On the Feasibility of Returning to the Gold Standard
38 Pages Posted: 3 May 2018 Last revised: 7 Oct 2019
Date Written: April 10, 2019
The gold standard is back in the news following a series of announcements from the Trump Administration indicating that the President was considering candidates for the open positions on the Federal Reserve Board who are sympathetic to the idea of restoring the gold standard. Among most economists, however, the gold standard remains overwhelmingly unpopular, although there are some economists who contend that returning to such a regime today would offer several benefits over the current monetary system. Whether doing so would be desirable is secondary to whether it would be feasible. What would the appropriate parity be? How much gold would it require? Is the existing gold stock sufficient to support it? How much would it cost? This paper takes up these questions. I argue that the current market price of gold is likely close to the appropriate parity, and that at this price, the gold stock is sufficiently large to enable the world's largest economies to return to the gold standard, although doing so would entail a one-time outlay of roughly \$3.5 trillion. I also find that the ongoing costs of maintaining the gold standard would, on average, require the countries considered in this study to dedicate approximately \$383 billion per year acquiring monetary gold.
Keywords: Gold Standard, Monetary Institutions, Resource Costs
JEL Classification: E42, F33, N10
Suggested Citation: Suggested Citation