Gold Sterilization

Summary of Gold Sterilization

A governmental policy to prevent the expansion of a nation’s money supply by preventing the accumulation of gold. In the case of a nation on the Gold Standard (read this and related legal terms for further details), a given quantity of gold is represented by a fixed number of units of currency. Augmentation of the national gold stock would permit introduction of additional units of currency into the economy, thereby expanding the money supply. The term gold sterilization is sometimes used by nations not on the gold standard to indicate an unwillingness to acquire reserve assets other than gold, such as foreign currency, for fear of expanding the money supply.

(Main Author: William J. Miller)