Because each currency is pegged to a fixed quantity of gold, triangular arbitrage fixes all bilateral exchange rates between gold-standard currencies; maintaining that peg requires adjusting domestic monetary policy, so a country cannot run an independent monetary policy without violating the standard or triggering gold flows.

causalpending

Speaker

Douglas Irwin

Evidence Quote

by sort of triangular arbitrage it implies something about the the price of pounds in terms of the price of dollars

Source

Douglas Irwin on the Great Depression and the Gold Standard 10/11/2010EconTalk
Created: 6/15/2026, 9:36:56 AM

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