Disdvantages of Gold Standard

Gold standard is an expensive affair and the expenditure is superfluous. We merely desire a standard of exchange; why must it be prepared of gold? It is sumptuousness. The golden metal might entertain the visualizing of savages only.

The disadvantages of gold standard can be summed up as under the following sub heads:

(i) (ii) Not steady in Value. Even the price of gold has not been established to be completely steady over extensive durations.

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(ii) Not Elastic. According to the gold standard, money can’t be stretched in reaction to the necessities of trade. The supply of money relies on the availability of gold. But the availability of gold relies on the accomplishment of the mining procedures which might have nothing to do with the aspects touching the development of trade as well as industry.

(iii) No Longer mechanical. In recent times, even the gold standards have been a controlled standard. The core banking system has been functional on purpose to be in command of the functioning of the gold standard. It is as a consequence no more mechanical as it was stated to be.

(iv) Gold standard has also been blamed with surrendering inner steadiness to exterior (exchange) constancy. It is the global feature of the gold standard which has been paid additional consideration to.

(v) Yet another disadvantage of gold standard is that "the movements of gold results in fluctuation in the rates of interest, so that outlay is inspired or ensured exclusively in order to develop or decrease money revenue.

(vi) Self regulating Policy for gold standard is not possible. A nation on a gold standard can’t pursue a self determining guiding principle. So to keep up the gold standard or to re-establish it (as in Great Britain following the First World War), it might have to reduce its currency in opposition to its will. Devaluation brings ruin to the financial system of a country. It spells, in its wake, large scale redundancy (unemployment), work closures in addition to innumerable affliction attendant on depression.