Central Banks Return to Gold Standard

Another threat from government would be a credible return to a true gold standard or similar system. If the U.S. were to issue dollars that were 100% backed by gold, the U.S. dollar would become a much stronger currency. The probability of such an outcome is minuscule. It would eliminate active monetary policy, including the Federal Reserve’s ability to set interest rates. It would limit the government’s ability to deficit-spend and therefore curtail politicians’ habit of delivering goodies to voters.

It would also be difficult to credibly execute. Since the U.S. government has already failed more than once to uphold a gold-backed dollar, citizens would rightly doubt its ability to pull off such a feat this time around. Even if the government were able to hold the peg to gold, Bitcoin would still be “harder” money due to gold’s increase in supply of 1%–2% annually. For these various reasons, it appears extraordinarily unlikely that the U.S. or another major country will return to a gold standard or similar system that could credibly compete with Bitcoin.