In other words, the finances of a deficit country were constrained because they did not have enough gold to go around, while a country with a surplus did not face those issues. In addition, usually the weight of modification falls on these weaker countries, which is another flaw in the gold standard. Because the weaker countries could not react quickly enough to economic problems, they had less capital to invest internally and abroad. Another author notes, "In principle, the free flow of capital across borders makes funds available more cheaply to poor countries and, by lifting investment, boosts GDP and raises living standards" (Author not available). Under the gold standard, capital did not flow freely across boarders of many of these weaker countries. This flaw creates a "deflationary bias" according to another economist. DeLong writes, "Hence a deflationary bias which makes it likely that a gold standard regime will see a higher average unemployment rate than an alternative managed regime" (DeLong). This is exactly what occurred in the United States after the crash of 1929. DeLong continues, "Commitment to the gold standard prevented Federal Reserve action to expand the money supply in 1930 and 1931 -- and forced President Hoover into destructive attempts at budget-balancing in order to avoid a gold standard-generated run on the dollar" (DeLong). When Franklin D. Roosevelt took the office of President in 1933, one of the first things he did was make ownership of gold illegal for the private sector, thereby ending the gold standard. According to economists, this is consistent with more liberal political leadership. Simmons writes, "Governments whose political imperatives are more consistent with low inflation do not need externally applied constraints; tighter monetary policy is therefore more likely when the left comes to power" (Simmons 424). Roosevelt, a Democrat, shored up the economy by switching to a flat money policy, and by that time, just about every other country in the world had done the same thing. The three economists conclude, "The United States was ejected from the gold standard because its macroeconomic fundamentals got...
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