Laura Bartz, Chater 11, Question 5

The idea of a gold standard seems fairly straightforward and it makes your currency sound super cool. Finding out exchange rates is much more simplified since all you have to find out is how much of your currency does it take to buy an ounce of gold and the same for the country's currency that you are trying to convert to and then the math is very straightforward. But Wheelan easily points out the massive problem with currency being backed by gold. When the value of the currency starts depreciating at a concerning rate, people immediately demand that the notes that they hold be exchanged for gold. This will then lessen the demand further for the currency and make it depreciate further which turns into a viscous cycle until the currency is worth nothing.