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The only thing worse than the gold standard is acting like you're on the gold standard when you're not. /1
Under the classical gold standard countries maintained gold reserves to back their currencies and manage international and internal gold flows. This meant interest rates could sometimes adjust to domestic conditions without threatening convertibility. /2
If you are in a fiat, floating currency regime and start targeting gold or a commodity basket, you don't have reserves of gold or commodities to manage the peg and as a result, interest rates must do all the work. /3
This is a recipe for boom/bust inflation/deflation cycles. /4
And since commodity prices are heavily driven by non-monetary factors - Saudi output, Chinese industrial production - your monetary policy will be overly influenced by global instead of domestic factors. /5
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