How much gold would you need to back the money supply?
Even when the UK still maintained the gold standard, it did not possess gold enough to back the total money supply.
The economy and the money supply needed to service it are both too large to go back to the gold standard.
I'm not an economist but isnt the total money supply proportional to GDP... the larger the GDP the larger the central bank can make the money supply and retain stability of prices and money value!?
doesnt the Quantity theory of money state that....
money supply x velocity of money = price factor x real GDP
So if GDP is increasing you can increase money supply without creating inflation and price increase, assuming all others factors remain constant.
