Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21
Ultimate Gaming and Home Working PC System Build 2021 - 5950X, RTX 3080, Asus MB - Scan Computers UK - 7th Jan 21
Inflation the bug-bear looking forward through 2021 - 7th Jan 21
ESG ETF Investing Flows Drive Clean Energy to Fresh Highs - 7th Jan 21
5 Financial Market Surprises in 2021 - 7th Jan 21
Time to ‘Reset’ Your Investment Portfolio in 2021? - 7th Jan 21
Bitcoin Price Collapses almost 20% at the start 2021 - 7th Jan 21
Fed Taper Nervous Breakdown - 6th Jan 21
What Will the U.S. Dollar Ring in for 2021? - 6th Jan 21
Stock market frenzy- Ride the bandwagon but be sure to take along some gold coins - 6th Jan 21
Overclockers UK Custom Build Gaming System Review Heat Test and Final Conclusion - 6th Jan 21
Precious Metals Resuming Bull Market, Gold, Silver, GDX Trend Forecasts 2021 - 5th Jan 21
Trump’s Iran-COVID-Gate Anniversary  - 5th Jan 21
2021 May Be A Good Year For The Cannabis / Marijuana Sector - 5th Jan 21
Stock Market Approaching an Important Target - 5th Jan 21
Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB - 5th Jan 21
NEW UK Coronavirus PANIC FULL Lockdown Imminent, All Schools to Close! GCSE Exams Cancelled! - 4th Jan 21
The Year the World Fell Down the Rabbit Hole - 4th Jan 21
A Year Like No Other for Precious Metals… and Everything Else - 4th Jan 21
The Stocks Bull Market is Only Half Completed - 4th Jan 21
An In- Depth Look At Gold Price Trend - 4th Jan 21
Building America Back After a Dark Covid Winter - 4th Jan 21
America's Dark Covid Winter Ahead - 4th Jan 21
Buy a Landrover Discovery Sport in 2021? 3 Year Driving Review - 3rd Jan 21
Stock Market Major Peak in Early April 2021 - 3rd Jan 21
Travel and Holidays 2021 - Flight Knight Cabin Bag Review - 3rd Jan 21
�� Happy New Year 2021 Fireworks and Drone Light Show from London and Sheffied - BBC�� - 2nd Jan 2
The Next IMMINENT Global Catastrophe After Coronavirus - 1st Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Why the U.S. Should Return to the Gold Standard

Commodities / Gold and Silver 2011 Jul 12, 2011 - 05:17 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDavid Zeiler writes: Should the U.S. return to the gold standard?

It's a question that has taken on new relevance during a time of soaring deficits and sky-high national debt. Many of the world's most successful governments, from ancient Rome to the British Empire, enjoyed centuries of economic stability by adhering to a gold standard. And some economists credit the period of prosperity at the end of the 19th century to a global gold standard.


"The period of 1870 to 1914 recorded the highest real growth rates worldwide and was

among the most peaceful ones in history," says a report on gold released earlier this month

by European bank Erste Group. "Most of the budgets were balanced, and there was a free flow of capital across borders. The only job of the central banks was to exchange gold for paper or vice versa."

Even former Federal Reserve Chairman Alan Greenspan has noted the historical benefits of the gold standard.

"Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity," Greenspan told Fox Business News in January. "There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard."

Money Morning Contributing Editor Martin Hutchinson agrees, and he is one of a growing number that believe the U.S. should return to the gold standard - even though he sees such a drastic change as unlikely.

"It would solve the unemployment problem, because expensive capital makes people use more labor," said Hutchinson. "And it would indeed enforce fiscal discipline."

Hutchinson concedes that such a drastic action would indeed have negative consequences, as well - but the long-term benefits of stability would be preferable.

"Stock markets would crash, bonds I'm not sure, because investors currently are relying on inflation to solve the U.S. debt problem," he said. "It could become dangerously deflationary."

Indeed, Hutchinson and others believe the United States should return to the gold standard to reverse years of U.S. Federal Reserve policies that have eroded the value of the dollar.

Still, that could be better than the alternative, which is watching the U.S. and other governments around the world attempt to print their way out of economic ruin.

An Inconvenient Solution
Many analysts fear that the Fed's policy of pouring $2.3 trillion into the economy in an attempt to spur growth is really only fostering inflation and devaluing the dollar - with potentially disastrous consequences.

Fixing the value of the dollar to gold would mean more money could not be printed unless more gold was obtained to back it up. Historically, economies using a gold standard currency enjoy stable prices - governments can't print the excess money that causes inflation - and governments without excess money can't spend themselves into massive debt.

That's why many local activists and legislatures are pushing for a return to the gold standard.

Social conservative group American Principles in Action joined forces with the Iowa Tea Party in June to set up a "Gold Standard 2012" bus tour that included appearances by several Republican presidential contenders.

Also last month, three Republican senators introduced a bill to Congress, the Sound Money Promotion Act, which would make it easier to use gold and silver coins as currency. Utah has gone even further - its Legal Tender Act of 2011 makes it possible to use gold and silver as cash, but with the value based on weight.

"Fiat currencies are frequently manipulated in such a way to finance the large-scale expansion of national governments," Sen. Mike Lee, R-UT, told Smart Money. "The expanded discussion about the need for at least the option of precious metal currency systems is because of that fear."

The world went off the gold standard in 1914 because the powers of Europe needed to print more money than the gold standard would allow in order to pay for World War I.

The gold standard reappeared just after World War II as part of the Bretton Woods agreement. The idea was to avoid the international monetary chaos of the interwar period, particularly the Great Depression, by tying currency to gold.

Unfortunately, only the U.S. dollar was actually convertible to gold; other currencies were pegged to the dollar. The system relied upon the U.S. government acting in a fiscally responsible manner.

"That wasn't a gold standard," Money Morning'sHutchinson said of Bretton Woods. "That was fiat money dressed up as a gold standard."

The large costs of the Vietnam War and President Lyndon Johnson's Great Society created such stresses on the U.S. monetary system that President Richard Nixon was forced to drop the gold standard in 1971.

So while history illustrates the benefits of the gold standard, it also illustrates why it has so often been left behind - ravenous government budgets, particularly when that hunger is fed by an emergency like war or economic distress.

Since the United States has both now, it would seem extremely unlikely that Washington lawmakers will agree to a return to the gold standard any time soon.

"Politicians like easy money too much," said Hutchinson.

Source :http://moneymorning.com/2011/07/12/why-the-u-s-should-return-to-the-gold-standard-even-though-it-wont/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules