Some people support the idea of the return to the gold standard, while others consider it to be completely irrational. The former’s main argument is that if the gold standard is adopted once again, inflation will not happen. The reason for it is that it ensures the amount of gold, which a certain country possesses, restricts the amount of money it can produce. According to Cowen (2019), from 1815 to the beginning of World War I, the age of the gold standard prevented any disruptions, kept the peace, and encouraged economic growth. Many individuals believe that it can protect them from inflation and make them feel more confident about their financial resources.
On the other hand, the return to the gold standard seems impossible in the modern world. The state of the global economy is incredibly complex and involves extremely large amounts of money. Besides, governments would not be able to prevent adverse consequences of economic crises if the gold standard is employed, as they would not be allowed to print more money.
Furthermore, the current lending policies to developing nations practiced by the International Monetary Fund (IMF) create multiple opportunities and threats at the same time. It is noted that “IMF lending aims to give countries breathing room to implement adjustment policies in an orderly manner, which will restore conditions for a stable economy and sustainable growth” (IMF, 2020, par. 3). It means that they decrease trade barriers, encourage investments, and lower competition.
Therefore, the IMF lending policies to developing nations appear to be beneficial for international businesses. However, they can also lead to a serious recession in a developing country unable to stick to the IMF’s requirements; thus, the decline in investments, massive unemployment, and economic instability may occur. It creates an enormous threat for international businesses, which are likely to suffer severely from such outcomes.
References
Cowen, T. (2019). The best argument for the gold standard. BloombergQuint. Web.
International Monetary Fund. (2020). IMF Lending. Web.