Essay on The Federal Reserve System Of The United States Economy

1053 Words Apr 6th, 2015 null Page
The use of the gold standard ended in 1971 and since then the U.S. dollar has been solely endorsed by the full faith of the government. This decision made by President Nixon has caused an ongoing debate within the country on whether the use of the monetary fiat system has done more harm than good to the United States economy. The gold measure was an exchange rate system that defined the U.S. dollar with gold currency. Subsequently, America’s inflation, government control, and the national debt has all increased. The return of the gold standard would prevent these issues from growing and help restore the economy to a positive financial standpoint.
The inflation rate in America has significantly increased since the end of the gold standard. The Federal Reserve System, which is a privately-owned, centralized bank given authority by the U.S. Congress to issue currency and set interest rates, can produce money when desired. Inflation is when the supply of capital increases faster than the economy expands, which results in higher prices. The supply of the fiat money is exogenously controlled by the government so that the government chooses the inflation rate (Canto, Findlay, and Reinganum, 6). Three ways that the government increases money supply is through expanding the money stock by monetizing the federal debt, utilizing open market operations, and distributing credit enlargements through commercial bank loans to private borrowers. Lewis Lehrman, of the Lehrman Institute,…

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