Return to Gold?

Richard Grossman has an interesting op-ed piece in the Los Angeles Times on why the US should not return to the gold standard - click here.  The Free Exchange blog at the Economist also has a post on the gold standard. I have recently been examining the financial crises which occurred in the UK in 1837, 1857, 1857 and 1866 for my new book. On each occasion, whenever one of these financial crises occurred, the Bank of England had to increase its interest rate (known as the bank rate), sometimes as high as 10%.  Why did they do this in the middle of a crisis?  Shouldn't interest rates be cut in a crisis?  The answer is simple: the gold standard meant that the Bank had to increase its interest rate to prevent gold draining from it and the country.

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