A Pure Gold Standard Provides a Stable Monetary System, Far Superior to the Current System Based on Discretionary Central Banking and Fiat Money

A “pure” gold standard is defined as a monetary system wherein all monies, including banknotes and demand deposits, are backed 100 percent by gold. This is quite distinct from a gold exchange standard, which is based on a fractional reserve banking system tied to a fixed price for gold. The gold exchange standard, which existed prior to 1971, proved to be unreliable and incapable of preventing monetary crises. But a 100 percent reserve commodity standard would be a vast improvement over the gold exchange standard. Based on both historical evidence and the unique properties of the yellow metal, I demonstrate that a pure gold standard provides a remarkably stable monetary system, far superior to the current precarious system based on discretionary central banking and fiat money.

--Mark Skousen, preface to the third edition of Economics of a Pure Gold Standard, 4th ed. (Irvington-on-Hudson, NY: The Foundation for Economic Education, 2010), Kindle e-book.