The Gold Standard Essay

388 WordsNov 13, 20122 Pages
Luke DaMommio Professor Clark ECON 1301 October 26th, 2012 Gold Standard The gold standard sounds good on paper. Gold does not fluctuate like cash money does; and when cash fluctuates, inflation occurs. Yet, it will not work. The gold standard does not allow governments to fight recessions, and simply cause a rise in interest rates. The gold standard enthusiasts would argue that the gold standard would spread money out among all Americans and stop the rich from getting richer. Some Libertarians even go as far as to argue that the government being able to print money is actually against the constitution. With one basis of money that cannot be printed, the rich would not be able deceive investors and falsify monetary information. The gold standard would also reduce inflation because the value of gold will stay constant, gold can be dug up, but you can’t make it. The problem with the gold standard is that the downsides completely outweigh the upsides. When America goes into a recession, the government has to be able to fight these recessions. To fight recessions, governments may need to print more money; and the gold standard prevents that. Yes, printing more money can cause inflation, but a little inflation is better than the alternative outcome. This is why; in a survey done by a University of Chicago economist, zero economists supported the gold standard. The market establishes long-term interest rates. If the gold standard were in place, interest rates would sky rocket. During the great depression people had no way to pay their debts with ridiculous interest rates because of the gold standard. Interest rates are a huge factor in our fiscal economy, and any standard that effects them negatively, is most likely the wrong choice. When gold is scare, interest rates have to rise to pick up the slack, which I find worse for the economy than inflation. The

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