I noticed in financial stuff, you'll often hear people say how things were better on the gold standard. While this is usually from the message board equivalent section, you'll occasionally see a respectable publication run an editorial about how we need to go back to the gold standard. I really don't understand why even fairly educated people have obsession with shiny metals. Let's say you have an economy where everyone is on gold standard (if not trading becomes an issue too). You're still going to get trade deficits, i.e. USA probably still buys a lot of stuff from China because labor is cheap there. So if gold is the only thing that has value and you accumulate a deficit, what's stopping the other country from trading your money back to gold? But since you can't produce more gold, there's a point where you'll eventually run out of gold, and by defintion at that point your money is no longer backed by gold.
So to avoid this you either don't allow people to trade money back to gold, or you lower the amount of gold you can get back, or you just avoid trading. The first two is basically the same as having a floating currency anyway since you're essentially redefining what the value of currency is. The third option would probably suck in terms of quality of life. I guess gold standard works if you don't ever plan on trading with anyone else in the world, or that you're only trading people that maintains an exact trade balance of 0 with you (yeah right).
So to avoid this you either don't allow people to trade money back to gold, or you lower the amount of gold you can get back, or you just avoid trading. The first two is basically the same as having a floating currency anyway since you're essentially redefining what the value of currency is. The third option would probably suck in terms of quality of life. I guess gold standard works if you don't ever plan on trading with anyone else in the world, or that you're only trading people that maintains an exact trade balance of 0 with you (yeah right).
