Economists debate gold standard on the New York Times website

Inclusive Economy11 Nov 2010Evert-jan Quak

A discussion on the gold standard has started on New York Times website, following an opinion piece by the World Bank director Robert Zoellick that suggested reinstating the importance of gold for the global economy. Unanimously, the academics participating in the discussion denounce the re-introduction of the gold standard as a viable strategy to limit currency fluctuations. And it turned out that this was not what Mr. Zoellick meant. He just wanted policymakers to recognize the great importance of gold prices for their currencies.

Jeffrey Frankel interpreted correctly that Zoellick was also referring to the changing role of the dollar as a worldwide reserve asset. He argued that instead a system of several reserve currencies will arise, probably with the Euro, Japanese yen, English sterling and Chinese renminbi. Russell Roberts states in his contribution that although central banks should not be constrained by the gold standard, they are now almost unlimited in their expansion of resources to intervene and bailout careless financial giants. If the world wants to become more prudent with money, setting checks on central banks is an important start, according to Roberts.