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The gold standard

By   /   October 17, 2013  /   Comments Off

HAROON ATCHA // POLITICAL COLUMNIST

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 Once upon a time, about 42 years ago to be exact, you could walk into the Federal Reserve with $35 in your pocket and walk out with an ounce of gold. That’s because as late as 1971, every United States Dollar was backed by gold or silver. This system, known as the Gold Standard, was officially ended by President Nixon in favor of our current system. You’ve heard people proposing a return to the Gold Standard like Ron Paul, Republican congressman from Texas. I tend to hear a lot of people get excited over gold any time our economy seems overburdened or our congressman can’t decide on a budget. It’s portrayed as a magic bullet that can make all of our troubles disappear. But I’m not so convinced. A return to the Gold Standard would be disastrous.

The argument that I tend to hear most when talking about the Gold Standard is how it would force our government to live within their means. This argument goes something like this: if we didn’t allow our government to borrow heedlessly, we wouldn’t get ourselves into enormous debt. While that isn’t wholly untrue, it’s not exactly helpful either. Imagine a situation in which our government wasn’t able to manipulate our currency for fiscal stimulus. Sticking to a Gold Standard makes our fiscal policy very rigid. Without the ability to control the value of our currency, and inject cash where it’s needed the most, we would suffer from severe depressions. Look no further than the Great Depression for proof. Our government’s inability to combat deflation contributed to how long it took us get out of that situation. In fact, countries that abandoned the Gold Standard during the Great Depression were among the first to make substantial recoveries.

Another argument that comes up a lot is how our money isn’t inherently valuable to which I say: thank God. Our currency, like every other currency on the planet, exists as a medium for exchange because humans believe it’s valuable. Our money is tied to the belief that the government of the United States will continue to honor its debts and obligations. I am in favor of that idea because I like the fact that our money isn’t tied to a hunk of yellow rock pulled from the ground. And at any rate, what makes gold so inherently valuable? Can you eat gold? Will it keep you warm when your furnace goes out in the middle of winter? Of course you can’t. If we want money that’s inherently valuable we can print our bills on bread; otherwise we need to accept that some things are complicated and that doesn’t make them bad.

At any rate I understand why people like the idea of the Gold Standard. I’d be lying if I said it never caught my eye but it’s a solution that ignores the root of our problems. When we’re faced with trouble we look for the quickest solution. What we need isn’t the Gold Standard though; we need to learn restraint. Yes, we often spend irresponsibly as a country but that’s not a good reason for us to cut ourselves off from an immensely helpful tool. We wouldn’t say to a person, “you should never take a loan in your life, even in case of an emergency because you went over your credit card limit as a kid.” So why should we do that to our government?

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  • Published: 6 months ago on October 17, 2013
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  • Last Modified: October 17, 2013 @ 3:15 pm
  • Filed Under: Columns, Opinion

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