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What are the disadvantages and advantages of the gold exchange standards?

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2008-10-15 17:48:37

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.

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