Top Pro & Con Arguments
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