Spring Break
Bring back the gold standard and lose the paper trail
Adam Brown
Issue date: 9/24/08 Section: Opinion
With the recent downturn in America's financial markets, you may be asking yourself why the American dollar is weak. I have come to the conclusion that one of the main reasons is the result of our fiat paper money standard. Instead of letting inflation be dictated by the free market, whose different variables would weigh on rates independently, our nation's rates are dictated by the Federal Reserve, an entity that is held accountable to no one.
The Federal Reserve does this by buying bonds in banks, which gives banks more money to lend out. Competition from other banks and the need to loan this money out drives interest rates down. The Federal Reserve then writes and cashes the check on itself and prints the money up without taking into account what happens when an excess amount of money is printed.
Banks also loan money out to those who shouldn't be given loans. When times are hard and the dollar is cheapened by inflation, the housing market slumps, and homeowners struggle to make payments, as evidenced by the recent mortgage crash.
History has shown us with central banking systems, such as in Germany after WWI and the continental currency during the Revolutionary War, when there is an excess of money, the currency will be worth less than before, forcing inflation in the cost of goods and services. This is why many of the founding fathers hated paper money. Prices on everything rise, but raises in pay are last to rise, so the working class is the last to receive the new money.
If a gold standard was brought back to replace the paper money system, I believe that it would be a rough road, but that it would pay off in the end. Gold is finite, and as a precious metal that has real value, it cannot be easily produced nor counterfeited as easily as paper. Due to the limited amount of gold and silver, the American dollar would have a steady and strong buying power.
Also, with a limited supply of real money, we would be forced to not borrow and print money. As a result, it would also force us to end unnecessary wars, end runaway government spending, end foreign aid and reduce our empire. Switching from paper to gold would be hard economically at first, but it is a sure way to keep the American dollar strong and keep our economy strong.
For further reading, consider "The Case Against the Fed" by Murray Rothbard and "The Revolution: A Manifesto" by Ron Paul. I'm not an expert at economics, so if any student or professor has a better idea of how the Fed runs or about the gold standard, sound off and let's hear about it.
The Federal Reserve does this by buying bonds in banks, which gives banks more money to lend out. Competition from other banks and the need to loan this money out drives interest rates down. The Federal Reserve then writes and cashes the check on itself and prints the money up without taking into account what happens when an excess amount of money is printed.
Banks also loan money out to those who shouldn't be given loans. When times are hard and the dollar is cheapened by inflation, the housing market slumps, and homeowners struggle to make payments, as evidenced by the recent mortgage crash.
History has shown us with central banking systems, such as in Germany after WWI and the continental currency during the Revolutionary War, when there is an excess of money, the currency will be worth less than before, forcing inflation in the cost of goods and services. This is why many of the founding fathers hated paper money. Prices on everything rise, but raises in pay are last to rise, so the working class is the last to receive the new money.
If a gold standard was brought back to replace the paper money system, I believe that it would be a rough road, but that it would pay off in the end. Gold is finite, and as a precious metal that has real value, it cannot be easily produced nor counterfeited as easily as paper. Due to the limited amount of gold and silver, the American dollar would have a steady and strong buying power.
Also, with a limited supply of real money, we would be forced to not borrow and print money. As a result, it would also force us to end unnecessary wars, end runaway government spending, end foreign aid and reduce our empire. Switching from paper to gold would be hard economically at first, but it is a sure way to keep the American dollar strong and keep our economy strong.
For further reading, consider "The Case Against the Fed" by Murray Rothbard and "The Revolution: A Manifesto" by Ron Paul. I'm not an expert at economics, so if any student or professor has a better idea of how the Fed runs or about the gold standard, sound off and let's hear about it.
Viewing Comments 1 - 1 of 1
Robin Crandall
posted 10/08/08 @ 11:50 PM CST
Why did Congress give it's constitutional authority to create currency to the FED? In an open democracy, how is it that the FED is allowed to meet in secret? How did the whole concept of "fiat" money,i. (Continued…)
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