0
$\begingroup$

In Free to Choose: A Personal Statement (Milton and Rose D. Friedman) I read that when a given country economy is developing well then the national reserve of gold is decreasing, while if that country economy is not developing well then the national reserve of gold is increasing.

I do not understand why is it happening? It is exactly opposite of what I expected.

Improve this question
$\endgroup$
3
  • 2
    $\begingroup$ can you provide citation/page from the book where this is discussed. As far as I know Friedman & Friedman discuss gold reserves in relation with monetary policy during Great Depression, not in connection to economic developement $\endgroup$
    – 1muflon1 ♦
    Commented Oct 21, 2020 at 11:23
  • $\begingroup$ I think this needs a quotation as well. “Developing well” is too broad. In a gold standard system, reserve growth normally follows the current account balance, and so trade surpluses lead to an increasing balance. However, it is not obvious why that should be an objective of policy. $\endgroup$
    – Brian Romanchuk
    Commented Oct 21, 2020 at 12:27
  • 1
    $\begingroup$ As @1muflon1 says, your statement does not seem to be in the book. What it does say in Chapter 3 is that during a depression in one country when other countries are still growing, you should expect the country in depression to see its stock of gold increase (its imports would reduce while its exports would increase), and then gives the United States and France as examples. Your statement is rather broader, though would be consistent with a growing economy running a trade deficit when investing in capital goods for the future. $\endgroup$
    – Henry
    Commented Oct 21, 2020 at 17:11

0

Reset to default

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Browse other questions tagged or ask your own question.