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<p>[QUOTE=&quot;Cloudsweeper99, post: 88189, member: 3011&quot;]There aren&#039;t many people around anymore who understand how the old gold standard worked.&nbsp; First of all, gold flows were largely regulated by interest rates, not exchange rates.&nbsp; Gold didn&#039;t really have a &quot;price&quot; in the sense that the dollar today is priced in Yen or Euros.&nbsp; Gold traded on weight and interest rates.&nbsp; This made it totally unnecessary for the government to intervene and confiscate gold.&nbsp; The other myth is that countries could benefit by setting the &quot;price&quot; of gold in their own currency.&nbsp; This is the old mercantilist theory of trade that basically was totally discredited long before the 20th century.&nbsp; So the normal and easiest way to stop an outflow of gold was to raise interest rates on gold-backed bonds.&nbsp; Since gold is traded as a weight and gold is gold regardless of the currency it is denominated in, gold would flow toward the highest interest rate per ounce.&nbsp; So the &quot;normal&quot; way to stop a gold outflow and restore the balance of trade was to let interest rates increase, not confiscate gold and stop imports.&nbsp; If rates per ounce were higher in London, gold would flow out.&nbsp; If rates were higher in New York, gold would flow in.&nbsp; Under normal circumstances, the rates fluctuated in a narrow band which accomodated the normal flow of goods between nations to achieve a balance.&nbsp; There was an old saying at the time that &quot;6% rates will draw gold from the Moon.&quot;&nbsp; And in practice the rates generally fluctuated between 4% and 6% for decades in Europe and North America, keeping trade and exchange rates under control within a free market framework.&nbsp; Somehow everybody always thinks that everybody else forgets how the process worked before actually understanding it themselves.&nbsp; But it&#039;s a free country and we aren&#039;t on the gold standard so there is probably no harm in believing whatever makes one comfortable regardless of whether it is grounded in fact or myth.</p><p><br /></p><p>What it boils down to in the end is that some people believe in free markets and others are more comfortable with the thought that government intervention in markets will improve the process, even if it involves the taking of assets by force &quot;for the good of the nation.&quot;&nbsp; I think Speedy is on the right track with his investigations.[/QUOTE]</p><p><br /></p>

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