The Gold Standard 

In 2012, inflation proceeds gradually in the United States because of unemployed resources.  At full employment, inflation accelerates.  But then, as the Fed and the banking system reduce the growth rate of credit, the threat of deflation will reappear (as in 2006-07 and 2012).  Because the reserve currency system generally leads to a rapid increase in global purchasing power without a commensurate increase in the supply of goods and services, the systemic tendency of the reserve currency system is inflation— Read more

Since 1971, the floating, world dollar standard has been even more perverse and crisis-prone than the reserve currency systems of Bretton Woods and of the interwar era.  Indeed, the privilege and the burden of the dollar’s role as the world’s official reserve currency has been a cause not only of extreme inflation and the threat of deflation, but also of industrial and manufacturing displacement in the United States.  The world dollar standard is a primary cause of declining U.S. competitiveness, a witness of w Read more

The Bretton Woods pegged exchange rate system, based on the official reserve currency role of the dollar, collapsed in 1971 because the United States had accumulated more short-term debt to foreigners than it was willing to redeem in gold.  The collapse of the Bretton Woods system, based on the official reserve currency role of the dollar, ushered in the worst American economic decade since the 1930s.  The unemployment rate in 1982 was higher even than the unemployment rate occasioned by the collapse of the Fed-induced Read more

The rule-based true gold standard not only ends the official reserve currency role of the dollar, but it also limits arbitrary Federal Reserve money issuance secured by defective and illiquid collateral.  Unstable mutations in the true (or classical) gold standard of the past—including the failed “gold-exchange” system of Bretton Woods and the collapse of its predecessor, the “gold-exchange standard” of the 1920s and 1930s—must be ruled out. So, too, must floating exchange rates.  For almost a century, policy maker Read more