The use of gold as currency is based on tradition, not logic
The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money or a standard of currency is an artifact of the past. There do not seem to be any major benefits gained from implementing the gold standard into the current economy. It severely impedes the government's ability to help the country during times of recession.
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The Argument
It is well established that gold is the money of Kings and Empires of the past. Ever since the Persian Empire, gold has been vastly implemented as a medium of exchange. In today's economy, it is very questionable if using gold or having money backed by gold in the federal reserves--also known as the gold standard--will yield major positive outcomes.
Reversion to the gold standard, or the usage of gold itself as a currency, will severely limit the government's ability to increase its money supply. Unless the Federal Reserves obtain more gold, they cannot increase the supply of money in the economy. This can prove to be particularly fatal during recessions as evidenced by the Great Depression. After the stock market crashed in the United States in 1929, people rushed to the banks to retrieve their money. This caused a great shortage and in 1933 alone, 4000 banks were suspended.[1] During this time, due to the gold standard, the government could not print more money to loan to businesses and banks, or stimulate the economy.
The gold standard also prevents the Federal Reserve from helping a struggling economy in any way. During times of recession, the FED lowers interest rates, and during times of inflation, it raises them. This is all done in an attempt to maintain the supply of money. But the gold standard prevents them from doing any of these. It can be concluded that, though in the past gold and the gold standard proved to be essential, it would only act as a deterrent in today's society and economy.
Counter arguments
Reverting to the gold standard will have many major advantages and it is the only logical move to make in today's economy. By using currency backed by gold, international trade will easily witness a great boost.[2] This is because steady exchange rates will be established. It will eliminate radical monetary swings that can cause unexpected losses for major countries in the face of international trade. It will also decrease the amount of inflation governments can end up imposing on a country. Without the presence of the gold standard, governments can simply print as much money as they want in relation to the gravity of the situation. But the gold standard will effectively suppress these governmental powers for the good of the economy. Therefore, the use of the gold standard was not only beneficial in the past but it will also be highly beneficial in the future.