Gold in the international arena: how automatic is international adjustment?
While to the layman the idea of a modern day "gold standard" conjures up images of gold coins and bullion hidden in the crypts of Fort Knox "backing" the value of the American currency, to students of international economics, the connotation of a gold standard is quite different. To the latter, the gold standard is merely one of several alternative systems of international monetary adjustment— a system for settling, and ultimately correcting, payments imbalances in a country's international accounts. However, given the key role of the dollar in international trade (dollars are used in over 70 percent of all international transactions), it should be obvious to anyone, whether layman or international financier, that any unilateral move by the United States towards a gold standard would have dramatic implications for the international monetary system. This suggests that any judgment on the merits of such a move must take into consideration its international impact.