Is there enough gold to return to a gold standard?
The “Ron Paul” debate around a return to a gold standard is being revisited after the US Republican Party called for a commission to look at such a system. But there may be too little gold to restore the gold standard, says UBS economist Paul Donovan.
With a gold standard, the regulatory scheme exchanges paper currency for gold at a fixed conversion rate, which would effectively put a set price on the dollar tied to gold. Fans say this would increase confidence in the currency by tying it to something that is in finite supply, thus hobbling the ability of central bankers to create debt-based money at will.
Amid the chorus of opposition to the gold standard, the argument that there is simply not enough gold to do this is well-aired. But that’s not quite the full story, according to Paul Donovan, an economist at UBS.
From The Telegraph UK –
“More accurately, the supply of gold is not growing fast enough,” he says. “This is the fatal flaw.”
