By George D. Watkins
Several countries of the world have bullions in gold stockpiles or deposits, as a backup to their respective economies. The United States of America, Britain, China, and even the IMF have bullions in gold reserves.
Economic pundits have termed the use of gold bullion in economic monetary maneuverings and backing as the gold standard monetary system. The gold standard is a monetary system where a country’s currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold.
Against this backdrop, the Speaker of the 54th Legislature, House of Representatives, Dr. Bhofal Chambers has introduced a debate for economic pundits to discuss the possibilities for Liberia to adopt a gold bullion economic mechanism, aimed at strengthening the Liberian dollars and keeping inflation under significant control.
At current, Liberia practices a foreign reserves deposits control mechanism, and the export of raw materials to international markets to attract foreign currencies, and backs its reserves in local and foreign banks.
However, Speaker Chambers believes as he intones in several of his discussions with bilateral, multilateral, and even some state actors in Liberia, about the consideration of the country to adapt to the economic practice of having significant gold bullion in its bank vaults as a back-up to its monetary regime and economy.
Speaker Chambers has however divulged, that are many countries of the world who practiced dual economic monetary policies, where they have bullions in reserves to back their respective economies, whilst they practice the concept of balance of trade which supports inflows of other currencies and cumulating to having their respective currency reserves.
It is believed, evident by the success story of some low-scale and industrial gold mining operations in Liberia, that the country has a record amount of gold in several mines, creeks, streams, hollow waters, and forest lands across the country.
The outcome of a Major Currency Backed by Gold
Lower Inflation: Without the ability to print money and expand the money supply, inflation is likely to be lower. Low inflation is often put forward as the main virtue of the gold standard. It is argued this can give greater stability in the economy encouraging investment and growth.
Deflation: The problem is that if there is a limited expansion in the money supply and an overvalued exchange rate, an economy could easily end up with deflation. Most modern economies see significant growth in the money supply during a period of economic expansion.