Why the U.S. Left the Gold Standard: Origins, Benefits, Drawbacks (2012)

The gold standard is supported by many followers of the Austrian School of Economics, free-market libertarians and some supply-siders. In the United States, strict constitutionalists object to the government issuing fiat currency through central banks. Some gold-standard advocates also call for a mandated end to fractional-reserve banking. Many similar alternatives have been suggested, including energy-based currencies, collections of currencies or commodities, with gold as one component. A return to the gold standard was considered by the US Gold Commission back in 1982, but found only minority support. In 2001 Malaysian Prime Minister Mahathir bin Mohamad proposed a new currency that would be used initially for international trade among Muslim nations, using the Islamic gold dinar, defined as 4.25 grams of pure (24-carat) gold. Mohamad claimed it would be a stable unit of account and a political symbol of unity between Islamic nations. This would purportedly reduce dependence on the dollar and establish a non-debt-backed currency in accord with Sharia law that prohibited the charging of interest. As of 2013 the global monetary system continued to rely on the dollar as a reserve currency. Former U.S. Federal Reserve Chairman, Alan Greenspan acknowledged he was one of "a small minority" within the central bank that had some positive view on the gold standard.[87] Greenspan once famously argued the case for returning to a 'pure' gold standard in his 1966 paper "Gold and Economic Freedom", in which he described supporters of fiat currencies as "welfare statists" intending to use monetary policy to finance deficit spending.[88] More recently he claimed that by focusing on targeting inflation "central bankers have behaved as though we were on the gold standard", rendering a return to the standard unnecessary.[89] Similarly, economists like Robert Barro argued that whilst some form of "monetary constitution" is essential for stable, depoliticized monetary policy, the form this constitution takes—for example, a gold standard, some other commodity-based standard, or a fiat currency with fixed rules for determining the quantity of money—is considerably less important.[90] Congressman Ron Paul is a long-term, high-profile advocate of a gold standard, but has also expressed support for using a standard based on a basket of commodities that better reflects the state of the economy.[91] In 2011 the Utah legislature passed a bill to accept federally issued gold and silver coins as legal tender to pay taxes.[92] As Federally issued currency, the coins were already legal tender for taxes, although the market price of their metal content currently exceeds their monetary value. Similar legislation is under consideration in other US states.[93] The bill was initiated by newly elected Republican Party legislators associated with the Tea Party movement and was driven by anxiety over the policies of President Barack Obama.[94] In 2013, the Arizona Legislature passed SB 1439, which would have made gold and silver coin a legal tender in payment of debt, but the bill was vetoed by the Governor. As of 2013, no countries use a gold standard. From 1936 until 2000 the Swiss Franc was based on a 40% gold-reserve.[96] Gold reserves are held in significant quantity by many nations as a means of defending their currency and hedging against the dollar, which forms the bulk of liquid currency reserves.[97] Both gold coins and gold bars are traded in liquid markets and serve as a private store of wealth. In 1999 the European Central Bank and 11 European national banks signed the Washington Agreement on Gold declaring that "gold will remain an important element of global monetary reserves"; the Agreement was later amended and extended. http://en.wikipedia.org/wiki/Gold_standard

Comments

1. I love silver!
2. the Bank required Me to back with assist the Value Note should also be back with assist! we would be better off heading to a true Gold standard!
3. reinstate the gold standard and implement tariffs in goods and services so we can get our country back. Keynes wanted to hand the reins over to the rich banking elite and he achieved it. Fiat currency only benefits those who control the presses no one else. we simply cannot print money from thin air
4. Seems pretty clear: economic stability of a metal standard is good for the people. Economic instability is wonderful for a tiny criminal elite. I prefer a silver standard. It could truly democratize commerce....
5. How can you have mortgages under a gold standard?
   
   Banks borrow sort and lend long or in other words they borrow funds from individuals for 6 months to a year is the form of Certificate of Deposits and then they lend it out for 30 years to someone to buy a house. Part of the reason of the S&L crisis was caused by the banks doing this and when interest rates went up the S&L went under. An example of this would be when someone deposits their money in the bank and earns 7% interest on it for 6 months. The banks then take these deposits and lends them out to a home buyer at 9% interest and they make money off the interest rate spread and everything works. But what happens when inflation hits and interest rates spike. The depositors can then earn 12% interest but the banks have lent out the money for 30 years at 10% interest?
   
   At one time mortgages used to only be given for 5 years and borrowers had to put down 50% in order to get that. When the banking system was on a gold standard there was a lot of bank runs and bank failures because the government couldn't just create money to expand and contract the money supply.
   
   So if we return to the gold standard would buyers just have to put down 50% and get a mortgage for 5 years?
6. 4:00
   Actualy the coinage act of 1792 defined the dollar in terms of silver.
7. All the world Gold is worth 10 trillion, the world GDP is 77.83 trillion. So there is not enough gold to fully back all the currencies of the world. As other nations become more industrialized, that global GDP will increase, but gold will not. The United States' GDP was estimated to be $17.914 trillion as of Q2 2015 so there is not even enough gold to back the US GDP. china has a gdp of 6.8 trillion so it could right now do a gold backed currency, however it would have to obtain 3/4 of the worlds gold to try to do that. All you could hope to do with regards to gold is make a gold back currency for a global currency but it would be one of many used.
8. this is nothing but mental/verbal masturbation.
9. just shut the fuck up and put it all back on the Damned Gold standard, you bullshit artists!!!
   get the hell off your asses and take goddamn action. blah-blah-fuckin-blah: gets zero accomplished!!
10. Ridiculous idea going forward, absolutely will not work! may have worked in 1855, oh, actually it did then.
    
    We used to trade by barter: 1 chicken = 30 eggs etc. I house = 2 pieces of gold then we modernised and dropped the gold standard . Quite right too, except now we need another economic change to more accurately  keep currency value within sovereign money creation that is not created as debt.
    
    The problem with creating money as debt being  the dwindling waged human being that is inevitable because human beings
    cannot compete with the advances made and being made in IT tech software and hard automation tech. It is becoming uncompetitive to hire a human all across the world. We don't need paper even, we have a keyboard.
11. Very good presentation. Anyone who studies history with any bit of honesty knows that gold is the only way to keep governments in check and provide for the best market conditions possible for the average person.
12. UNLESS GOLD IS VALUED AT THE SAME VALUE THROUGHOUT THE WORLD ... A GOLD STANDARD WILL NOT WORK ...what happened is the US held golds value at $35 an oz ... other countries valued gold at a much higher price ... countries required that the US pay trade deficits with gold .... that loss is the reason we went off the gold standard ...
13. Just 2312 views in 13 months. Instead of an informed populace, we have ignorance and apathy coast to coast. This should be seen by every single American so they understand the insanity of the system. The depth of the deceptions is staggering.
14. Just read Bernstein’s The Power of Gold: The History of an Obsession - I respect Lehrman and Grant but they're extraordinarily difficult to listen to here. These humans might not be very good with paper money, but they're not much better at public speaking, jeez. The dismal science, indeed.
15. Just read Peter Bernstein's book.