This is the Cato Daily Podcast for Friday, February 8th, 2008. I'm

Caleb Brown. How and why would the United States ever return to a gold standard?

Could the US do it without also convincing other countries to go along?

And for those who would just as soon get rid of the Federal Reserve, could the gold standards set the stage for a return to free banking where money is just another good in the marketplace.

Lawrence H White is author of a new Cato briefing paper, is the gold standard still the gold standard among monetary systems. It was released this morning.

You yourself note that one of the most compelling criticisms of a return to the gold standard by the United States is that many of the

benefits would not be realized if the US moved to it unilaterally. What do you

mean by that? Well one of the virtues of the classical gold standard was that it was an international gold standard, which meant that you could take, as Keynes put it you could take your coined wealth on your person to a foreign country and

They would happily accept it so you didn't have the problem of floating exchange rates you didn't have the problem of floating exchange rates, you didn't have the problem of having

to change money at the border.

So having a unified monetary system that covered all the advanced countries was one advantage.

And the second advantage was by having so many countries on the gold standard, the demand

for gold was mostly a monetary demand or a transactions demand, which made the purchasing power

of gold more stable. Today, gold's been demonetized and we see its price bouncing around dramatically

from week to week. that didn't happen when

gold was money.

And so if just the U.S. went back on the gold standard, I fear that the purchasing power of gold would still be subject to this speculative buffeting.

It would help stabilize the demand for gold if lots of countries adopted it at the same time or together.

What would be the impact of an international gold standard on inflation

versus deflation and its impact on savers versus spenders.

Well we can look at the historical record of inflation under the gold standard

and we see that the price level wasn't perfectly stable, but it was more stable than it has been since the end of the gold standard, certainly since the end of World War II.

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