Download Gold Standard: Introduction to pros

Return to the Gold Standard?
Ursula Bettendorf
Shannon Bowen
Kristina Appel
Pepe Montoya
Midori Maxwell
Eva Jimenez
Gold Standard: Introduction to pros
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The Gold Standard Promotes Better Consumer
Confidence
– Gold is a commodity. It will Always have Value.
– Gold has a Higher Purchasing Power

Gold as a Single World Currency
– Can be Used to Further Facilitate International Trade
– Contains a Self Regulating Mechanism

Fiat Money is Government Control
– Government has Unlimited Control Over Monetary
Policy
– Redistributes Wealth Through Creation of Additional
Currencies and Credit
Gold Standard: Introduction to cons

Too many problems
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Too costly
Limited supply
Liquidity trap
Deflationary bias
Positive benefits of fiat
currency
– Simplicity
– Government control to
facilitate economic
growth and stability
Gold Standard: Introduction to cons

Historical precedent of failure
– Caused recessions that deepened
into Great Depression
» Countries which abandoned gold
standard earlier than the U.S.
largely escaped the Great
Depression
– Constricted economic growth
» Bank runs
Gold Standard: Debate
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Less complications with the Gold
Standard
More Benefits with Fiat Money
Gold is the customarily accepted
medium of exchange
Fiat Money is a More Appropriate
Medium of Exchange, and More
Customarily Accepted
Gold Standard: Debate

Negative Side of the Fiat
Currency
– The costs imposed on
society
– The costs imposed by
special interest groups
– The costs in the form on
inflation –induced
misallocations of resources
– The costs incurred by
businessmen
Gold Standard: Debate

Fiat Standard can Expand Money Supply to
Counter Unemployment
– Credit Expansion, Foreign Aid, Trade, and Government
Aid Programs Are also Encouraged

The Standard can Manipulate the Currency to
Avoid Recessions and Depressions

Under the Gold Standard, the Automatic
Adjustment Mechanism Causes Outflows which
Hurt the Economy
Gold Standard: Debate

Misconceptions linked with the Gold Standard and
the Great Depression
– The idea that the Pancea for debt is credit
– Prosperity is a product of credit rather than the increase
and exchange in wealth
Gold Standard: Debate
The U.S. Suffered 8 Depressions while on
Commodity Money
 Gold Standard was the Root of the Problem
in the Great Depression

– In the 1920’s there was Nothing to Force Surplus
Countries into Higher Prices to Manage the Balance of
Payments
– President Roosevelt Cured the Great Depression by
Changing the Fixed Price of Gold
– Countries that weren’t on the Gold Standard in 1929 or
that abandoned it, escaped the Great Depression. Those
that didn’t, suffered the most.
Conclusion to the Pros
The Great Depression caused by other
factors besides gold standard
 Less government interference
 Lack of historical information on the fiat
system
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Conclusion to the Cons
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Depression Caused by the Gold Standard
Experienced Recessions Under the Gold Standard
No Government Control
– Can’t Expand Money to Finance the Country
– No Welfare or Public Benefits
– In Reality, No One can Control the Supply of Gold

Costs of Gold
– Mining
– Limited Supply

Governments are Unlikely to Return to the Gold
Standard, because it would Mean Turning
Monetary Policy Over to Uncontrollable Swings
in the Stock of Gold.
Conclusion to the Cons

Using Gold as a Commodity to Barter or to
Directly Support the Value of Paper Currency is
Unrealistic and Impractical to Effectively Stabilize
an Economy of Change. Nor does such a Standard
Encourage Economic Development. Also it is both
Irrational and quite Impossible for a Floating
Economic System to Successfully and Fairly
become a Fixed System, like that of the Gold
Standard.