Essay on Gold Stander

Submitted By xuzheng19880626
Words: 482
Pages: 2

Eco 427
Mini Paper: Should U.S. to return to the Gold Standard?
Xu Zheng

What is Gold standard?
The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. There are three distinct types of "gold standards". The gold specie standard is a system in which the monetary unit is associated with the value of circulating gold coins or has the value of a certain circulating gold coin along with other coins made of less valuable metal.
Should U.S. back to the Gold standard? In my opinion U.S. should not back to the Gold standard.
For the domestic of U.S. the debt crisis and the U.S. government keeps huge spending on frequent foreign wars it lead Fed (Federal Reserve System) continued Banknote Printing. So the gold convertibility of bank notes will be more and more difficult which undermined the principle of free exchange. The subprime mortgage crisis is still has impact on U.S. and the employment rate remains in the doldrums so that the Financial environment is erratic. The export reduced serious that capital flight will cause the massive outflow of gold.
For the International side As U.S. dollar is Global currency the European debt crisis affecting international financial markets that some government credit cannot be guaranteed. The demand of U.S. dollar is huge that some people in small country using dollar even more than their national money. The dollar has lower inflation than their national money did. If U.S. to return to the gold standard, the Fed will face huge principal savings pressure that is difficult to control the outflow of gold.
In addition 2/3 of the world’s gold stock is occupied by few super countries that weaken the power of other national based monetary system. It will inevitably lead to damage the freedom gold casting and freedom circulation.