The Gold Standard
Qingjing Xu
Econ 1320
Instructor McDermott
01/14/2012
The Gold Standard The gold standard, a monetary system, directly links a currency’s value to that of gold. For the country that on the gold standard, if they want to increase the amount of money, they have to expand its gold reserves as a condition. Because the supply for global gold grows only slowly, it becomes an effective way to prevent the government overspending and create inflation. Many countries, such as the U.S., using the gold as their currency in the past even though it is not exist any more for now. The U.S. President Richard Nixon ended the gold standard at 1971 in order to prevent the U.S. gold reserve were turn into weakness by dollar-flush foreigners.
As the recent financial crises and the high unemployment rate in U.S, the old topic was brought back to our table: should U.S. readopt the gold standard? Some people believe that their situation would be better if the U.S. readopt the gold standard. The reason is people think that the gold standard has brought long-run price stabling. “ Compare the aforementioned average annual inflation rate 0.1 percent between 1880 and 1914 with the average of 4.1 percent between 1946 and 2003 (Bordo, 1).” Also, they think it would prevent them form the government printing too much money and creating inflation because there was only so much currency and gold that they could issue. However, other people argue it and pointed out the gold is rarity and has limit amount, so is not enough to serve as a monetary base.” Total gold owned by the government –including the Federal Reserve and the U.S. Mint-is 248 million ounces. That’s about $405 billion dollars at today’s prices, hardly enough to support a $15 trillion economy. (Waggoner, 1) “ In my opinion, I strongly disagree that the U.S. go back to the gold standard. The reason is that I believe the gold is not always stability as people thought. If miners
Econ 1320
Instructor McDermott
01/14/2012
The Gold Standard The gold standard, a monetary system, directly links a currency’s value to that of gold. For the country that on the gold standard, if they want to increase the amount of money, they have to expand its gold reserves as a condition. Because the supply for global gold grows only slowly, it becomes an effective way to prevent the government overspending and create inflation. Many countries, such as the U.S., using the gold as their currency in the past even though it is not exist any more for now. The U.S. President Richard Nixon ended the gold standard at 1971 in order to prevent the U.S. gold reserve were turn into weakness by dollar-flush foreigners.
As the recent financial crises and the high unemployment rate in U.S, the old topic was brought back to our table: should U.S. readopt the gold standard? Some people believe that their situation would be better if the U.S. readopt the gold standard. The reason is people think that the gold standard has brought long-run price stabling. “ Compare the aforementioned average annual inflation rate 0.1 percent between 1880 and 1914 with the average of 4.1 percent between 1946 and 2003 (Bordo, 1).” Also, they think it would prevent them form the government printing too much money and creating inflation because there was only so much currency and gold that they could issue. However, other people argue it and pointed out the gold is rarity and has limit amount, so is not enough to serve as a monetary base.” Total gold owned by the government –including the Federal Reserve and the U.S. Mint-is 248 million ounces. That’s about $405 billion dollars at today’s prices, hardly enough to support a $15 trillion economy. (Waggoner, 1) “ In my opinion, I strongly disagree that the U.S. go back to the gold standard. The reason is that I believe the gold is not always stability as people thought. If miners