Footsteps Toward a Gold Standard

The sustained rally of gold, which started in 1999 and continues unabated, naturally cries out for an explanation. The obvious place to look – recent price inflation in United States – fails however to provide the answer. We argue that the driving force is a broad trend to monetize gold internationally, a trend that would naturally lead to a renewal of a gold standard. If so, we can expect a dynamic transition as gold replaces dollars as the world monetary base. We fix then on the main features of the transition, on the advantages and disadvantages of a gold standard. Lastly, from this perspective we suggest that it would be better for the world to reformulate Bretton Woods, straightforwardly recreating its two-track approach that combined the discipline of a gold standard with the discretionary management by monetary authorities, a modern Friedmanite combination.