Entry Submitted by MenoReno at 1:59 PM EDT on March 21, 2020
So, while we sit twiddling our thumbs in physical isolation, let's look at the pros and cons for returning to the gold standard. Certainly, you can't listen to the gurus while hearing how we're going back to the gold standard like yesterday.
Anyway, for the edification of all, here's the list with thanks to procon.org;
Pro1;
Gold has been valued by humanity for over 6000 years. Fiat money has no intrinsic value.
Con1;
The price of gold fluctuates, sometimes wildly. This would not provide a stable foundation to run an economy.
Pro2;
The implementation of the gold standard would limit the size of government and its ability to print unlimited amounts of money.
Con2;
Back in the 80s, Reagan's gold commission discovered that a well managed fiat system controlled inflation better than the gold standard could.
Pro3;
The fiat system is not democratic.
Con3;
The gold standard creates periods of deflation and economic contractions.
Pro4;
The gold standard would lower inflation and keep consumer prices down.
Con4;
History shows that the gold standard caused panicky markets, bank crashes, and probably prolonged the Depression in the 30s.
Pro5;
Implementing the gold standard would reduce the trade deficit.
Con5;
Returning to the gold standard would hurt the FEDs ability to help the economy in times of recession or depression, just like the one we are in now.
Pro6;
The gold standard would limit the expansion of the national debt.
Con6;
The gold standard would limit the government's ability to address unemployment.
Pro7;
Return to the gold standard would limit military and defense spending and our ability to wage wars.
Con7;
After the Civil War, the US returned to the gold standard. It immediately crashed the economy which was in a fragile state after the war. With our economy at a standstill now, returning to the gold standard would court further disaster.
Now there are other arguments to be made for and against. Personally, I think the world economy has grown far too big to peg our currency to a limited commodity such as gold. Oil might be better, but the same stability problem would exist. A few weeks back, oil was trading at $60 per barrel and now it's in the low $20s.
This is not to say, the fiat system couldn't work better. But it's still better than the alternative.
MenoReno
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