Baker Institute expert: Return to gold standard could induce a ‘damaging level of deflation’

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David Ruth
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david@rice.edu

Jeff Falk
713-348-6775
jfalk@rice.edu

Baker Institute expert: Return to gold standard could induce a ‘damaging level of deflation’

HOUSTON – (Feb. 25, 2016) – Of the remaining GOP presidential candidates, only John Kasich and Marco Rubio have rejected the idea of a return to the gold standard, a monetary policy that was abolished by President Richard Nixon in 1971. Is the United States better off linking its money supply to a global commodity market or allowing an independent central bank to respond to economic conditions?

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Russell Green, the Will Clayton Fellow in International Economics at Rice University’s Baker Institute for Public Policy, said that whether based on theoretical or historical comparisons, the gold standard appears less likely to deliver price stability than the current system.

Green is the author of a new issue brief titled “Gold Standard or Fool’s Gold? Should the U.S. Consider Returning to the Gold Standard?” He is available to discuss the current debate surrounding the gold standard.

“We are much better off adjusting money supply according to economic conditions than anchoring it to the whims of a global commodity market,” said Green, an adjunct assistant professor of economics at Rice and former U.S. Treasury Department official. “If gold markets were perfectly stable, the gold standard would likely induce a damaging level of deflation because new gold is mined at a much slower rate than the global economy grows. But with China and Russia being major producers, we cannot count on stable markets.”

For more information or to interview Green, contact Jeff Falk, associate director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.

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Related materials:

Issue brief: http://bakerinstitute.org/research/returning-gold-standard-fools-gold.

Green biography: http://bakerinstitute.org/experts/russell-green.

Founded in 1993, Rice University’s Baker Institute ranks among the top five university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog.