Word: dollarization
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Dates: during 1980-1989
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Richard Nixon ended the last links between the dollar and gold on Aug. 15, 1971, when he said that the U.S. would no longer exchange American gold for dollars held by foreign central banks. But since that time, inflation and interest rates have reached unimaginable levels, stirring longings for a return to the golden days of yesteryear, when the dollar's value was determined not by man-made policies in Washington but by how much gold it could...
Supply-side theorists argue that a return to gold is an essential precondition for restoring economic stability. Says Economist Arthur Laffer: "We should make money stable by making a dollar bill as good as gold." They maintain that a gold standard would restrict the Federal Reserve's ability to create credit because the long-term growth of money would be determined by increases in the world's stock of gold, which is expanding by only about 2% annually. Thus limiting money growth would create confidence in the value of the dollar, be a blow to inflation expectations...
Most members of TIME'S Board of Economists regard a U.S. return to the gold standard as a distant and potentially dangerous goal. They maintain that such a move would probably force the Federal Reserve to try to make dollars more valuable by holding down the money supply and pushing up interest rates. Such action would, of course, crush businesses heavily dependent on borrowed funds and substantially boost unemployment. The dollar would be under particular pressure whenever conflicts like the Iran-Iraq war caused wealthy Arabs and other panicky investors to seek the safety of the yellow metal. Warns...
Alan Greenspan, a New York economic consultant and sometime adviser to the Reagan Administration, is the board's only gold advocate. He believes that the U.S. can and should reinstate the gold standard if the Government manages to curb rising prices and restore the dollar's sta bility. Says Greenspan: "Once inflation has been conquered, the discipline of the gold standard would surely reinforce anti-inflation policies and make it far more difficult to resume financial profligacy...
...Says Jean Yates, a senior analyst at Gnostic Concepts, a consulting firm based in Menlo Park, Calif.: "It's like having a record player. People buy one record player, but they keep buying records year after year." Currently software takes only between 100 and 150 of every dollar spent on hardware. By 1985 the proportion is expected to rise to between...