How do we have a monetary system that is not a function of some mineral, aka gold?
David W asked:
I know that Richard Nixon took the United States off of the gold standard in the 1970s. But how does this decision effect the stock market, inflation, and job security currently.
I know that Richard Nixon took the United States off of the gold standard in the 1970s. But how does this decision effect the stock market, inflation, and job security currently.
excellent question. although very specialized. and not the cup of tea of all who read these columns. you have heard recently that Milton Friedman passed away (g-d bless his soul) he put the nation into the right course by his monetarist views. as an answer to your direct question — you obviously realize and are in agreement that “keep gold standard” is not very logical since gold is a finite material (i.e. it is not endless) and we need the monetary unit for indefinite growth given the explosion of our own populations and those of other countries (see china, etc.) once you understand those simple facts of life you realize that on no gold standard we need a good government that will keep the monetary supply in good check and balance too. if we have a government that overspends, and prints its way out in printing more money without the equivalent growth in the economy then we have trouble which leads to the ills of inflation, stock market bumps, and insecurity in the job market. hope it answers your question. from a professor of economics.
Does not affect it much. We now base it on the net worth of the country itself. Generally less fluid then the price of gold anyway. The bottom can drop out on the worth of almost anything, but we still need a place to live and work, so there is “value” in our day to day econmics.
I always wondered that since we didnt have to trade something off to “print” money, then what is or ever was the point of it. How can we say we are in debt yet all we would have to do is print more money since we dont have to trade something in in order to print it. Does that make any sense to anyone but me?
First, gold is only valuable because it looks cool. I got that and all the following information off of the History Channel: most monatary systems based on a presious mineral are based on it because that mineral is shinny and decrotive, hense the phrase “Oooo! Shiny!”. The United States still does use some shiny coins and does put gold in some coins, though it is rare. The conclusion the History Channel presented is that a monetary system based on gold is flawed because cold is a soft medal and can easily be manipulated, causing the money to be easily conterfited. When elberate patterns on paper with a special ink with a magnetic strip is harder to counterfit.