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The gold standard does make prices depend on gold supply, but that is roughly 2% inflation (3kt mine supply over gold stock of ~150kt). That is roughly in line
by mikhailfranco 3y ago
The gold standard does make prices depend on gold supply, but that is roughly 2% inflation (3kt mine supply over gold stock of ~150kt).
That is roughly in line with BTC inflation at the moment, and also, as it happens, central bank inflation targets (expectations of anything more would lead people to buy gold, or BTC, or just warehouse cash).
However, the real discipline of a gold standard is to restrict debt (credit). The market for lenders and borrowers (investors) sets the (Wicksellian) interest rate, as any market should.
Governments cannot just print money to run indefinite deficits, to curry favor with the electorate. The democratic desire for low taxes and infinite subsidies cannot be consumated. There has to be fiscal discipline. That is the value of the gold standard.
- slg 3y agoYou seem to be mixing inflation of the money supply with inflation of the value of money. There is strong causality there, but it isn't the only cause. Considering the money supply is the primary cause we have control over, going back to the gold standard creates greater risk of other causes like supply or demand shocks harming the economy as we would no longer be able to nudge inflation in the desired direction to counteract those other causes. And if the primary remaining benefit of the gold standard is to rein in government spending, I would simply argue there are other ways to do that. It seems like throwing the baby out with the bath water to give up control of monetary policy in order to better control fiscal policy.