Essay Example on The Golden Rule or Fool's

Without any restrictions on the government's ability to print cash they can print unlimited sums to pay for whatever they want to Under a gold standard the value of cash depends on the value of gold that the government holds Just like everything else the value of gold is controlled by the economic forces of the international market Thus meaning that while usually the value will increase over time causing some inflation its value could also decrease causing deflation Deflation unlike inflation is when a currency is buying power increases Although this sounds good over time prices can become unstable Moreover deflation has been involved in all the economic crises in America Returning to a gold standard could put the US at risk for deflation Although returning to a gold standard would put the US at risk for deflation it is not very likely to deflate enough to cause a major recession Also slight periods of deflation are better for the economy than long periods of increased inflation According to the most recent reports on the value of gold it has had stable growth in the past few years Gold Price Chart Although both are undesired in a stable economy a low rate of deflation is preferable to a high inflation rate because high inflation causes people to want to spend all their money now instead of saving it and face it losing value over time Although returning to a gold standard would be a lot of work and a significant change it would be worth it in the long run 

The main reasons the US needs to return to a gold standard are that it will reduce inflation over time limit government spending and help to decrease the US's trade deficits and national debt Currencies following a gold standard have been proven to have lower inflation rates The governments overspending can be reduced by having a currency that follows a gold standard by limiting the cash it can print This will also help reduce the national debt Although it might seem impossible to convert to a gold standard system steps can be taken to ease the US into it and reduce the immediate side effects Works Cited Status Report of U S Government Gold Reserve Status Report of U S Treasury Owned Gold www fiscal treasury gov fsreports rpt goldRpt current_report htm Bernanke Ben Origins and Mission of the Federal Reserve Lecture 1 Board of Governors of the Federal Reserve System www federalreserve gov aboutthefed educational tools lecture series origins and mission htm Arthur J Rolnik and Warren E Weber Money Inflation and Output Under Fiat and Commodity Standards www minneapolisfed org Spring 1998 Billi Roberto M and George A Kahn What Is the Optimal Inflation Rate www kansascityfed org QcdXg PUBLICAT ECONREV PDF 2q08billi_kahn pdf REPORTS Government Debt Position and Activity Report www treasurydirect gov govt reports pd pd_debtposactrpt htm Gold Price Chart Gold Price goldprice org gold price chart html