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.