Nouriel Roubini: Gold Standard Will Not Work
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Economist Nourial Roubini said that the a gold standard would make business cycles more extreme and make it impossible for central banks to fight inflation or deflation.
The idea of a gold standard for the global economy would also in Roubini's opinion would do nothing to combat unemployment.
"A fixed exchange regime, even if it is not a gold standard… that world just doesn't work. Because in that world, monetary policy by definition instead of being countercyclical becomes procyclical," Roubini said in an interview with NetNet. "Suppose you have a fixed exchange rate regime...it just exacerbates the business cycle."
Roubini stands by the idea that a fixed rate regime or gold standard would limit the flexibility that central banks can implement to improve a nation's economy in fundamental ways.
He added that the fixed rate regimes block the ability of banks to provide when necessary lending to an economy as a last resort.
"When you had a traditional gold standard, boom and bust with severe swings in economic activity were the norm—really big ones. It was only once we moved to fiat money that central banks were able to smooth the business cycle, and make it less volatile, as we did during the financial economic crisis," Roubini said.
The idea of a gold standard for the global economy would also in Roubini's opinion would do nothing to combat unemployment.
"A fixed exchange regime, even if it is not a gold standard… that world just doesn't work. Because in that world, monetary policy by definition instead of being countercyclical becomes procyclical," Roubini said in an interview with NetNet. "Suppose you have a fixed exchange rate regime...it just exacerbates the business cycle."
Roubini stands by the idea that a fixed rate regime or gold standard would limit the flexibility that central banks can implement to improve a nation's economy in fundamental ways.
He added that the fixed rate regimes block the ability of banks to provide when necessary lending to an economy as a last resort.
"When you had a traditional gold standard, boom and bust with severe swings in economic activity were the norm—really big ones. It was only once we moved to fiat money that central banks were able to smooth the business cycle, and make it less volatile, as we did during the financial economic crisis," Roubini said.
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