Gold Standard

The role of the Gold Standard in the world’s financial circulation is crucial. All of the finances are regulated in correspondence to the policies of the International Monetary System. The Gold Standard is the unit of economic value in the monetary system, which serves as a standard value of correlation towards other economic units. White (2008) writes: “A gold standard leaves the quantity of money to be determined by accidental forces” criticizing the Gold Standard and failure of its’ functions. The Gold Standard has various types, each having a particular function. The defects of these types expose the International Monetary System at risk.

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First, the capacity of economic growth productivity is limited due to the scarcity of the material resources, which the money is backed in. It is also supported by the information that the total amount of the gold valued in 142,000 metric tons is not enough for the purposes of serving as a monetary basis. In such a way the correspondence of the demand for gold may exceed the availability of the metal. In addition, despite the fact that historically this monetary system in a long-run has brought economic stability, in the short-run use of the Gold Standard resulted in unstable price levels. “The purchasing power of money under the gold standard was steadier and more predictable”, however, the high price rangers resulted in the unclear debts values of the creditors (White, 2008, p. 3). White supports the statement saying that “the stock of gold did not grow at a perfectly steady rate during the era of the historical gold standard” (2008).

Although, the main function of the International Monetary System is to ensure satisfactory flow, correct, and maintain the global stability, regulate inflation, and “fascilitate an orderly payments system” (Astrow, 2012, p. 1). The Gold Standard system does not fully satisfy the needs of the International Monetary System, as it lacks the control over the adequate liquidity.

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