Violations of the Gold Points, 1890-1908

Abstract

Evidence is presented that the gold standard system was inefficient in two ways. (1) Gold point violations sometimes persisted for long periods indicating that profit opportunities were not always eliminated quickly. (2) Following gold point violations, gold occasionally flowed in unprofitable directions. It is argued that government interference in the workings of the system was a source of these inefficiencies. This suggests that the gold standard did not completely restrict the discretionary power of monetary authorities. If present-day gold standard advocates seek to eliminate discretionary monetary policy, revival of the traditional gold standard is probably insufficient to attain their goal.