Peter Webster Chapter 11 Question 6

I found what he said about the gold standard to be interesting. The gold standard backed up American dollars in gold. A good thing about this was that it provided exchange rates that were consistent and predictable. The government couldn't print new money unless it had enough gold to backup the currency. The problem is that when money is backed by gold and it has a problem like in the Great Depression, foreigners want gold instead of money. Then the government has to increase interest rates, although that is the opposite of what people need during a depression. So the gold standard is no longer in use as it failed during the Great Depression.