Spengler wrote:David Ricardo proposed a gold standard without the need for a single ounce of gold in reserve: the central bank can buy and sell gold in order to keep the purchasing power of the currency constant in terms of gold. Suppose the Fed were to target today’s price of about $1,310. If gold rose, it would contract the money supply until the gold price fell, and vice versa. In practice some combination of a gold reserve and open market operations would be required to keep the gold price stable (all gold price movements are not the result of changes in money supply and the central bank should be able to buy and sell gold as well). Many considerations go into the correct price at which to stabilize gold, but the arithmetic Harper presents is simply irrelevant.
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