Why it will be exceedingly difficult to ever return to a gold standard

The pressure that 20th century governments experienced to sacrifice currency stability for other objectives, such as full employment, did not exist in the 19th century.

Back then, workers susceptible to unemployment when the central bank raised the discount rate had little opportunity to voice their objections, much less kick out those responsible.

Wages and prices were relatively flexible. Therefore, a shock to the balance of payments that required a reduction in domestic spending could be accommodated by a fall in prices rather than a rise in unemployment. This further diminished the pressure on the authorities to respond to employment conditions. Consequently, the central bank’s priority to maintain currency convertibility was rarely challenged.

Now we live in a world where the voters can vote themselves the goodies, and politicians maintain power by promising to dole out those goodies. Indeed, a far cry from the world during the gold standard era.

The above article is written in part by author, Jack Crooks who writes for Money and Markets.com.

Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow