The World Should Return to the Gold Standard

Arguments Contention 1: Stable Economy P1: Economic Stability The Gold Standard Promotes Economic Stability. "The U. S. price level was almost exactly the same in 1913, when the Federal Reserve Board was established, as it was in 1792, when Congress passed the Coinage Act defining the value of the dollar under the Constitution. That value of the dollar was the same as well in 1934, when Franklin Roosevelt terminated the original, Constitutional right of every American to exchange every dollar for its defined amount of gold. " "But since America abandoned the gold standard in 1971, the purchasing power of the dollar has declined by 85 percent. A dollar saved in 1971 was worth only 15 cents by 2012. While gold cost $20 an ounce in March, 1910, the same as in 1792, by April 15, 2012, it cost $1,658. A dollar, worth one twentieth of an ounce of gold when the Federal Reserve was established in 1913, was worth only 4 cents by 2010. " "By contrast, under President Obama, since 2008, oil prices have almost tripled, gasoline prices have doubled, and basic food prices, such as for sugar, corn, soybean and wheat, have almost doubled" [1]. So the gold standard promotes economic stability, unlike the fiat money which creates hyper-inflation, so the gold standard is beneficial to the economy, unlike the Fiat Money, which creates massive inflation, as seen in the graph below. s://lh6. googleusercontent. com. .. ; alt="" width="550px;" height="296px;" />[2] P2: Stable Long-Term Economic Growth The Gold Standard Promotes Long-Term Economic Stability. "The original Founding Founders understood basic economics so much better than any Nobel Prize winner, or any of the other 20th Century economic sophists who convinced us to abandon the gold standard that worked so spectacularly for America. When America was on the gold standard, the real rate of economic growth averaged nearly 4% a year. Since then real annual growth has stagnated at about 25% less. Under Obama the Magnificent, real growth has been barely half what it was under the original American gold standard. At 4% real growth, our economy, incomes and standard of living would double every 17 years. After 34 years, a generation, per capita GDP, which defines the standard of living, would be 8 times larger. On the gold standard, the wages of working people would be paid in gold, as all would enjoy the same right to exchange their dollars for gold. That means their wages would not be depreciated by inflation. They would know that anything they saved would be worth the same any time in the future when they needed it. By contrast, under President Obama, since 2008, oil prices have almost tripled, gasoline prices have doubled, and basic food prices, such as for sugar, corn, soybean and wheat, have almost doubled. Moreover, the gold standard strongly encourages investment, since investors know the dollars they will be paid back on what they invest will be worth the same as the original dollars they put into the investment. That investment is what creates jobs for working people, as new businesses are created, and current ones are expanded. That investment also increases real wages for working people, as it increases the demand for their labor. Capital investment also increases worker productivity, as workers enjoy new tools and equipment that make them more productive. That results in higher wages, consistent with the higher economic growth. As a result, the American people would increase their savings and investment under the gold standard. But the gold standard would also draw increased investment in the American economy from the world over, in response to the assured stable value of the dollar. Combining the restored gold standard with the tax reform previously proposed in this series would further increase capital investment in America, both domestic and foreign, in response to the much lower tax rates on savings and investment" [3]. Stable Economic Growth has 2 factors: Investment and an Upward growth spiral, which is created by investment. So the gold standard increases stable long-term growth, because it encourages investment, which Fiat Money does not encourage. Contention 2: Government Control P1: Government Debt The Gold Standard would limit government debt. This is because as evidenced by these quotes, debt can't be created as the money supply must be equal to or less than the demand. If it's not, than the government must have enough gold to buy the extra money. So it's impossible to have a high national debt, if the government uses the gold standard instead of the fiat money. "Contrary to myth, and intellectual confusion, under the gold standard the money supply would not be limited to the government’s holdings or supply of gold. The Fed could increase the supply of dollars to meet the demand for dollars, providing the money needed to service economic growth. As long as the supply did not exceed the demand, there would be no increased draw on the Fed’s holdings of gold due to the increased supply of dollars. So if the economy demanded more money to support the level of economic growth, under the gold standard, there would be no limitation on the Fed supplying it. This is why any country could operate a gold standard on any reserve of gold the government holds to support it. (The government could also print more of its currency to buy more gold in the marketplace if it thought holding more gold was necessary. That is fully consistent with the gold standard as well. )" [4]. "Today, the United States lives with federal budget deficits of more than $1 trillion each year, interest rates that are artificially held below market levels, aggregate debt that is growing much faster than the economy, and a chronic trade deficit that is larger than whole industries" [5]. So as shown in the quotes when the US abandoned the gold standard and turned to the Fiat, it's public debt skyrocketed and became volatile and grew exponentially, while when the government had the gold standard it's public debt was low and stable. This can also be seen in the graph below. So the gold standard limits government debt. s://lh4. googleusercontent. com. .. ; alt="" width="545px;" height="290px;" />[6] P2: Power to the People/Government Intervention The Gold Standard gives the power to the people and takes the power away from the government. This is because the definiton of gold standard makes that it relies on supply and demand and only the people can control the demand. This evidenced by the following quote from Forbes, a Financial Newspaper. "Under the gold standard, working people would control the money supply, not elitist bureaucrats. If the Fed increased the supply of dollars beyond the people’s demand for dollars, people would exchange dollars for gold. The people would consequently stop the Fed before it could create inflation. But the people could also increase the money supply if needed to support economic growth. Under the gold standard, banks and other financial institutions would be empowered to mint their own gold coins as long as the amount of gold in the coins was correctly denominated. Banks could consequently increase the money supply to meet the demand for business loans or other unsatisfied demand for money. That increased demand for gold would induce mining companies to increase their supply of gold. But they could not increase the money supply faster than the demand for money. If the people did not want to hold more gold coin, there would be no takers for the newly minted coins" [7]. So the government can't control the money, which is good as politicians might have an ulterior motive such as that humans are naturally short-sighted and so a typical voter cares more about short-term economic growth than long-term economic growth, while in the long-term long-term economic growth benefits the economy more than short-term economic growth. in fact short-term economic growth doesn't equal long-term economic growth and might even be in the long term detrimental to the economy. This is why politicians prefer Fiat Money over the gold standard, as Fiat money is more beneficial to the economy in the short-term, but the gold standard is less detrimental to the economy in the long-term. However politicials want to get reelected and so they have an ulterior motive. However if the people are well-informed, they will decide with no ulterior motive as people will help themselves, so it will be beneficial to the people to give power to the people, which the gold standard, unlike fiat money does. s://lh3. googleusercontent. com. .. ; alt="" width="457px;" height="700px;" />[8] Conclusion: In conclusion, I explained why it would be beneficial to return to the gold standard. The points i explained were that it helps economic stability, long-term economic growth, government debt, government intervention. So due to this it is my opinion the world should return to the gold standard as it would be much more beneficial to the global economy than Fiat money. Citations: [1]: . http://www.forbes.com... [2]: . http://www.unanimocracy.com... [3]: . http://www.forbes.com... [4]: . http://www.forbes.com... [5]: . https://blogs.cfainstitute.org... [6]: . http://www.marketoracle.co.uk... [7]: . http://www.forbes.com... [8]: . https://commons.wikimedia.org...In case the graphs don't work, click on the respective link for the graphs or look in this album . http://www.debate.org...