New Evidence on the Resource Costs of Irredeemable Paper Money

19 Pages Posted: 31 Jan 2013

See all articles by Tyler Watts

Tyler Watts

East Texas Baptist University

Lukas Snyder

Ball State University

Date Written: January 28, 2013


This paper compares estimates of the resource costs of monetary gold accumulation under the classical (1880-1914) gold standard with estimates of the resource costs associated with gold “investment” in the post-Bretton Woods era (1972-present) for the United States. While the costs associated with monetary or “investment” uses of precious metals — primarily gold coins and bullion — fell to historically low levels during the “great moderation” era (1982-2007), they rose sharply during both the “great inflation” era of the 1970s and the “great recession” era (2008-present), approaching levels consistent with the average for the classical gold standard in terms of real gold “investment” per capita. These results indicate that a transition to fiat money does not eliminate the resource costs of investment or “monetary” uses of gold. Indeed, fiat money volatility, whether realized as high and variable inflation rates, or the large monetary expansion undertaken since the 2008 financial crisis, can generate gold investment on par with the levels of monetary gold production of the classical gold standard.

Keywords: gold standard, resource costs, opportunity costs, gold investment, gold flow

JEL Classification: E40, E42, E50

Suggested Citation

Watts, Tyler and Snyder, Lukas, New Evidence on the Resource Costs of Irredeemable Paper Money (January 28, 2013). Available at SSRN: or

Tyler Watts (Contact Author)

East Texas Baptist University ( email )

One Tiger Dr.
Marshall, TX 75670
United States

Lukas Snyder

Ball State University ( email )

Muncie, IN 47306-0340
United States

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