The gold standard – Do you Agree with Jack Kemp or not? The economists usually refer gold, silver, platinum and palladium to elite group of precious metals. Precious metals in general and gold in particular are specially ranked among other mineral resources. Gold traditionally was considered one of the first precious metals known to mankind. From the very beginning gold was used to produce precious jewelry, and, further, people started to use it as a base of monetary system. In XIX century the major part of world countries introduced so-called gold standard, where the exchange rate was tied to gold. During the period of Great Depression the major part of countries had to refuse from using gold standard.
The countries hoped that such step could allow them overcoming decline in the world economy. Further, gold again became the direct participant of the monetary system, when in 1944 Breton-Wood Agreement fixed new principles of monetary policy. According to the agreement, US dollar became the main stand-by currency. Exchange rate of other countries was firmly tied to dollar. Dollar, in its turn, was tied to the gold. The gold standard was valid up to 1971, when President of the United States Nixon cancelled convertibility of dollar to the gold. Gold considerably lost its significance for world monetary system.
However, modern economists and politicians star to advocate a return to the gold standard. Their proposal is based on the affirmation that return to the gold standard is a good way to keep inflation low and maintain economic growth and stability. According to Jack Kemp, former congressman and the Republican vice-presidential nominee in 1996, American government should accept the fact that our inability to manage fiat currencies is causing the global economic slowdown (n.p.).
The Essay on The Gold Standard
The Gold Standard Througout most of the 1800's, the United States utilized a bimetallic system of money. Though it was focused on both gold and silver, it was essentially using a gold standard because very little silver was actually traded. A real gold standard came to fruition in 1900 after the passage of the Gold Standard Act. The gold standard was used from that time until it came to an end in ...
He quotes the words of Ronald Reagan who said that he didnt know any great world nation that refused from using the gold standard and remained great. The idea of return to the gold standard is really not new. George Sores examined the crisis of the world capitalism and underlined that exchange and currency markets play destabilizing role in the world economy. Really, the fluctuations of exchange rates inadequately reflect economic situation of the country.
Yet, the influence of these rate exchange fluctuations is quite high. No doubt that America, the country that is interested in export and import, has difficulties with future prognoses concerning foreign currency. The return to the gold standard can have influence on monetary and credit policy. The emissive bank will be deprived of independence because the emission of dollar will be tied to the gold. The gold standard, in its turn, implies free conversion of dollar to gold and vice versa. It should be taken into account that after implementation of the gold standard, further economic processes in the country will differ from those in causa fluctuating currencies.
The country will definitely require global re-examination of methods of management and stimulation of the economy. What are the possible prognoses of far-reaching consequences? The recent events in Iraq confirm that demand for the gold inevitably increases during the moments of instability. Correspondingly, the currency that will be tied to the gold standard will automatically become the world reserve currency. This currency will be so-called financial etalon for other world countries. Dollar is the world reserve currency. However, due to its active contraposition to Euro, American should undertake all efforts in order to keep the leading positions. America should keep the leading position of dollar in the world economy. Further, our country should undertake all attempts in order to overcome the rising inflation.
The Essay on Third World Countries
World' Countries today? Who should be held responsible for these problems? Why? What has Canada done to help 'Third World Countries'? There has always been a dominant country in the world that sets the economic standard throughout powerful countries. Canada has always been a top rated economic country, usually behind the United States and other large Commonwealth countries. Starting back in the ...
Floating currencies are more dangerous for financial stability of the country as far as their fluctuations influence price inflation. Besides, Jack Kemp considers that American central bank makes mistakes in the discretionary management of floating currencies (n.p.) and such situation puts the entire world economy at risk. The gold standard can also help the country to determine how much liquidity markets demand. Jack Kemp brings in evidence sad experience of the Bank of Japan that couldnt determine the requirement for liquidity markets and contributed to prolonging and deepening Japans monetary inflation (n.p.).
The only way to manage a currency is to tie it to the gold. The gold can be used as a reference point and a new monetary standard for a new millennium (n.p.).
The gold standard will allow the citizens of America buying and selling gold at will, and the government will forget about raising or lowering interest rates and simply add liquidity (buy bonds) when the price of gold tries to fall and subtract liquidity (sell bonds) when it tries to rise (n.p.).
Besides, the will be no need for American government to maintain a large stock of gold or to redeem gold and dollars on demand as far as the citizens will be able to do it in the marketplace.
In such a way, it will limit the role of central bank. Besides, the return to teh gold standard would restore economic security by stabilizing prices, smoothing business cycles, and rewarding savers and capitalists who think ahead and invest in the future (Rockwell, n.p.) Bettina Bien Greaves considers that the return to the gold standard meets only with ideological problems. According to her, the most important issue is the change of ideology because people consider that the return is too difficult and there are just too many people in the world [] and the economy is too complex (n.p.) The return to the gold standard is quite simple. The country will meet no difficulties on the way. The gold will serve as a financial anchor able to protect the US dollar. World monetary system will receive a perfect system of protection.
The Essay on If the gold standard was in use today, would it hinder economic growth
The gold standard refers to a monetary system in which the unit of account of money will be fixed with the weight of gold. There are many people who argue that the gold standard should be implemented to bring down the inflation. By fixing the supply of money with gold, the government will not be able to issue money without having gold in reserve. However, on the other hand, there are experts who ...
Financial stability, minimal inflation, self-supporting budget all these goals can be achieved by returning to the gold standard. America has problems with its economy and return to the gold standard can be merely is the only thing to do. American still has great potential and perspectives of more perfect financial stability. There is no alternative to the gold standard: our economy needs a golden anchor.
Bibliography:
– Greaves, Bettina Bien. (November 1995).
Features: How to Return to the Gold Standard. The Freeman: Ideas on Liberty.
45:11. Retrieved October 23, 2006. http://www.fee.org/publications/the-freeman/articl e.asp?aid=4848 – Kemp, Jack. (June 28, 2001).
Our Economy Needs A Golden Anchor. Wall Street Journal. Retrieved October 23, 2006. http://www.freerepublic.com/forum/a3b3b649a0c7b.ht m – Rockwell, Llewellyn H.
(19996).
The Light Party Supports Our Return to the Gold Standard. Retrieved October 23, 2006. http://www.lightparty.com/Economic/GoldStandard.ht ml.
