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The gold standard: myths and facts

The gold standard: myths and facts

While many people believe the US should adopt a gold standard to guard against inflation or deflation, and stabilize the economy, there are several reasons why this reform will not work. However, there is a modern adaptation of the gold standard that could achieve a stable price level and avoid the many disruptions brought upon the economy by monetary instability.

Under a gold standard, the US treasury could exchange dollars for gold at a price of, say, $1,000 per ounce. In practice, that means banks would freely exchange their dollar accounts at the Fed for electronic claims to gold.

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The Wall Street Journal

John H Cochrane is a professor of finance at the University of Chicago Booth School of Business and a senior fellow at Stanford University’s Hoover Institution.

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