EH.Net Abstracts in Economic History

                ABSTRACTS IN ECONOMIC HISTORY
                     (c) 2003 EH.Net
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Name: Ernst Juerg Weber
Email: eweber at ecel.uwa.edu.au
Institution: University of Western Australia 

Co-author: none

Title: The Misuse of Central Bank Gold Holdings 

Internet Address of abstracted work: not available 

By mail:
Business School (Economics)
University of Western Australia
Crawley, WA 6009
Australia

Language: English

Abstract:
Although the gold standard era has long passed, central banks continue to
hold large quantities of gold. Why do central banks invest in gold at great
economic cost? A popular view holds that official gold reserves make a
currency more secure. In this paper it is demonstrated that this argument
goes astray by applying principles that were true under the gold standard
to the modern monetary system. The operation of the historical gold
standard is reviewed and it is shown that gold reserves, and other real
asset holdings (real bills doctrine), do not prevent the central bank from
inflating in the modern paper standard. Central bank gold holdings, far
from being an innocuous relic, do indeed compromise financial markets and
monetary policy. (There are several printing mistakes in the balance sheets
CB3, P1 and P2. Books that were sold after November 2003 include an erratum
slip that is also available from the author.) 

Bibliography: Weber, Ernst Juerg. 2003. The Misuse of Central Bank Gold Holdings. In: Tcha, MoonJoong (ed.) Gold and the World Economy, London: Routledge, pp 64-80.

Subject: H
Geographical Area: 0
Country/Region:
Time Period: 0

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