The Park Place Economist


David Rasho '01


Throughout modern history and especially in the last century, business cycles, inflation, and banking crises have plagued the world economy. Such problems stand in the way of achieving uninterrupted economic growth; the ideal economic state. Economists versed in Austrian Business Cycle Theory claim to have the solution to these problems. They blame fiat money and fractional reserve banking for the boom-bust cycle, inflation, and financial crises. As a solution, they offer a monetary system consisting of a 100% reserve gold standard. Austrian economists have various solutions such as free banking, but this paper focuses on the 100% reserve gold standard.