...about the gold standard. I was surprised she decided to do this topic, and when she sent me a draft of it I was quite surprised how much she had learned.

But after World War I came the Great Depression. Country after country abandoned gold standard after the Depression. During World War II the allies held a meeting at Bretton Woods, N.H., to establish that the dollar was fixed to gold and everyone fixed to dollar. But that ended in 1971 because the United States didn�t want to play by those rules either.

I asked [St. John's economics professor Louis] Johnston if the gold standard made sense for today, and he argued that it would not. �Governments have no better sense of what a currency �ought� to be than anyone else, so there is no case to give a government a monopoly in this area. Let markets determine what the value of a currency will be.�

It turns out the value of our currency is not assured by government promising to convert money to gold. Instead, it depends on government doing those things that a gold standard would require. If we have the gold standard and no discipline, it fails. If we have the discipline, we don�t need a gold standard to tell us what our dollar will be worth 20 years from now.

Do we have that discipline now?

See also, as always, the Concise Encyclopedia of Economics.

Labels: economics, money