Gold has played a major role
in the history of money and
monetary policy. With the
abandonment of convertible
money and the adoption of fiat
money, the integral role of gold in monetary
policy disappeared. Nevertheless, there continue
to be proposals to bring gold back into a
more prominent role in monetary policy.
These proposals essentially take two tacks.
One argues that governments should readopt
convertibility of currency into gold. The second
argues to retain fiat money, but to use the
price of gold as an early indicator of changing
price pressures. Both of these proposals imply
an enhanced role for gold in monetary policy.
This article examines both proposals.