return to the gold standard?
DESCRIPTION
Return to the Gold Standard?. Ursula Bettendorf Shannon Bowen Kristina Appel Pepe Montoya Midori Maxwell Eva Jimenez. Gold Standard: Introduction to pros. The Gold Standard Promotes Better Consumer Confidence Gold is a commodity. It will Always have Value. - PowerPoint PPT PresentationTRANSCRIPT
Return to the Gold Standard?Return to the Gold Standard?
Ursula BettendorfUrsula Bettendorf
Shannon BowenShannon Bowen
Kristina AppelKristina Appel
Pepe MontoyaPepe Montoya
Midori MaxwellMidori Maxwell
Eva JimenezEva Jimenez
Gold Gold Standard: Introduction to prosStandard: Introduction to pros The Gold Standard Promotes Better Consumer The Gold Standard Promotes Better Consumer
Confidence Confidence – Gold is a commodity. It will Always have Value.Gold is a commodity. It will Always have Value.
– Gold has a Higher Purchasing PowerGold has a Higher Purchasing Power
Gold as a Single World CurrencyGold as a Single World Currency– Can be Used to Further Facilitate International TradeCan be Used to Further Facilitate International Trade
– Contains a Self Regulating Mechanism Contains a Self Regulating Mechanism
Fiat Money is Government ControlFiat Money is Government Control– Government has Unlimited Control Over Monetary Government has Unlimited Control Over Monetary
PolicyPolicy
– Redistributes Wealth Through Creation of Additional Redistributes Wealth Through Creation of Additional Currencies and CreditCurrencies and Credit
Gold Standard: Introduction to consGold Standard: Introduction to cons
Too many problemsToo many problems– Too costlyToo costly– Limited supplyLimited supply– Liquidity trapLiquidity trap– Deflationary biasDeflationary bias
Positive benefits of fiat Positive benefits of fiat currencycurrency– SimplicitySimplicity– Government control to Government control to
facilitate economic facilitate economic growth and stabilitygrowth and stability
Gold Standard: Introduction to consGold Standard: Introduction to cons
Historical precedent of failureHistorical precedent of failure– Caused recessions that deepened Caused recessions that deepened
into Great Depressioninto Great Depression» Countries which abandoned gold Countries which abandoned gold
standard earlier than the U.S. standard earlier than the U.S. largely escaped the Great largely escaped the Great DepressionDepression
– Constricted economic growthConstricted economic growth» Bank runsBank runs
Gold Standard: DebateGold Standard: Debate
Less complications with the Gold Less complications with the Gold StandardStandard
More Benefits with Fiat MoneyMore Benefits with Fiat Money Gold is the customarily accepted Gold is the customarily accepted
medium of exchangemedium of exchange Fiat Money is a More Appropriate Fiat Money is a More Appropriate
Medium of Exchange, and More Medium of Exchange, and More Customarily Accepted Customarily Accepted
Gold Standard: DebateGold Standard: Debate
Negative Side of the Fiat Negative Side of the Fiat CurrencyCurrency– The costs imposed on The costs imposed on
societysociety– The costs imposed by The costs imposed by
special interest groupsspecial interest groups– The costs in the form on The costs in the form on
inflation –induced inflation –induced misallocations of resourcesmisallocations of resources
– The costs incurred by The costs incurred by businessmenbusinessmen
Gold Standard: DebateGold Standard: Debate
Fiat Standard can Expand Money Supply to Fiat Standard can Expand Money Supply to Counter UnemploymentCounter Unemployment– Credit Expansion, Foreign Aid, Trade, and Government Credit Expansion, Foreign Aid, Trade, and Government
Aid Programs Are also EncouragedAid Programs Are also Encouraged
The Standard can Manipulate the Currency to The Standard can Manipulate the Currency to Avoid Recessions and DepressionsAvoid Recessions and Depressions
Under the Gold Standard, the Automatic Under the Gold Standard, the Automatic Adjustment Mechanism Causes Outflows which Adjustment Mechanism Causes Outflows which Hurt the EconomyHurt the Economy
Gold Standard: DebateGold Standard: Debate
Misconceptions linked with the Gold Standard and Misconceptions linked with the Gold Standard and the Great Depressionthe Great Depression– The idea that the Pancea for debt is creditThe idea that the Pancea for debt is credit
– Prosperity is a product of credit rather than the increase Prosperity is a product of credit rather than the increase and exchange in wealthand exchange in wealth
Gold Standard: DebateGold Standard: Debate The U.S. Suffered 8 Depressions while on The U.S. Suffered 8 Depressions while on
Commodity Money Commodity Money Gold Standard was the Root of the Problem Gold Standard was the Root of the Problem
in the Great Depressionin the Great Depression– In the 1920’s there was Nothing to Force Surplus In the 1920’s there was Nothing to Force Surplus
Countries into Higher Prices to Manage the Balance of Countries into Higher Prices to Manage the Balance of Payments Payments
– President Roosevelt Cured the Great Depression by President Roosevelt Cured the Great Depression by Changing the Fixed Price of GoldChanging the Fixed Price of Gold
– Countries that weren’t on the Gold Standard in 1929 or Countries that weren’t on the Gold Standard in 1929 or that abandoned it, escaped the Great Depression. Those that abandoned it, escaped the Great Depression. Those that didn’t, suffered the most.that didn’t, suffered the most.
Conclusion to the ProsConclusion to the Pros
The Great Depression caused by other The Great Depression caused by other factors besides gold standardfactors besides gold standard
Less government interferenceLess government interference Lack of historical information on the fiat Lack of historical information on the fiat
systemsystem
Conclusion to the ConsConclusion to the Cons Depression Caused by the Gold StandardDepression Caused by the Gold Standard Experienced Recessions Under the Gold StandardExperienced Recessions Under the Gold Standard No Government ControlNo Government Control
– Can’t Expand Money to Finance the Country Can’t Expand Money to Finance the Country – No Welfare or Public BenefitsNo Welfare or Public Benefits– In Reality, No One can Control the Supply of GoldIn Reality, No One can Control the Supply of Gold
Costs of GoldCosts of Gold– MiningMining– Limited Supply Limited Supply
Governments are Unlikely to Return to the Gold Governments are Unlikely to Return to the Gold Standard, because it would Mean Turning Standard, because it would Mean Turning Monetary Policy Over to Uncontrollable Swings Monetary Policy Over to Uncontrollable Swings in the Stock of Gold. in the Stock of Gold.
Conclusion to the ConsConclusion to the Cons
Using Gold as a Commodity to Barter or to Using Gold as a Commodity to Barter or to Directly Support the Value of Paper Currency is Directly Support the Value of Paper Currency is Unrealistic and Impractical to Effectively Stabilize Unrealistic and Impractical to Effectively Stabilize an Economy of Change. Nor does such a Standard an Economy of Change. Nor does such a Standard Encourage Economic Development. Also it is both Encourage Economic Development. Also it is both Irrational and quite Impossible for a Floating Irrational and quite Impossible for a Floating Economic System to Successfully and Fairly Economic System to Successfully and Fairly become a Fixed System, like that of the Gold become a Fixed System, like that of the Gold Standard.Standard.