Why Shouldn T The Gold Standard Be Legalized

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

Since there were several bills that he vetoed that could have helped hundreds of citizens out the Depression, people no longer liked him. That year Franklin D. Roosevelt (FDR) was elected as president. After taking office in March 1933, FDR declared a nationwide bank standstill, to prevent a bank run. FDR would speak to the public over the radio called fireside chats, where the first ones were about the banking crisis. A new act was passed called the Emergency Banking Act, to try and help the Great Depression. The purpose of the act was to allow the government to see which banks were financially stable and allow those banks to open. The impact was the people started to have faith in the banks again, and slowly started to use them again. FDR actions had helped the people and the nation’s banking crisis was coming to an end. (Great Depression

That was then. Now we use fiat money or non-commodity money which is just another way of saying, money not backed by gold or any other commodity. So the big question is, how is our money valued?

The Great Depression (1929-1939) was the deepest and longest-lasting economic downturn in the history of the Western industrialized world. However, many wonder what was the cause of such economic downfall. According to Source A one of the reasons was that “There was a general rush by a large portion of our population to turn bank deposits into currency or gold - - a rush so great that the soundest banks

The credit system of the country had ceased to operate, and thousands of firms went into bankruptcy (Born...,.12). Something had to be done that would provide for a flexible amount of currency as well as provide cohesion between banks across the United States. (Hepburn, 399) This knight in shining armor, as described in the story of the bank run, was the Federal Reserve. The Federal Reserve Act of 1913 helped to establish banks as a united force working for the people instead of independent agencies working against each other. By providing a flexible amount of currency, banks did not have to hoard their money in fear of a bank run. Because of this, there was no competitive edge to see who could keep the most currency on hand and a more expansionary economy was possible.

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

On December 23, 1913, due to a series of financial panics, the Federal Reserve System was created. The Federal Reserve, or the Fed, is the central banking system of the United States of America. The major financial crisis that mainly created the Fed system was the Panic of 1907, also known as the Knickerbocker Crisis. During the Panic of 1907 the New York Stock Exchange fell almost 50% from its peak the previous year. The Great Depression of 1930 was a key factor in the changes to the system. Through the years the Feds’ roles and responsibilities have expanded and its structure has evolved. Although the system was created because of an crisis, the U.S. Congress has established three key objectives for the monetary policy in the federal Reserve

During the years of 1893 to 1898, the United States went through an economic depression that severely damaged the economy. The final days of the Harrison administrations consisted of the financial failure of the Philadelphia and Reading Railroad in January of 1893, the United States was in deep trouble. After the financial railroad of Philadelphia and Reading Railroad, the National Cordage Co. Railroad failed in May, the Erie Railroad in July, the Northern Pacific in August, the Union Pacific in October and the Atchison, Topeka and Santa Fe Railroad in December (Watkins, n.d.). There was an average of 24 businesses failing per day in the month of May (Schoonover, LaFeber, n.d.). In addition, the Sherman Silver Purchase Act and the “Billion Dollar Congress” caused the nations gold reserved to decline as the government began to use a bimetallic monetary system.. The nations reserves dropped under $100 million after President Cleveland was sworn in March of 1893. People began to panic and this led to a plunge in the stock market and European investors began to pull their funds from the United States frightened by the weakening economy. This led to a four year depression in which 15,000 companies and 600 banks closed with about one billion dollars worth of bonds defaulted (Schoonover, LaFeber, n.d.).

Money markets slammed on October 1929 and this is what caused the Great Depression to happen. For a length of time the country was at the point where signs of troublesome were shown such as joblessness; which turned out to be a gigantic issue for the Americans as well as for different nations. “By 1933, unemployment was at twenty-five percent” (FDR). Never had the highs been higher and lows been lower for the economy. With cash going away individuals started to live in hardships with no real way to earn money. Hoover being president at the time, had great hopes for the economy of America, once this catastrophe hit he was not necessarily blamed for the troubles happening. The nation reacted to The Great Depression in many ways. People were let down by President Hoover which effected the economy, children began to impact society, and families fell apart. Some people turned to music, while others turned to violence.

Money has been been a big central network in developing our country today. Back then people used to barter items with others, so they could get different things they may need things like corn, fish, wheat, and etc. Salt was another commodity money salt was very difficult to obtain mainly in the inner countries and it is very good to cook with because it adds flavor to your food. In the south people became so wealthy because they didn't use money either there was a system called “Mit’a” from the age of 15 young Incan males had to do physical labor to state of a set of days. They built public buildings and places in return the government all the basic necessities of life food, clothing, tools, housing and, etc. The first known currency

The Gold Rush was often described as the making of a country, as it was the leading factor of wealth to Australia’s economy. According to the Australian Government, Victoria contributed to one-third of the world’s gold output, which meant that just the gold industry accumulated to more than 18 million dollars to the Australian economy (Australian Government, 2015). In January 1925, Australia economy was halted by a gold standard known as the Bretton-Woods gold-US dollar exchange system to restrict money supply. Given that many of the world’s countries were operating on a gold standard, the gold in Australia was largely controlled by central banks which limited individuals to buy and sell gold. It was not until 1971, with the collapse of the gold system, which formed a new growth

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.

The gold standard regulated the quantity and growth rate of the nation’s money supply. The Federal Reserve was charged with the duty of regulating the inflow and outflow of gold by increasing or decreasing the discount rate. The discount rate is the interest rate the Fed charges depository banks that borrow reserves from it. An outflow of gold meant an increase in the money supply and this was triggered by a decrease in the discount rate. On the other hand an inflow implied an increase in the discount rate and hence a restriction of the money supply. The activities of the Federal Reserve with regard to the gold standard were to be in accordance with all other countries on the standard such as the United Kingdom in other for the system to work effectively.

They kept the dollar proportional to the amount of gold the United State's possessed in its treasury and in the banks. The shift from the gold standard allowed an excess of dollars to be printed, thus causing inflation. Inflation caused the value of the US dollar to diminish and led to an insecure value of the dollar. The insecurities of the US dollar led to the Stock Market Crash in 1929. In addition, American spending greatly contributed to the Stock Market Crash. In the 1920s, Americans developed spending habits related involving an increasing amount of debt. The factory development during WWI shifted to a development of consumer goods in the 1920s. Consumer goods thus encouraged the spending of the American dollar. Many Americans went into debt pursuing the many luxuries of the 1920s. The increased amount of debt brought the stock market to crash in 1929. The shift from the gold standard, inflation rates, and excess consumer spending provoked the Stock Market Crash of 1929.

There are many alternatives to money. Gold for one has been the alternative for money for centuries. Gold coins are the smallest unit of currency that can actually be traded with another commodity. Since gold follows the 6 properties of ideal money (durability, Portability or Transportability, Divisibility, Uniformity, Non counterfeit ability, Acceptability