The United States Should Return to the Gold Standard

My CaseC1: Stability and GrowthI will tackle deflation/inflation later, but my opponent forgets that the gold standard leads a full faith in the currency when it is backed by something rather than nothing. The current fiat system has been a disaster, largely caused neo-mercatilist politicians. Under a gold standard, real money means real prices no matter inflation or deflation:"Sound money via a gold standard would mean that median incomes would once again rise in real terms. When you have fiat money, as we've discussed, prices go up and real salaries go down. You're getting paid in money that is worth less and less." [4]The value will remain constant, so investors know what their returns will be more efficiently with a gold standard. We shouldn't forget, after all, that one of the benefits of gold stability is an accountable government:"Gold makes governments accountable. Having to maintain a stable monetary value makes it harder to turn on the printing press to pay for political promises or to buy votes. Governments have to turn instead to borrowing and higher taxation, actions that require popular support. In other words, gold discourages the profligacy possible with fiat money by assuring that spending has consequences." [4]My good friend debating me here has a great interest in social issues. I know 16k well, so I'm sure he knows gold keeps stability by having less crime. Under fiat money there is more crime because of inflation:"Inflation has actually been found to have a stronger connection to crime than joblessness. One study by German and American researchers found that inflation had far and away the greatest effect on property crime, greater than variables like manufacturing employment." [4]There is inflation today as a result of three primary economic variables and that CPI can have its problems: C2: HistoryConsidering that the UK went on the gold in 1717 and the Industrial Revolution didn't happen until 1760, we can conclude the growth between that time was directly from their gold standard. In addition, Spain itself was a state didn't fall as the result of the gold standard, but because of its institutions. Spain's property rights were quite wrong, as Glenn Hubbard and Tim Kane have found, because they support a centralized monarchy and excluded people of other religions. [6]As I have cited before, real GDP growth during times of the gold standard was, on average, higher than it was after the gold standard. This is the data from Herman Cain and Rich Lowrie and I will repeat it here:Classical Gold Standard (1873 to 1913): Real GDP growth 3.7 percentBretton Woods system (1947 to 1967): Real GDP growth 4.1 percentNo Gold Standard (1971 to 2010): Real GDP growth 2.8 percent [1]I have also proven earlier the same thing with real median income numbers, in which growth was higher before the gold standard was taken off. This proves that the periods of the gold standard were better than after it. My opponent uses the returning soldiers from the Civil War as the primary reason for industrial progression during the later half of 1800s, but my numbers are already well after the Civil War (eight years to be precise). For other real GDP growth numbers we can go to Samuel H. Williamson, an economist at the University of Illinois in Chicago and president of MeasuringWorth.com, where historical economic data is collected. The five year post-Civil War period (1865 to 1870) saw real GDP growth of 1.30 percent, but from 1873 to 1913 growth was 3.73 percent. Under Bretton Woods we have 4.13 percent growth and after it with the eliminate of the gold standard there was 2.88 percent growth. [2]Since Civil War soldiers obviously returned to work in less than a few years, we see the years after the Civil War did not enjoy economic growth, therefore the end of the Civil War did not cause massive economic growth. What did was the confidence of investors under a stable dollar.My opponent cites Paul Krguman, who shows banking panics during the time of the classical gold standard and argues that as an example of why the gold standard would not work. However, newer information has debunked this argument. The economic historian Brian Domitrovic tackled every single one of these banking panics and found that they were not caused by the gold standard: 1873: "Certainly not in 1873, when the United States was still contemplating returning to the gold standard that it had abrogated in the civil war the decade prior." [3]1884: "1882-86, yearly growth came in 5.3%, 2.8%, -1.6%, 0.3%, 8.1%. Growth over the five-year period, with 1884 at the mid-point: 9.6%. By the end of the decade, the 1880s, further 28% growth (6.2% per annum) had been tacked on. For there to be a “major financial panic,” economic growth must take a substantial and sustained hit—as in the years after 1929 and our own cherished post-2007 era. Here we have a modest trough bounded by good growth before, and epic growth after. Take 1884 off the list." [3]1890: "Saying that there was a panic in 1890 is weird, in that growth was some 9% that year." [3]1893: Briefly, 1893 was primarily cause by fiat money since a few years before the government launched a massive fiat monetary expansion and a 50 percent increase in tariffs. This caused a bubble which burst in 1893. The U.S. didn't embrace the gold standard, it damaged it and that is what caused the recession in 1893 by not sticking to sound money. [3] 1907: The result of cornering copper in the market, nothing to do with the gold standard. [5]The Great Depression (1930-33): Steve Forbes and Elizabeth Ames have written: "Hogwash. The Great Depression was the tragic consequence of the Smoot-Hawley Tariff Act enacted by the United States in June 1930. Equity marketys try to anticipate the future. This dreadful legislation was unprecedented, imposing an average 60% tax on over 3,000 imported items. When it appeared that a destructive tariff of historic proportions might pass Congress, the stock market cracked and then crashed in September-November 1929." [4] In the end, my opponent argues that today economies are more complex in a modern world, but this doesn't prove any case because during the gold standard trade was growing and the world was continuing to be explored. The world was already globalized by the time of Bretton Woods anyway. Economics is based on the study of human actions through scarcity, production, the transfer of wealth, consumpton as well as the rules of supply and demand. This does not change no matter what era the world is in, they will always be there. My RefutationsR1: The Gold Standard is deflationaryI've refuted the gold standard and the Great Depression in C2, so I won't address that here, but I will address that deflation isn't a bad thing as some people might think. Robert P. Murphy of the Ludwig von Mises Institute writes:"One could construct an analogous argument argument for the computer industry, in which the government passes regulation to slow down improvements in operating systems and processor speed. After all, how can computer manufacturers possibly remain viable if consumers are always waiting for a faster model to become available? What consumer would be foolish enough to spend money on a laptop when it will be obsolete in six months? The solution to this paradox, of course, is that consumers do decide to bite the bullet and buy a computer, knowing full well that they would be able to buy the same performance for less money, if they were william to make." [7]If anything, deflation doesn't encourage hoarding, but instead saving if consumers really do delay buying items. By saving, the loan capacity is expanded and businesses can buy more items to drive the price lower. Businesses would continue to expand because they know consumers will eventually buy. After all, there's no point to holding out for lower prices, but never actually buying.R2: ImpracticallityMy opponent's first argument seems to say that there isn't enough gold in the world. Lawrence H. White of the Cato Institute responds:"At a market price of $1,700 per fine troy ounces (to choose a recently realized round number), those holdings are worth $444.6 billion. Current required bank reserves (as of October 2012) are less than one fourth as large, $107.3 billion. Looked at another way, $444.6 billion is 18.4 percent of the current money supply measure “M1” ($2,417.2 billion as of October 22), which is the sum of currency in circulation and checking-account balances. That is a more than healthy reserve ratio by historical standards." [8]Forbes writes:"You don't need to have piles of a precious metal for a gold standard to work. Even during the heyday of the classical gold standard, no country ever had 100% gold back for its money." [4]Sources1. Cain, Herman, and Rich Lowrie. 9-9-9: An Army of Davids. Herndon, VA: Velocity ; Mascot, 2012. Print.2. http://www.measuringworth.com...3. Domitrovic, Brian. "The Gold Standard Had Nothing To Do With Panics And Busts." Forbes. Forbes Magazine, 19 May 2014. Web. 16 Feb. 2015.4. Forbes, Steve, and Elizabeth Ames. Money: How the Destruction of the Dollar Threatens the Global Economy--and What We Can Do about It. N.p.: McGraw-Hill Education, 2014. Print.5. http://en.wikipedia.org...6. Hubbard, R. Glenn., and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013. Print.7. Murphy, Robert P. The Politically Incorrect Guide to the Great Depression and the New Deal. Washington, DC: Regnery Pub., 2009. Print.8. White, Lawrence H. Recent Arguments against the Gold Standard. Washington, D.C.: Cato Institute, 2013. Cato. The Cato Institute, 20 June 2013. Web. 16 Feb. 2015.