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Message:: [QUOTE="GoldFinger1969, post: 5577916, member: 73489"]The reason gold rose and fell in REAL DOLLARS (inflation-adjusted) is because monetary policy was limited and the adjustment process for exogenous economic shocks (i.e., The Depression or Panics) was INTERNAL and fell on prices and wages. In layman's terms:  when an economic disruption -- inflation or recession/depression -- happens, the economy is like the human body when encountering disease.  It fights back by creating economic antibodies.  These antibodies are falling wages and prices.....a falling currency..... inflation/deflation. If the currency/monetary policy is fixed (Gold Standard, Euro) then the adjustment process can not be through the money supply or currency....it must be accomplished by FALLING wages and prices.  This is an INTERNAL adjustment made at the MICRO level.  An EXTERNAL adjustment is inflation or a falling currency and is done at the MACRO level. But prices are sticky to the downside for wages and prices.  Hence, additional pain and lost GDP output and why flexibile monetary and currency policies don't suffer Lost Decades like those tied to the Euro, Gold Standard, etc. Class Dismissed ! <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie8" alt=":D" unselectable="on" unselectable="on" />[/QUOTE]