Many politicians, especially Libertarians, talk about the Gold Standard as something that can save our financial system. When I hear that it sounds a little like “let them eat cake” to me. Here’s why…
If the gold standard is the answer, why don’t people just buy gold?
The problem is not that gold is such a bad investment. It’s the fact that most people do not have the disposable income to buy quantities of it. If they do, unforeseen necessities typically wipe them out to the point of selling investments to make ends meet. The problem isn’t gold, it’s a society and financial system that tends to keep people broke.
We had a “copper standard” for a while, remember? Pennies used to be made with copper. But copper rose in value and people started to melt their pennies! Money backed by metal is a bad idea.
Money should not be a commodity.
Once you possess gold there is a motivation not to spend it. After all, it’s a finite resource. If you hold it the value should increase. Think of all the investments in your community that won’t happen if all the rich families have to do to make money is hold on to their currency! Our system depends on the idea of personal investment in businesses and each other. Taking that away will do more harm than good.
Furthermore, the people that get in early on a commodity tend to make the most profit. If our money is backed by any finite resource it would tend to favor those people alive now. What about future generations? Gold makes sense if you’re selfish. If you think long-term it’s a horrible idea.
In 1971 the price of an ounce of gold was $35. Forty years later it was over $1700. That’s way more profit than the average successful investor makes on the stock market. If you can get a return of over 5000% on your money where is the motivation to invest that money in a business or purchase things? You’d only need to purchase a king-sized mattress to hide all your gold-backed currency! Personal growth for those with extra money to invest would benefit at the expense of societal expansion in the form of external investments that would be more of a risk than simply holding your money. Not a good plan for society.
The current system is not bad. It’s just managed badly.
I’m going to say something unpopular here – our money system is just fine. Printing endless dollars is the right thing to do. Money should be endless just like the abundance of the universe. There should be plenty to go around for everyone. The problem is that too many people at the top have gotten lazy printing money for themselves. They see the power to roll out trillions of dollars right in front of them and the temptation is too great.
They create a complex system of derivatives or some other financial vehicle created solely for the purposes of being played like a violin only for those who built the system. To the typical tune of harmful fluctuations. Perhaps they believe, cynically, that without struggling our society would grow out of control! Understandable, but still pretty fracked up. We need more appropriate managers of our money supply. Economists.
The system needs to return to simplicity.
Over time, those in command of our money have purposefully, I think, created a complex system that only they truly know how to work within. What was once their ace in the hole is now burning a hole in everyone’s pocket. It’s time to clean up the mess of our financial system so that a kid can understand it. If you can’t teach the system in a high school class it’s too complex.