Summary version: Implementing gold is a bad idea, and history has shown why.http://www.theatlantic.com/business/arc ... ay/265696/
Why do bad things happen to good economies? In other words, why do countries that do what they "should" sometimes fall behind countries that don't? The question answers itself. There's a time and a place for orthodoxy, and forgetting that fact usually ends poorly.
Great Britain and France took turns learning this lesson in the 20th century, during the interwar period. It doesn't get much more unorthodox than the aftermath of wars and depressions. Setting aside the unprecedented human catastrophe, World War I left both countries with a legacy of high inflation and high debt. Britain was determined to return to the status quo ante and to return almost immediately, which meant bringing back the gold standard and bringing it back at its prewar exchange rate. France took a more laissez-faire attitude about turning the economic clock back to 1913.
This was a disaster for Britain, and, well, not a disaster for France. Returning to the gold standard at its prewar parity, which Britain did in 1925, meant pushing prices down to where they had been before years of high inflation -- in other words tight money and tight budgets. And that meant high unemployment and high debt due to miserable growth. In contrast, France kept the franc free floating, and, boy, did it ever float ... down, that is. This massive devaluation pushed prices up, which in turn pushed war debts down, in real terms.
There was also this:
Ideas have consequences, especially when it comes to economics. Britain crucified its economy in the 1920s on a cross of gold; France did so in the 1930s. Today, the Fed has ignored destructive calls to raise rates in the face of high unemployment and low inflation because zero rates just seem perverse, but fiscal policy is where bad ideas are a threat.