What is wrong with returning to the gold standard?

Question

It makes perfect sense to me. The whole country is living on credit right now. Why not try living on what we have in the bank?

It doesn't work for corporations, it works fine for people.

Answer 1

Go ahead and try living on what you have in the bank. Good luck.

Without the federal reserve this country would not be the powerhouse in the global world that it is.

Try to think of it this way, How many business were started up based upon credit? How many billions of dollars would we lose in our economy if all currency was backed by gold? Would you be able to purchase a modest $100,000 home w/o credit? Do you have the skills to build your own home?

It wouldn't work for corporations or people. Think of the large number of people who own there own small business. Just go out and take a stroll around your town. You see Bob's pizzaria, I can gurantee you that restaurant initially started on credit. How about Joe's Hardware? Not to mention all of the home based businesses. Our economy thrives when people spend money, you place a gold standard on all currency people would be spending less, and less. Therefore more people would be losing there jobs as the company they work for isn't bringing in the money they once were. People wouldn't spend $100 on a pair of jeans. How many people are employed by the GAP?

Answer 2

Well even if we wanted too, we cant. There isnt enough gold in existnce to match the current money supply. So the only way to do that is to devaliue the dollar by a ton. Instead of $800 or so an ounce of gold, wed have to make it somewhere on the order of $8000 per ounce of gold, by cutting the current money supply to about a tenth of what it currently is. This would instantly create hyper inflation if we did this.

And money would still be in the bank, and the money supply would still grow, but it would grow on pace with gold which historically grows along with economic growth. Furthermore, how does going to a gold standard effet how much credit is borrowed or not? We would still have money and banks, just the money would represent a unit of gold. They had credit while we were on the gold standard. The trade deficit and low savings rate have more to do with a tax policy that tripple taxes the returns on savings, and thus incentivses more consumption then savings. This is one of the big reasons why we have a trade deficit. There is large investment demand in te country because of the need to produce for consuption, but the savings are not there, so savings have to be borrwed from foreign nations.

Gold also doesnt work as well as a satble currency as it used too, because a larger proportion is used as a commodity now in jewlery and electronics, so its value would fluctuate more with the turn of the business cycle.

Furthermore, a gold standard only works when all other countries do it too. Otherwise, the change in price of gold vs the current dollar will just be a volatile swing between the gold backed dollar and other currencies causing massive and frequent changes in trading patterns make the international economy not able to work.

Answer 3

There is nothing wrong with returning to the gold standard. It is a very good idea, though many who do not understand the system will say otherwise.

Having a dollar that is not backed by anything allows the government to print out as much money as they want whenever they need it. This causes extreme inflation and is the reason why our dollar is currently failing on the world scale. If our dollar is again backed by gold, then it will again be stable and our economy will reverse this downward spiral that it has been launched into by the government printing out money that is worth nothing.

Answer 4

It would not must be a surest. in certainty competing currencies based one in all those distinctive commodities or perhaps baskets of commodities will do. Inflation isn't under administration. If it replaced into it could nevertheless value .05 cents for a bottle of coke and not a million.50. on account that 1913 the U. S. considerable economic corporation has robbed each and every American of ninety 8% of their paying for potential. From 1900-1920 gold merely went up a pair of pennies. besides that background PROVES fiat constantly fails. what's very risky is that now the U. S. dollar is the Reserve forex of the worldwide and is fiat. How can human beings being robbed of a million-3% if their money be a solid difficulty? Its theft.........

Answer 5

The gold standard has its own set of problems, including concentration of wealth and diluting the gold with lead or other alloys. The Populist movement promoted the silver standard as being more beneficial to the common man. The other problem with returning to the gold standard is that it is probably impossible without a major readjustment of the gold price or the dollar price.

Answer 6

The one thing our government has learned by history, to fund wars...you need a fiat currency in which there are no checks and balances, but you have to make people think that the currency has value.
If we were on a Gold standard, It would make our government adhear to the peoples wishes and limit thier spending abilities, so America would benifit greatly with a gold standard, the USA would just not get a blank check to police world.

Answer 7

Where are we going to get enough gold? Just imagine all the copper and zinc coins painted gold. You can see the problem, right there. And to fool the ones who know something about WEIGHT, they'd paint lead! The gold standard had all these problems and more back in the day. I seen no reason to believe it would be any better now.

Answer 8

#1) we have much less gold then the size of our economy in real dollars. So it would be a depressed economic state.
#2) If we go back to the gold standard other countries would demand our gold which would collapse the dollar further

Answer 9

Gold's value is very volatile - over just the last four years, its value has swung from a low of $395/oz. to a high of around $840. Basing our monetary value on that would result in similar fluctuations in the value of the dollar.

Answer 10

It isn't practical to return to the "gold Standard" for our financial system. Think about how much gold would have to be stored and where in the world could you keep that amount of gold.