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Gold standard would be a check on inflation

Staff Columnist

Published: Monday, September 27, 2010

Updated: Friday, August 23, 2013 16:08

Today, worries about inflation are justifiably widespread. In the past, there was a check in place to prevent inflation from spiraling out of control: sound money. Unlike the Federal Reserve Notes used in our daily transactions today, which are actually nothing but pieces of paper, sound money is backed by a commodity, usually gold. The advantages of sound money over fiat paper money are numerous.

Simply stated, gold is highly valued by people – paper is not. The more Federal Reserve Notes in circulation, the less each individual note is worth. Inevitably, in order to finance the government's ever-growing welfare state and its increasing interventions overseas, the Fed will be forced to print more money. How does this impact you? As the Fed prints more money, you will be able to buy less and less with a one-dollar bill until you won't be able to buy anything. As the French Enlightenment thinker Voltaire noted, "Paper money always returns to its intrinsic value – zero."

Although the value of gold can decrease, gold will never be worth zero. As long as people continue to regard gold as an extremely valuable metal, a gold-backed currency will always have some intrinsic value.

A gold standard means each dollar bill would be backed by gold. Thus, our currency would be worth more than it is today, and the purchasing power of a dollar bill would be higher than it is today. People would afford more goods and our country's overall standard of living would improve considerably.

Furthermore, a gold standard would restore the American ideal of limited government by providing a check on inflation. As Ron Paul and Lewis Lehrman note in "The Case for Gold," there is a fixed amount of gold in the world; consequently, only so much money could be printed. Unless politicians wanted to commit political suicide by raising taxes, unconstitutional government programs would inevitably have to end. For instance, there would be no money to fund unnecessary wars that weaken our national defense. Likewise, entitlement programs and corporate welfare programs that unjustly punish the judicious and reward the irresponsible would have to end.

If the United States adopted sound money, the term "dollar" would be defined as a fixed quantity of gold. Suppose a dollar was defined as five grams of gold. This would mean that one could go to a bank and exchange a one-dollar bill for five grams of gold, or vice-versa. The beauty of this is that the definition of a dollar would be fixed, and people would have a much more accurate idea of where they stand for the long term.

No longer would the corporate moneyed interests be able to change the definition of the dollar whenever they pleased. No longer would parents have to worry about whether the money they are saving for their children's college education would hold its value for when they need it. No longer would a college student saving to pay off his or her student loans have to worry about the possibility of his or her money becoming worthless, leaving him or her unable to pay the loans. Opponents of a gold standard argue that a fixed definition of the dollar would not allow for the creation of enough money to accommodate population growth. This argument is nonsense because it accepts population growth without confronting it.

According to the UN, there are almost seven billion people in the world today. By 2050, the world population is expected to be over nine billion. This is unsustainable. Overpopulation is a very real environmental crisis. We need a monetary system that forces people to live within their means by having fewer children, not a system that allows the population to spiral out of control. If we had a gold standard, people would be forced to have fewer children. Without a doubt, we must return to the gold standard.

 

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