If you want a gold standard, it's easier to set bank's reserve requirement to 100%.

Context: This was a comment in a video telling how government actions influence monetary inflation.

Question: Is the statement true?

P.S.: Please, give a source to the answer.

  • 1
    $\begingroup$ You could search on the internet for the “Chicago plan” or”full reserve banking.“ Full reserve banking is obviously not the same thing as the Gold Standard, since governments are not forced to keep their currency at a certain parity to gold. $\endgroup$ – Brian Romanchuk May 3 '20 at 22:46
  • $\begingroup$ If you want gold standard, the heart must have what it wants. But how do you measure how "easy" setting bank reserve requirements? What exactly are you asking here? $\endgroup$ – Giskard May 4 '20 at 19:45
  • $\begingroup$ Also... are you outsourcing a Youtube comment war to this SE? $\endgroup$ – Giskard May 4 '20 at 19:45
  • $\begingroup$ @Giskard I can't understand the confusion my question provoked. $\endgroup$ – Oshio May 5 '20 at 6:19
  • $\begingroup$ @BrianRomanchuk seems to have understood my doubt, "Chicago plan" and "full reserve banking", were a good keywords for searching at google. $\endgroup$ – Oshio May 5 '20 at 6:19

Examine this statement:

If you want a gold standard, it's easier to set bank's reserve requirement to 100%.

The only sense in which this is true is that it eliminates fractional reserve lending.

However, a key defining characteristic of the gold standard is that government-issued money can be converted into gold upon demand. This creates a real constraint upon government fiscal policy. Having a 100% reserve requirement does not imply such a constraint on government policy, the currency can be a fiat currency.


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