Gold Standard
Reason For Selection
As a child, I never understood why gold was so expensive. It was nice, shiny and heavy but I was never a fan. I rather buy silver or platinum jewelry. After growing up and hearing the term gold standard, I interpreted it as being the best. Now that I’ve read the textbook, it makes me wonder why anyone would want to bring it back. Yes, the gold standard was great back in history but now it is a whole different economy.
Key Term Explanation
Gold was a source of money from the beginning of time. When governments started printing money, it was convertible to a predetermined amount of gold. The gold standard regulated the quantity and growth rate of a nation’s money supply. It began in the 1880s. From the 1880 to 1914, countries’ currencies were fixed on gold. The gold standard is not currently used by any government with Britain stopping in 1931 and the United States in 1971. The gold standard was replaced by fiat money. The price of gold is no longer used as a standard, but the price of gold is determined by the demand for the metal. Gold is a major financial asset for countries and central banks.
Major Article Summary
Four years ago, the Republican Party called for the establishment of a committee to investigate possible ways to set a fixed value for the dollar. In a recent debate, Senator and presidential hopeful Ted Cruz said, “The Federal Reserve should focus on sound money and monetary stability, ideally tie to gold.” Senator Rand Paul supports creating a commission to study whether the dollar needs to be linked to a hard asset like gold. Because of low interest rates and an unparalleled bond buying program, there is some worry but belief that the gold standard is the cure. One reason is because gold holds its value over long stretches of time. However, the problem is that countries need to hold onto ever increasing amounts of gold in order to keep up with demand. Limiting the amount of...