Gold Standard

[red65coupe]

I'm only an undergrad but have a question. My professor couldn't seem to answer my question, and I have a feeling she has limited knowledge on the US prior gold standard. my question is: Was inflation of gold ignored at the time by the government with the exchange rate kept at $20.67 per ounce? Or did everyone need to have general knowledge of the fluctuating price of gold to avoid being ripped off if they were to trade their money for gold, as well as prices at stores constantly changing? And were there any kind of controls put in place to control inflation/deflation of gold?

[vonHayek]

The short answer is, they didn't.

For a better understanding as to the why I suggest a reading of "Gresham's law." (warning: wiki link because it's late and I'm lazy)

This is more popularly referred to as "Bad money drives out good." Though this is, at best, an overly simplistic representation of Gresham's thesis.

I strongly suggest reading beyond my lazy wiki link if the subject interests you.

Cheers!

Curtis