What Was The Pros And Cons Of The Gold Standard

The Gold Standard was the framework by which the value of cash was characterized in terms of gold, for which the money could be traded. The Gold Standard ended up being deserted in the Depression of the 1930s. Friedman felt that,“The gold standard is not feasible because the mythology and beliefs required to make it effective do not exist. This conclusion is supported not only by the general historical evidence referred to but also by the specific experience of the United States” ( “The Gold Standard:Please Stop”).Economists who contradict the Gold Standard may perceive what must be accomplished with a specific end goal to make a centrally controlled paper standard better than a decentralized Gold Standard. Milton Friedman poses the key question: "How can we establish a monetary system that is stable, free from irresponsible tinkering, and

Twenty-five years of broad economic expansion and prosperity comes to an abrupt end in the 70s as it was replaced by crawling growth and inflation. This sudden shift was due two factors; a mix of long term processes and unexpected shocks. Many long term processes contributed to the economic drawback. Manufacturing was gradual declining in the United States relative to the rest of the world after World War II. In 1971, for the first time in the 1900s, the United States was in an export trade deficit. This was partly because the dollar was linked to gold making products more expensive abroad. Nixon took the United States off the gold standard to make American goods cheaper. Unfortunately, this was not very effective because other nations had significantly cheaper labor and raw materials. This growing competition put many firms out of business. This was especially hurtful for the manufacturing industry, which saw a huge decrease of workers. After success in the 50s and 60s such as pensions and paid vacations, many unionized workers also took a hit in 1970s. Many companies started eliminating high paying jobs and moving jobs to cheaper areas of

There was pushback from the Federal Government, President Grover Cleveland included, wanted to keep the money supply fixed in gold, held in the hand of the government (Doc D). Monopolization of the wealth supply was pandemic in the United States in the late

This dip caused deflation, which hurt the farmers because prices went up and they believed that inflation would be better. The existing currency system in the late nineteenth century was the Gold Standard. This meant that gold was the only item backing currency in the United States. Republicans in the government, such as William McKinley favored the Gold Standard. In McKinley’s acceptance speech (Doc B), it states “Free silver would not

In 1892 Mary E. Lease talks about the low prices in farming and how politicians mislead them and tell them decreasing prices are from overproduction(Document G). Even though Lease thought otherwise data at the time was contrary. Document A shows this. For wheat as production increased price per bushel decreased, for cotton for the most part as production increases the price per pound decreases, for corn from 1870-1885 as production increased price decreased. 1900 in the outliner because production increased and so did price. This is way in Document J farmers are against the gold standard. Big cities were for the gold standard because it helped with industrialization but farmers were against it for a plethora of reasons. Their complaints were gold's inflexibility. When farmers brought their crop to market in the fall, an inflexible currency would cause a shortage of money which would drive down prices. Document H talks about the unpredictability of farming and how this can affect prices of the product. And based on the price of the product it depends how much food a family can keep for themselves. So not only is the production of the product to sell unpredictable but so is the welfare of the family based

During his presidency, William McKinley had many domestic affairs to deal with. Amid the most significant issues, McKinley’s tariff legislation was a big one. Bimetallism was also an important issue. The McKinley administration went after an agreement that would include silver, as a standard European currency. McKinley didn’t like the idea so he began promoting a completely gold-based currency. In 1900, he signed the Gold Standard Act, which officially ended the use of silver as a standard of United States currency and established gold as the only standard. This still affects us today because although no country uses the gold standard, there is a rising support for its reintroduction in the hope of regulating U.S.

The Federal Reserve Bank was dependant on the gold standard, and needed to have an equivalent of gold worth 40 percent of the bills it issued. Citizens began losing faith in paper money and went to the bank to exchange it for gold at rapid rates. The bank didn’t have enough gold to keep up with the demand and had reached the limit of bills that could be printed. Returning gold to citizens put a further strain on the economy because of the lack or resources. “In March 1933, when the Federal Reserve Bank could no longer honor its commitment to convert currency to gold, President Franklin Roosevelt declared a crisis.” (Richardson, 2013) Executive Order 6102 essentially suspended the gold standard and stopped gold outflows and made citizens return the gold they

This depression lead many to say that gold was inadequate to use in a capitalist system. Many countries stayed with the gold system thinking they could patch up the gold standard, as it had worked perfectly before World War I and it was still the most advanced economic policy to date, so many countries stayed on the gold standard. What many countries didn’t expect, which would lead to the downfall of the gold standard, was World War II.

The Great Depression in the United States was preceded by a normal post war recession. Following that, there was a stock market crash in October 1929. Soon after U.S. stocks declined, the effects spilled over into European and South American countries. Japan took a hit too. President Hoover’s resolution to loan money to banks proved unsuccessful.

“A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.” – Ross Perot. The words of the 1992 Presidential candidate still ring true today, and in fact they have since the abolition of the gold standard in 1971 by President Nixon. Ever since that warm August day the United States has been on a death plunge into immaculate amounts of debt. However, by the establishment of the silver standard in the way I will explain to you today, makes it clear that action on such a policy must be taken.

First, the United States started currency reform so it would work with the modernized financial system. The second factor the nation put into place was taxing foreign goods coming into the United States. This helped the nation have more income to fix the mess of the depression quicker. Thirdly, businesses that had expendable cash employed local people for odd jobs to help in their local area. The forth factor was the population growing; the larger amount of people helped the balance of production and consumption. With the economy balancing out, people started getting work again; which made it so there were more people buying the goods being produced. The last major factor was the high demand for cotton and other products in other countries. The demand made it so the nation could produce large amounts of products and sell those products in other countries on top of in the United States. According to “A Short history of the International Economy since 1850” by William Ashworth; “one government after another was instituting enquires as to what had gone wrong – enquiries which produced the most varied and often unconvincing explanations.” (p. 212) For example, some sources explain when the currency was changed to the gold standard it did more harm than good: but others explain that the gold standard did a significant amount of good for the economy. The Webster dictionary defines the gold

At the end of World War Two, the Bretton Woods system was established for world currencies. This system involved countries fixing their currencies to the US Dollar, which in turn was tied to the value of gold at a fixed exchange rate of $35 per ounce. As this was a fixed exchange rate system it effectively forced countries to pursue a certain monetary policy, in order to keep their currency pegged to the Dollar and in turn the value of gold.

Eight decades has elapsed since the outbreak of the Great Depression, but the continuing mystery of its cause keep provoking academic debates among scholars from various fields. Eichengreen and Temin joint the debates by linking the gold-standard ideology with the cause of the Great Depression. They content that because of this ideology monetary and fiscal authorities implemented deflationary policies when the hindsight shows clearly that expansionary policies were needed. And these contractionary policies consequently pushed the stumbling world economy into the Great Depression. Eichengreen and Temin put heavy weight on analyzing why the prewar gold standard could be a force for international financial stability while interwar gold

Gold was used for many different things and it was valued very much during the past and even now it is valued. A common use of gold was when it had been turned into

1. The gold standard and the money supply. Under the gold standard all national governments promised to follow the “rules of the game”. This meant defending a fixed exchange rate. What did this promise imply about a country’s money supply? A country’s money supply was limited to the amount of gold held by its central bank or treasury. For example, if a country had 1,000,000 ounces of gold and its fixed rate of exchange was 100 local currency units per ounce of gold, that country could have 100,000,000 local currency units outstanding. Any change in its holdings of