The Gold Standard: Its Benefits And Value Vs. Fiat Currency

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During these very uncertain times many economists, and non-economists as well, are increasingly demanding a return to the gold standard.   However, because virtually every nation on the earth is today tied to what is commonly known as fiat currency, many persons don’t even know what is a gold standard, its history, its benefits or its value. To many, It is something from days gone past – or is it?

First of all, let’s define just what is fiat money.Fiat currency is the useless paper currency printed in hand bills from governmental treasuries. They are used as a medium of exchange and that is basically for all they are good. They have no more value behind them than a plastic credit card which has expired.

Now having said that, a gold standard is an agreement among nations to attach or “fix” their national currency to a specific weight in gold.  They can buy a determinate exact amount of gold for a certain weight, that being an ounce in measurement.   Since ancient times, gold and/or silver metals have been considered the establish medium of exchange or standards across the world.  Conversely, a combination of having both a silver and gold standard is known as bimetallism.

Previously, virtually every nation was on a gold standard. Past banks and financial institutions saw gold as a means to secure their national currency, bank deposits, and notes by converting to gold at the fixed price and this is exactly what happened.  For all purposes, national fiat currency is today what is used internationally . .                                                                                                    Photograph of a U.S. Treasury Gold Certificate

Gold’s Value Rises In Times of Economic Uncertainty

In times of economic instability such as political upheaval, wars, deflation or inflation, or currency devaluation, governments operate under a severe deficit such as we see today. To help offset these massive deficits, governments print more fiat currency basically flooding the markets with worthless paper bills.  If investment returns on real estate, bonds, and other investment vehicles are not adequate enough, then the price of gold rises and investors turn to this precious metal as their currency instead of simply fiat.

The Benefits of A Gold Standard

In general, there are many benefits to having a gold standard some of which are listed below:

* Perpetrated economic stability as long as a gold supply is not fluctuating constantly.

* It acts as a deterrent, (a hedge), against inflation and fiat volatility.

* The Federal Reserve is restricted from creating policies which facilitate a rising inflation rate in the nation.

Today, more voices are crying out for a return to a gold standard and it will behoove people to keep their eyes on where this cry goes in effect on the international and national economies.

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Written by Beverly Anne Sanchez

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