The Gold Standard was a monetary system previously used by many countries wherein domestic currency is fixed on the value and specified amount of gold. The bimetallic system was more commonly used wherein silver and gold coins were both circulated but with the former being used as money while the latter being treated as a basis of value. It is quite noteworthy that although no country presently uses the gold standard, many still maintain large reserves of gold.
The shift to the gold standard to the fiat currency has resulted to a tendency towards inflation because of the ease in printing money even without an equivalent in valuable commodity. In gold standard, money supply can only increase at the rate in which gold supply increases. The shift has allowed the Federal Reserve to indulge in deficit spending which is considered one of the major causes of woes in the economy. Unless a realistic solution is presented for the purpose of preventing expenditure beyond actual capability, the return to gold standard may be something worth considering.
Originally posted on August 30, 2012 @ 4:30 am