Fiat Currency And The Gold Standard Case Study

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Fiat currency and the Gold Standard
By historical definition currency has either been backed by an asset (i.e. gold) or backed by government guarantee in credit, which is essentially just promise of value. Money being backed by gold or other assets has consistently retained its value and inflation rate. On the other hand, “fiat currency” (money not guaranteed in value by physical commodity) has shown to be more elastic to cater to economic needs. There are cons as well: gold is a very scarce resource. When the world relied on the gold standard, the countries with large reserves of gold prospered while the developing nations fell behind because they lacked gold. Fiat currency is no saint in the matter of our economy either. It has been manipulated
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currency history, otherwise known as the Bretton Woods Agreement. Under this monetary policy, the Dollar retained its value much better than the fractional reserve system. For instance, in 1950, with 35 dollars (current day 345.69$), you could fill your refrigerator with groceries, and buy all the bathroom/hygiene products you need. In addition to this, the Bretton-Woods agreement fueled the growth of new business, homes bought by baby boomers, the employment rate, and the overall economy of the decade by keeping inflation incremental. Although gold could not be exchanged for dollars at banks anymore, the standard was still in place, and its positive results ensued. The ‘50s was the last decade of true economic prosperity. Afterward, U.S. currency took a landslide with the dollar shrinking to less than 1/3rd of its value by 1980. The depreciation of our market was all due to corrupt government policy, mass scale perpetuation of credit, and the gold link cut. The most viable solution would be a gradual, well thought out return to the gold standard, which would decrease inflation rates and instill more value in our currency over …show more content…
Financial analysts think it foolish to intertwine gold into U.S. monetary policy because they ignore the facts. Fiat currency does have its advantages (mainly in assisting government and corporations). It also helps finance small business with loans and FDIC insurance in the event that the owners lose their bank savings. Social programs flourish, and so do struggling communities with government aid and taxpayer funding. But why devalue our money with unnecessary printing when we can strengthen it with a commodity that we already have? The United States Treasury Department holds 11,041,059,958.46$ in gold, enough to finance a return to the Bretton-Woods agreement. In addition, gold prices are strong and stable above 1,000$ per oz. That will keep the dollar’s purchasing power stable. The only obstacle that we would face prior to readopting the gold standard would be surmounting the national debt of 18,000,000,000,000$. We know the advantageous nature of gold, we’ve seen it throughout history and we’ve also experienced the economic decline of the fractional reserve banking system. The benefits include more value/less inflation, lower unemployment rate, and higher GDP. Under this system, there is less cash available to finance fraudulent wars and no chance for giant corporations like Fannie Mae/Freddie Mac and Citi group to be bailed out due to

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