Gold and DeLong

Economics Economics Questions
1

On DeLong’s site he states:

  • For example, in the spring of 1995 the dollar weakened against the yen. Under a gold standard, such a decline in the dollar would not have been allowed: instead the Federal Reserve would have raised interest rates considerably in order to keep the value of the dollar fixed at its gold parity, and a recession would probably have followed.

Why does the value of the yen influence the fixed price of dollars for gold?

Also how can you use 1995 price fluctuations as a argument against a gold currency that at that point does not even exist?

If the value of the dollar is going down against the yen, does that not mean that there are too many dollars, meaning we are probably in a boom and a raising of interest rates is needed to avoid (not get us into) a recession.

I don’t get it, any help is appreciated.

Site is

http://econ161.berkeley.edu/Politics/whynotthegoldstandard.html

2

This begs the question, why would you have to have the Federal Reserve mucking with interest rates when you have a gold-back currency?

Sure, I could see (I wouldn’t support it, and it’d be stupid) a Central Bank that acted as “lender of last resort”, but it’s purpose wouldn’t extend beyond this.

There’d be a ratio of so many dollars per ounce of gold that would remain fixed, and that would be that.

3

how would the gold dollar have weakened to begin with, bad monetary policy, what monetary policy is the fed pursuing in the first place?

I don’t see the point DeLong is making. If he wants to say that a federal agency is incompetent at managing a gold standard currency, then he’s fighting snakes and thinks he’s taking down dragons. no disagreement here.