What are the disadvantages and advantages of the gold exchange standards?
1) An international gold standard has both positive and negative
attributes. Currencies that are backed by gold maintain very stable
exchange rates over long periods of time. This encourages
international trade and investments, which help the global economy
grow. A gold standard also creates a situation in which any errors
in exchange rates are automatically corrected by the movement of
gold. In addition to these advantages, the gold standard is also a
good defense against inflation. Backing currency with gold is a
great idea but a true gold standard is not plausible, the amount of
gold being minted today is not enough to keep back our currency
100%. It would lead to insufficient international monetary
reserves, which would hurt world trade and investment, and even
cause global deflation. Also, the rules of the gold standard can
not be strictly enforced with can cause problems.