The Merits and Feasibility of Returning to a Commodity Standard

20 Pages Posted: 12 Mar 2014  

Lawrence H. White

George Mason University - Department of Economics

Date Written: March 10, 2014


Although few academic economists today endorse a gold standard, historical data show that actual gold standards have outperformed actual fiat standards in at least five respects: (1) lower mean inflation rate, hence lower deadweight cost of economizing on money balances; (2) lower price level uncertainty, hence deeper long-term bond markets; (3) greater international trade and capital flows, due to network benefits of a common currency area; (4) lower resource costs of gold mining for monetary purposes with a lower real price of gold, due to the elimination of private demand to hold gold as an inflation hedge; and (5) greater fiscal discipline. Returning to a gold standard would be immediately feasible for the US, the Eurozone, and Switzerland, where official gold stocks are large enough at the current price of gold to provide historically reasonable reserve ratios behind broader monetary aggregates. Other major nations (Japan, UK, China) would have to purchase gold.

Keywords: Commodity money, Gold Standard, Inflation Hedge

Suggested Citation

White, Lawrence H., The Merits and Feasibility of Returning to a Commodity Standard (March 10, 2014). GMU Working Paper in Economics No. 14-05. Available at SSRN: or

Lawrence H. White (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

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