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One of the main selling points of a gold standard is the claim that it holds the line on inflation.

However, what is the track record of the gold standard in the U.S. given the earliest reliable numbers?

From the Bureau of Labor Statistics Inflation Calculator, we see:

  • From 1913 to 1932, while the U.S. was on a gold standard domestically and externally, inflation was 27.5%, or 1.45% annualized.
  • From 1933 to 1970, while the U.S. was on a gold standard externally, inflation was 66.4%, or 1.79% annualized.

We see that going off the gold standard domestically did correspond with higher inflation, but only marginally so.

While low inflation is generally regarded as a good thing, deflation isn’t. What the gold standard didn’t prevent was the massive deflation of 31.5% from 1929 to 1933, which greatly contributed to the annualized inflation rate of 1.45% from 1913 to 1932, instead of the 2.27% it would’ve been if there was no deflation from 1929 to 1933.

That’s significantly higher than the 1.45% annualized inflation from 1933-1970, when the lack of a domestic gold standard, according to gold standard proponents, should’ve pushed inflation far higher.

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