Proponents say the gold standard self-regulates to match supply to demand. Opponents say gold does not provide the price stability for a healthy economy.Prior to 1971, the United States was on various forms of a gold standard where the value of the dollar was backed by gold reserves and paper money could be redeemed for gold upon demand. Since 1971, the United States dollar has had a fiat currency backed by the “full faith and credit” of the government and not backed by, valued in, or convertible into gold.
Proponents of the gold standard argue that gold retains a stable value that reduces the risk of economic crises, limits government power, would reduce the US trade deficit, and could prevent unnecessary wars by limiting defense spending.
Opponents of the gold standard argue that gold is volatile and would destabilize the economy while disallowing government economic and military intervention, and increasing environmental and cultural harms via mining. Read more background…
Pro & Con Arguments
Gold retains a value that has been recognized across the globe throughout history, and a gold standard self-regulates to match the supply of money to the need for it.
American paper money is a “fiat” currency that can be printed without limit and has no real value – its value is only maintained by the “full faith and credit” of the government. Gold has real value due to its beauty, usefulness, and scarcity. Humanity has recognized the value of gold as a medium of exchange dating back to 550 BC, when the King of Lydia (modern day Turkey) began minting gold coins.  Steve Forbes, Editor-in-Chief of Forbes, stated gold “retains an intrinsic, stable value better than anything else.” 
Since gold is a finite natural material and must be mined and processed at a significant cost, it tends to be produced at levels consistent with demand. Under a gold standard, creating more currency requires obtaining more gold, which raises gold’s market price and stimulates increased mining. More gold is then used to back more money until a point when currency levels are adequate, the price of gold levels out, and mining is scaled back accordingly.  It is a self-regulating system.  Under a fiat money system the production of money has no natural self-regulation mechanism.
Over the 179 years the United States was on some form of a gold or metallic standard (1792-1971), the economy grew an average of 3.9% each year. Since 1971, under a fiat money standard not backed by gold in any way, economic growth has averaged 2.8% per year.  This lower growth rate translates into an economy that is about $8 trillion dollars smaller than it would have been had the gold standard not been abandoned in 1971. Read More
A gold standard would reduce the risk of economic crises and recessions, while increasing income levels and decreasing unemployment rates.
The ability of the Federal Reserve to print fiat money (money not backed by a physical commodity such as gold) and maintain easy credit by keeping interest rates too low from 2001 to 2006 was a significant cause of the real estate bubble which led to the Great Recession.    The response to the recession has been more of what caused it in the first place – printing money. Over $2 trillion in bailouts for failed financial institutions was paid for with Federal Reserve money, setting the stage for another possible bubble and collapse.   The Federal Reserve’s history of providing economic stability with fiat money has not been a good one. Since the United States abandoned the gold standard there have been 13 financial crises, including the financial crisis of 2008-2009 and the COVID-19 (coronavirus) pandemic recession.  
Prior to the United States abandoning the gold standard, the real median income for men rose an average of 2.7% per year between 1950 and 1968.  Between leaving the gold standard in 1971 and 2011, the average median income for men only increased 0.2% per year. 
In addition, unemployment levels were lower in the decades leading up to the United States abandoning the gold standard. Between 1944 and 1971, while on a partial gold standard, unemployment averaged 5%. From 1971 to 2019, unemployment levels have averaged 6.2% under the fiat money standard.  Read More
A gold standard puts limits on government power by restricting the ability to print money at will and increase the national debt.
With a fiat currency the government can essentially manufacture money out of thin air.  Since leaving the gold standard in 1971 US currency in circulation (M1) increased from $48.6 billion to over $5.2 trillion in June 2020.   Under a gold standard, new money could only be printed if a corresponding amount of gold were available to back the currency. This restriction is an essential check on government power.
Supreme Court Associate Justice Stephen Field, who served from 1863-1897, argued against fiat money, stating, ”arguments in favor of the constitutionality of legal tender paper currency tend directly to break down the barriers which separate a government of limited powers from a government resting in the unrestrained will of Congress. Those limitations must be preserved, or our government will inevitably drift from the system established by our Fathers into a vast, centralized, and consolidated government.” 
Under the fiat money system used by the United States the government can raise money by issuing treasury bonds, which the Federal Reserve can purchase with newly printed money. These bonds count toward the national debt. Between 1971 and 2019, the national debt increased 5,515% from $406 billion to $22.8 trillion. This increase in debt corresponded with an 2,606% increase in the money supply (M3) between May 1971 ($666.7 billion) and May 2020 ($18.0 trillion).  
As a percentage of the GDP (gross domestic product) the national debt has more than doubled since leaving the gold standard, going from from 35.6% in the fourth quarter 1971 to 107.7% in the first quarter of 2020.  Read More
Returning to a gold standard would reduce the US trade deficit.
A trade deficit is when the country is buying more goods and services (imports) than it sells (exports), creating the need for foreign financing that must be repaid when the deficit turns into a surplus (when the country is exporting more than it is importing). 
Our current fiat money system allows the Federal Reserve to finance large trade deficits by printing money.  Since abandoning the gold standard in 1971, the United States has had the highest trade deficits the world has ever seen – reaching a high of $758 billion in 2006. 
As of May 2020, $6.78 trillion of American national debt is owned by foreign creditors. Japan holds the most at $1.26 trillion, followed by China ($1.08 trillion), the United Kingdom ($394 billion), and Luxembourg (262.7 billion), among other countries. US debt held by foreign creditors amounts to about a third of all US debt. 
Japan and China want the value of the US dollar to be higher than their own currencies. But, as Ron Paul, MD, former US Representative (R-TX) noted, “debt of this sort always ends by the currency of the debtor nation decreasing in value. And that’s what has started to happen with the dollar, although it still has a long way to go. Our free lunch cannot last. Printing money, buying foreign products, and selling foreign holders of dollars our debt ends when the foreign holders of this debt become concerned with the dollar’s future value.”  Read More
A gold standard would force the United States to reduce its military and defense spending and could prevent unnecessary wars.
According to Ron Paul, MD, former US Representative (R-TX) “fiat money enable[s] government to maintain an easy war policy… To be truly opposed to preemptive and unnecessary wars one must advocate sound money to prevent the promoters of war from financing their imperialism.” 
The government’s ability to limitlessly print fiat paper money allows it to fund a massive global defense establishment, an estimated 800 bases in 80 or more countries and an operational ground troop presence in at least 15 countries.   The US defense budget was $738 billion for 2020.  In 2019, defense spending was $732 billion, or about 38% of global defense spending, and almost as much as the next 10 countries’ defense spending combined. 
This level of spending would not be possible if the United States returned to a full gold standard.Read More
Many politicians, businessmen, and organizations support the return to a gold standard.
Judy Shelton, PhD, MBA, Trump Administration economic advisor and 2020 nominee to the Federal Reserve Board, argued that returning to a gold standard is an “opportunity to secure continued prominence in global monetary affairs.” 
Alan Greenspan, PhD, former Chairman of the US Federal Reserve, called the gold standard “the primary global currency.” 
Ron Paul, MD, former US Representative (R-TX) made the return to a gold standard a central focus of his political career, arguing that government creation of fiat money is “morally identical to the counterfeiter who illegally prints currency.” 
Steve Forbes, Editor-in-Chief of Forbes, argued that a “new gold standard is crucial,” to save the country from a “crisis that would be even worse than 2008.”  
Many organizations support a return to a gold standard including the American Principles Project, the Lehrman Institute, and several economists of the Austrian school affiliated with the Ludwig von Mises Institute.   Read More
The availability and value of gold fluctuates and does not provide the price stability necessary for a healthy economy.
Under a gold standard the supply of money would be dependent on how much gold is produced. Inflation would occur when large gold discoveries were made and deflation would occur during periods of gold scarcity.  For example, in 1848, when large gold finds were made in California, the United States suffered a monetary shock as large quantities of gold created inflation. This rise in US prices caused a trade deficit as US exports became over priced in the international marketplace. 
Between 1879 and 1933, when the United States was on a full gold standard, the inflation adjusted market price of gold fluctuated from the $700 range (1890s) to the $200 range (1920s). From 1934-1970, when the US was on a partial gold standard, the inflation adjusted price of gold went from $563 to $201.  Fluctuations like these are damaging to a gold standard economy, because the value of a dollar is attached to the value of gold. For example, a 10% increase or decrease in the value of gold would eventually result in a 10% rise or fall in the overall price level of goods across the country. 
The total world gold supply increases about 1.5% to 2% per year. To maintain a healthy rate of global economic growth, the nominal rate of growth in world trade should be around 6% to 6.5%.   If an international gold standard were to be re-introduced this growth rate could not be maintained. 
Further, gold mining is estimated to be “economically unsustainable” by 2050, with new gold supplies running out and large-scale gold mining becoming impossible by 2075. At current rates, gold mines in South Africa, one of the largest global gold producers, could be stripped by 2040. Read More
A gold standard would limit the ability of the Federal Reserve to help the economy out of recessions and depressions, and to address unemployment.
Under the current fiat money system (money not backed by a physician commodity such as gold) the Federal Reserve can use monetary policy to respond to financial crises by lowering interest rates during a recession, raising them during a period of inflation, and injecting money into the economy when necessary. A gold standard would severely hamper the Federal Reserve from performing these functions. 
After the 2008 financial crash, the Federal Reserve’s TARP (Troubled Asset Relief Program) created $700 billion to bail out financial institutions and stabilize the economy.  According to Nobel Prize-winning economist Paul Krugman, PhD, without that intervention a “powerful deflationary forc[e]” would have been created. Without the Federal Reserve’s intervention, the 2008 crash could have led to another Great Depression.  
Former Federal Reserve Chairman Ben Bernanke, PhD, stated a gold standard “means swearing that no matter how bad unemployment gets you are not going to do anything about it using monetary policy.”  Under our current fiat money system, the Federal Reserve can expand the US money supply by purchasing treasury bonds and the government can use this money to help put the unemployed to work through public spending as the Obama administration did with the $787 billion fiscal stimulus.   The 2009 Obama stimulus prevented the loss of an estimated three million jobs. 
During the COVID-19 pandemic, the Federal Reserve took similar measures: lowering interest rates to near zero, supported financial market functioning, corporations, and small businesses, and cushioning money markets.  Under a gold standard these stimulus actions could not have occurred.Read More
Gold standards create periodic deflations and economic contractions that destabilize the economy.
Under a gold standard, economic growth can outpace growth in the money supply since more money cannot be created and circulated until more gold is first obtained to back it. When this happens deflation and economic contraction occurs. Between 1913 and 1971, when the United States was on some form of a gold standard, there were 12 years in which deflation occurred.  According to Federal Reserve Chairman Ben Bernanke, “the length and depth of the deflation during the late 1920s and early 1930s strongly suggest a monetary origin, and the close correspondence… between deflation and nations’ adherence to the gold standard.”  Since leaving the gold standard in 1971 there has only been one year (2009) in which any deflation occurred (-0.4%). 
Between 1879 and 1933 the United States had financial panics in 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933.  During the panic of 1933 alone 4,000 banks suspended operations.  Many of these panics were exacerbated by contraction in the money supply caused by the gold standard (more money could not be printed without first acquiring additional gold to back it).  Many economists contend that the gold standard played a role in preventing the United States from stabilizing the economy after the stock market crash of 1929, and prolonged the Great Depression. In 1933, when the United States went off the full domestic gold standard, the economy began to recover.   Read More
A gold standard would increase the environmental and cultural harms created by gold mining.
In the first quarter of 2019, mining one ounce of gold cost $1,000.  The average wedding band contains three to seven ounces of gold. 
All the human labor used for mining, refining, and storing gold is time and energy diverted from the real economy. The direct costs associated with a fiat paper money system (paper and printing costs) are much lower because a paper bill only costs between 7.7 and 19.6 cents in Apr. 2020. 
Returning to a gold standard would create increased demand for gold and mining activity would increase. Many gold mines use a process called cyanide leach mining that creates large-scale water pollution and massive open-pit scars on the land.  Producing one ounce of gold creates 79 tons of mine waste. 
Further, nearly 50% of global gold mining occurs on indigenous lands, where the communities’ land rights are often violated.    In Brazil, the Yanomami, a tribe of about 26,700 people who remain relatively isolated, are being threatened by illegal gold mining on their reservation in the Amazon rainforest. In addition to forest destruction and poisoned rivers, the Yanomami saw two of their communities wiped out by the flu and measles brought in by illegal gold mining operations in the 1970s. In 2020, COVID-19 was brought by miners. Read More
Returning to a gold standard could harm national security by restricting the country’s ability to finance national defense.
A gold standard would prevent the sometimes necessary quick expansion of currency to finance war buildup. In order to help finance the Civil War, President Lincoln authorized the printing of $450 million in fiat currency known as “greenbacks.” 
During World War I, the United States and many European countries stopped using a gold standard to finance war efforts by temporarily printing more money   As Kimberly Amadeo, MBA, President of World Money Watch, noted, “The Great War proved to be the first nail in the coffin for the international gold standard… [as it] was causing deflation and unemployment to run rampant.” 
The United States financed its involvement in World War II in large part by having the Federal Reserve print money, selling war bonds, and running large deficits. Read More
Many prominent economists oppose returning to a gold standard.
Federal Reserve Chairman Jerome Powell stated that a return to the gold standard would mean “other things would fluctuate, and we [the Federal Reserve] wouldn’t care. We wouldn’t care if unemployment went up or down. That wouldn’t be our job anymore.” 
Nobel Prize-winning economist Paul Krugman has called returning to a gold standard “an almost comically (and cosmically) bad idea.” 
Former Chairman of the Federal Reserve, Ben Bernanke, PhD, has said “the gold standard would not be feasible for both practical reasons and policy reasons.” 
In one survey of 50 economic experts, all senior faculty members at “elite research universities,” not a single one believed returning to a gold standard would be “better for the average American” in terms of price stability or employment outcomes.  One of the experts, Anil K. Kashyap, PhD, Professor of Economics and Finance at the University of Chicago, stated, “Love of the G.S. [gold standard] implies macroeconomic illiteracy.” Read More
|Did You Know?|
|1. As of the end of 2019, an estimated 197,576 tonnes of gold has been mined throughout history, with about two-thirds having been mined since 1950. Almost all of that gold still exists because the metal is virtually indestructible. If all 197,576 tonnes of gold were placed in a cube, the cube would only measure about 71.2 feet (21.7 meters) on each side. |
|2. On Aug. 5, 2020, gold prices rose to $2,000 per ounce for the first time ever due to the US dollar weakening during the COVID-19 (coronavirus) pandemic.  |
|3. In the first quarter of 2019, mining one ounce of gold cost $1,000.  The average wedding band contains three to seven ounces of gold. |
|4. In Aug. 1971, after President Nixon declared that dollars held by foreign countries would no longer be redeemable for gold, French President Charles de Gaulle sent a warship to retrieve France's gold from the New York Federal Reserve Bank.  |
|5. On Apr. 5, 1933, President Roosevelt issued an executive order forbidding the "hoarding" of gold. All gold coins, bullion, or certificates over $100 were to be turned in to the government and compensated at $20.67 per ounce. Personal gold jewelry and gold coins with numismatic value were exempted. The right to own more gold was not restored until 1974. |
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