Last updated on: 1/15/2013 | Author:

Barry Eichengreen, PhD Biography

George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California at Berkeley
Con to the question "Should the United States Return to a Gold Standard?"

“GOLD IS back, what with libertarians the country over looking to force the government out of the business of monetary-policy making. How? Well, by bringing back the gold standard of course…

Envisioning a statute requiring the Federal Reserve to redeem its notes for fixed amounts of specie [gold] is easy, but deciding what that fixed amount should be is hard. Set the price too high and there will be large amounts of gold-backed currency chasing limited supplies of goods and services. The new gold standard will then become an engine of precisely the inflation that its proponents abhor. But set the price too low, and the result will be deflation, which is not exactly a healthy state for an economy…

Proponents of the gold standard thus face a Goldilocks problem: the porridge must be neither too hot nor too cold but just right. What temperature exactly, pray tell, might that be? And even if we are lucky enough to get it right at the outset, consider what happens subsequently. As the economy grows, the price level will have to fall. The same amount of gold-backed currency has to support a growing volume of transactions, something it can do only if the prices are lower, unless the supply of new gold by the mining industry magically rises at the same rate as the output of other goods and services. If not, prices go down, and real interest rates become higher. Investment becomes more expensive, rendering job creation more difficult all over again.

Under a true gold standard, moreover, the Fed would have little ability to act as a lender of last resort to the banking and financial system. The kind of liquidity injections it made to prevent the financial system from collapsing in the autumn of 2008 would become impossible because it could provide additional credit only if it somehow came into possession of additional gold. Given the fragility of banks and financial markets, this would seem a recipe for disaster. Its proponents paint the gold standard as a guarantee of financial stability; in practice, it would be precisely the opposite.”

“A Critique of Pure Gold,”, Sep.-Oct. 2011

Involvement and Affiliations:
  • George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California at Berkeley, 1999-present
  • Chair, Academic Advisory Committee, Peterson Institute of International Economics
  • Fellow, American Academy of Arts and Sciences, 1997-present
  • Research Associate, National Bureau of Economic Research, 1986-present
  • Research Fellow, Centre for Economic Policy Research, 1984-present
  • Recipient, Distinguished Teaching Award, University of California at Berkeley Social Science Division, 2004
  • Recipient, Jonathan R.T. Hughes Prize for Excellence in Teaching, Economic History Association, 2002
  • John L. Simpson Professor of Economics and Professor of Political Science, University of California at Berkeley, 1994-1999
  • Senior Policy Advisor, International Monetary Fund, 1997-1998
  • Professor of Economics, University of California at Berkeley, 1986-1994
  • Faculty Research Fellow, National Bureau of Economic Research, 1981-1986
  • Assistant and Associate Professor of Economics, Harvard University, 1980-1986
  • Former Guggenheim and Fulbright Fellow
  • Former Fellow, Center for Advanced Study in the Behavioral Sciences
  • Former Fellow, Institute for Advanced Study
  • Education:
  • PhD, Economics, Yale University, 1979
  • MA, History, Yale University, 1978
  • M.Phil, Economics, Yale University, 1977
  • MA, Economics, Yale University, 1976
  • AB, University of California, Santa Cruz 1974
  • Other:
  • Recipient, doctor honoris causa, American University (Paris)
  • Recipient, 100 Leading Global Thinkers award, Foreign Policy magazine, 2011
  • Quoted in:
    Pro & Con Quotes: Should the United States Return to a Gold Standard?