretary they were doing the same thing they were doing in Italy, Russia and Germany, but without bloodshed and chaos) decided to manage the economy and fix it. And instead of being a Depression it become the Great Depression. And today we have the Greater Depression because the US government (and all government of the world) think they can fix the economy (and have it doing their bidding).