The United States Should Return to the Gold Standard

My CaseI firmly believe that a gold standard is needed back in the United States again. I hope here for a lively debate.I. Economic Boom and Stability A gold standard would would be able to create a booming economy by stabilizing the U.S. dollar, which allows investors, consumers, and producers to know the stable value and safety of the economy. As Peter Ferrara of Forbes writes:"Fixing a nation’s currency to gold assures that the currency maintains a stable long term value, without inflation, or deflation. That enables a nation’s money to serve as a measure of value, like a ruler measures inches, or a clock measures time. Such a stable measure of value, in turn, means money can best perform its most essential function in facilitating transactions." [1]With a stable dollar achieved, the United States could achieve great economic growth. It's actually the best stimulus out there. With currencies that aren't trustworthy, economic problems occur. Steve Forbes writes:"A profound and far-reaching loss of faith can produce a disastrous, self-fulfilling scenario: a massive sell-off of a currency on the foreign exchange market. At its worst, the kind of attack can bring a on a death spiral and collapse in monetary value. This can accelerate inflation at home and cause a government to sharply raise interest rates, throwing an economy into a severe recession. It can set off a panic that can spread to other nations." [2]Now with the gold standard, a stable currency is more trustworthy and what happens with a trustworthy currency? Forbes writes:"When a country has stable, trustworthy money, the opposite scenario unfolds: people want to hold their currencies. Capital and investment flow into countries with stable money. That's why stable money is the bedrock of prosperity. [2]II. HistoryI. Advance Britannia!Thanks to Great Britain, the world entered the Golden Era of economic history when it formally fixed the pound to gold in 1717. Forbes writes:"The British pound was tied to gold at a fixed rate for over 200 years and holds the record for stability. After Great Britain formally established the ratio for the pound to gold in 1717, lenders could rest assured that that they would be paid back in money that wouldn't lose its value. Capital creation and investment in the country exploded. The strength of Great Britain's currency helped create capital markets that turned that island from a second-tier nation to the mightiest industrial power in the world." [2]It remained under this rate until 1931, marking one of the greatest economic eras in world history. II. American ColossusAlexander Hamilton, the U.S.'s financial watchdog and Treasury secretary, was the one to create a gold standard. Forbes writes:"Reckles money priting during the colonial days and the War of Independence had left the finances of the young republic in shambles. Alexander Hamilton, the first secretary of the treasury, realized that the only hope for recovery lay in the system based on sound money. Among other initiatives, Hamilton established a mint with the dollar fixed by law to a specific weight of gold. The value was fixed at $19.39 per ounce." [2]After the American Civil War, the United States enjoy some of the greatest growth in the history of the United States. Average GDP growth from 1873 to 1913 was 3.7 percent and under the Bretton Woods system, which continued the gold standard after WW2, the U.S. enjoyed 4.1 percent growth in GDP from 1947-1967. When the country was taken off the gold during the Nixon adminsitration, the economy started to grow slower. From 1971 to 2010, the average for GDP growth was 2.8 percent. Real median income tells a similar story. From 1948 to 1967 it grew at an average of 2.7 percent. From 1971 to 2010 it grew at 0.5 percent. [4]Cain and Lowrie write:"If the United States had continued to grow at its gold standard rate, the economy today would be 50 percent larger - average incomes would be about 50 percent higher, and we wouldn't be struggling with a budget deficit." [4]Under the current policy of fiat money, the economy has grown much slower. Monetary spending has been a disaster:"Quantiative easing did not just fail as stimulus. It prevented recovery by causing a destructive misallocation of credit. Perhaps even worse, it caused, in its early stages, spikes in the prices of commodities the rased the cost of food and fuel, inflamming political divisions and unrest in many developing nations." [2]We cannot keep the current system and must go back to gold.Sources1. Ferrara, Peter. "Linking The Dollar To Gold: Completing The Recipe For Restoring An Economic Boom For America." Forbes. Forbes Magazine, 21 June 2014. Web. 16 Feb. 2015. 2. 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.3. Hubbard, R. Glenn., and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013. Print.4. Cain, Herman, and Rich Lowrie. 9-9-9: An Army of Davids. Herndon, VA: Velocity ; Mascot, 2012. Print.