Return to the Gold Standard?Return to the Gold Standard?

Ursula BettendorfUrsula Bettendorf

Shannon BowenShannon Bowen

Kristina AppelKristina Appel

Pepe MontoyaPepe Montoya

Midori MaxwellMidori Maxwell

Eva JimenezEva Jimenez

Gold Gold Standard: Introduction to prosStandard: Introduction to pros The Gold Standard Promotes Better Consumer The Gold Standard Promotes Better Consumer

Confidence Confidence – Gold is a commodity. It will Always have Value.Gold is a commodity. It will Always have Value.

– Gold has a Higher Purchasing PowerGold has a Higher Purchasing Power

Gold as a Single World CurrencyGold as a Single World Currency– Can be Used to Further Facilitate International TradeCan be Used to Further Facilitate International Trade

– Contains a Self Regulating Mechanism Contains a Self Regulating Mechanism

Fiat Money is Government ControlFiat Money is Government Control– Government has Unlimited Control Over Monetary Government has Unlimited Control Over Monetary

PolicyPolicy

– Redistributes Wealth Through Creation of Additional Redistributes Wealth Through Creation of Additional Currencies and CreditCurrencies and Credit

Gold Standard: Introduction to consGold Standard: Introduction to cons

Too many problemsToo many problems– Too costlyToo costly– Limited supplyLimited supply– Liquidity trapLiquidity trap– Deflationary biasDeflationary bias

Positive benefits of fiat Positive benefits of fiat currencycurrency– SimplicitySimplicity– Government control to Government control to

facilitate economic facilitate economic growth and stabilitygrowth and stability

Gold Standard: Introduction to consGold Standard: Introduction to cons

Historical precedent of failureHistorical precedent of failure– Caused recessions that deepened Caused recessions that deepened

into Great Depressioninto Great Depression» Countries which abandoned gold Countries which abandoned gold

standard earlier than the U.S. standard earlier than the U.S. largely escaped the Great largely escaped the Great DepressionDepression

– Constricted economic growthConstricted economic growth» Bank runsBank runs

Gold Standard: DebateGold Standard: Debate

Less complications with the Gold Less complications with the Gold StandardStandard

More Benefits with Fiat MoneyMore Benefits with Fiat Money Gold is the customarily accepted Gold is the customarily accepted

medium of exchangemedium of exchange Fiat Money is a More Appropriate Fiat Money is a More Appropriate

Medium of Exchange, and More Medium of Exchange, and More Customarily Accepted Customarily Accepted

Gold Standard: DebateGold Standard: Debate

Negative Side of the Fiat Negative Side of the Fiat CurrencyCurrency– The costs imposed on The costs imposed on

societysociety– The costs imposed by The costs imposed by

special interest groupsspecial interest groups– The costs in the form on The costs in the form on

inflation –induced inflation –induced misallocations of resourcesmisallocations of resources

– The costs incurred by The costs incurred by businessmenbusinessmen

Gold Standard: DebateGold Standard: Debate

Fiat Standard can Expand Money Supply to Fiat Standard can Expand Money Supply to Counter UnemploymentCounter Unemployment– Credit Expansion, Foreign Aid, Trade, and Government Credit Expansion, Foreign Aid, Trade, and Government

Aid Programs Are also EncouragedAid Programs Are also Encouraged

The Standard can Manipulate the Currency to The Standard can Manipulate the Currency to Avoid Recessions and DepressionsAvoid Recessions and Depressions

Under the Gold Standard, the Automatic Under the Gold Standard, the Automatic Adjustment Mechanism Causes Outflows which Adjustment Mechanism Causes Outflows which Hurt the EconomyHurt the Economy

Gold Standard: DebateGold Standard: Debate

Misconceptions linked with the Gold Standard and Misconceptions linked with the Gold Standard and the Great Depressionthe Great Depression– The idea that the Pancea for debt is creditThe idea that the Pancea for debt is credit

– Prosperity is a product of credit rather than the increase Prosperity is a product of credit rather than the increase and exchange in wealthand exchange in wealth

Gold Standard: DebateGold Standard: Debate The U.S. Suffered 8 Depressions while on The U.S. Suffered 8 Depressions while on

Commodity Money Commodity Money Gold Standard was the Root of the Problem Gold Standard was the Root of the Problem

in the Great Depressionin the Great Depression– In the 1920’s there was Nothing to Force Surplus In the 1920’s there was Nothing to Force Surplus

Countries into Higher Prices to Manage the Balance of Countries into Higher Prices to Manage the Balance of Payments Payments

– President Roosevelt Cured the Great Depression by President Roosevelt Cured the Great Depression by Changing the Fixed Price of GoldChanging the Fixed Price of Gold

– Countries that weren’t on the Gold Standard in 1929 or Countries that weren’t on the Gold Standard in 1929 or that abandoned it, escaped the Great Depression. Those that abandoned it, escaped the Great Depression. Those that didn’t, suffered the most.that didn’t, suffered the most.

Conclusion to the ProsConclusion to the Pros

The Great Depression caused by other The Great Depression caused by other factors besides gold standardfactors besides gold standard

Less government interferenceLess government interference Lack of historical information on the fiat Lack of historical information on the fiat

systemsystem

Conclusion to the ConsConclusion to the Cons Depression Caused by the Gold StandardDepression Caused by the Gold Standard Experienced Recessions Under the Gold StandardExperienced Recessions Under the Gold Standard No Government ControlNo Government Control

– Can’t Expand Money to Finance the Country Can’t Expand Money to Finance the Country – No Welfare or Public BenefitsNo Welfare or Public Benefits– In Reality, No One can Control the Supply of GoldIn Reality, No One can Control the Supply of Gold

Costs of GoldCosts of Gold– MiningMining– Limited Supply Limited Supply

Governments are Unlikely to Return to the Gold Governments are Unlikely to Return to the Gold Standard, because it would Mean Turning Standard, because it would Mean Turning Monetary Policy Over to Uncontrollable Swings Monetary Policy Over to Uncontrollable Swings in the Stock of Gold. in the Stock of Gold.

Conclusion to the ConsConclusion to the Cons

Using Gold as a Commodity to Barter or to Using Gold as a Commodity to Barter or to Directly Support the Value of Paper Currency is Directly Support the Value of Paper Currency is Unrealistic and Impractical to Effectively Stabilize Unrealistic and Impractical to Effectively Stabilize an Economy of Change. Nor does such a Standard an Economy of Change. Nor does such a Standard Encourage Economic Development. Also it is both Encourage Economic Development. Also it is both Irrational and quite Impossible for a Floating Irrational and quite Impossible for a Floating Economic System to Successfully and Fairly Economic System to Successfully and Fairly become a Fixed System, like that of the Gold become a Fixed System, like that of the Gold Standard.Standard.