Estimating the Resource Costs of a Gold Standard

27 Pages Posted: 3 May 2018 Last revised: 22 Apr 2019

See all articles by Bryan Cutsinger

Bryan Cutsinger

Angelo State University - Accounting, Economics and Finance Department; Texas Tech University - Free Market Institute

Date Written: April 10, 2019

Abstract

One of the common criticisms of the gold standard is that it requires a significant amount of real resources to maintain. However, this claim is based on an unrealistic assumption regarding the reserve ratio that would exist under a gold standard. Unfortunately, comparatively little evidence exists that attempts to derive more realistic estimates for the resource costs of a gold standard. The purpose of this paper is to estimate the resource costs associated with a resumption of the international gold standard. I find that the current stock of above-ground gold is sufficient to facilitate a return to the gold standard, and that doing so would require a one-time outlay of nearly \$3 trillion. I also find that maintaining a gold standard once implemented would require the participating economies to dedicate roughly .45 percent of output per year to acquiring gold - an amount equal to approximately \$305 billion. These findings are significantly less than those cited by the gold standard's critics, and suggest that the resource costs of a gold standard are substantially less than is commonly recognized.

Keywords: Gold Standard, Monetary Rules, Resource Costs

JEL Classification: E42, F33, N10

Suggested Citation

Cutsinger, Bryan, Estimating the Resource Costs of a Gold Standard (April 10, 2019). Available at SSRN: https://ssrn.com/abstract=3157678 or http://dx.doi.org/10.2139/ssrn.3157678

Bryan Cutsinger (Contact Author)

Angelo State University - Accounting, Economics and Finance Department ( email )

San Angelo, TX 76909
United States

Texas Tech University - Free Market Institute

Box 45059
Lubbock, TX 79409-5059
United States

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