The Gold Standard
Prior to 1971, the United States was on various forms of a gold standard where the value of the dollar was backed by gold reserves and paper money could be redeemed for gold upon demand. Since 1971, the United States dollar has been a fiat currency backed by the “full faith and credit” of the government and not backed by, valued in, or convertible into gold.
Proponents of the gold standard argue it provides long-term economic stability and growth, prevents inflation, and would reduce the size of government. They say a gold standard would restrict the ability of government to print money at will, run up large deficits, and increase the national debt. They say the economy has historically performed best under a gold standard.
Opponents argue a gold standard would create economic instability, spur periodic economic deflation and contraction, and hamper government’s ability to stimulate the economy and reduce unemployment during recessions and financial crises. They say returning to a gold standard would be extremely difficult given the scarcity of gold and could severely harm the already fragile US economy. Read more…
