Consequences of a Dollar Standard
by Christopher Mayer (von Mises)
gold-eagle.com
Since the end of the Bretton Woods agreement in 1971, the dollar has been an irredeemable currency, no longer defined or measured in terms of gold. Nonetheless, in an ironic twist, it has become the world's dominant currency and the core reserve asset of central banks all over the world. It has replaced gold as an international currency.
The transformation has not happened without consequences. One of these is that the discipline imposed by the gold standard is no longer operative. Another consequence, related to the first, is the profound effect this has had on international trade.
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Gold is the best money, because for centuries, as a result of countless individual choices, it has evolved as such. It was not imposed on the market by force, but was cultivated in the soil of the market itself. It grew naturally in the open air of voluntary exchange, not in a cloistered greenhouse of government fiat.
Though the old classical gold standard was not perfect, it was, in Rothbard's words "by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange and investment."
There is not much more one can ask from a currency.
/ jim |
