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Here’s Why the U.S. No Longer Follows a Gold Standard
Every few years, the idea of the gold standard becomes a hot topic. And why not? Gold is shiny and valuable, and people like it.
What Is the Gold Standard?
A gold standard means the value of a country’s currency is linked to a specified amount of gold. Under the gold standard, governments needed to be ready and willing to buy and sell gold to anyone at the set price. However, countries had the ability to change their gold-to-money ratio, or how much money they would exchange for an ounce of gold, as noted in a Page One Economics essay about the gold standard.
The U.S. switched to a fiat money system. Fiat money has no value of its own and doesn’t represent anything of value, such as gold. But the government stipulates that the paper money is legal tender for carrying out transactions or paying taxes, as noted in the Page One Economics essay.
What Are Disadvantages of the Gold Standard?
There are significant problems with tying currency to the gold supply:
It doesn’t guarantee financial or economic stability.
It’s costly and environmentally damaging to mine.
The supply of gold is not fixed.
What Is the Gold Standard?
A gold standard means the value of a country’s currency is linked to a specified amount of gold. Under the gold standard, governments needed to be ready and willing to buy and sell gold to anyone at the set price. However, countries had the ability to change their gold-to-money ratio, or how much money they would exchange for an ounce of gold, as noted in a Page One Economics essay about the gold standard.
The U.S. switched to a fiat money system. Fiat money has no value of its own and doesn’t represent anything of value, such as gold. But the government stipulates that the paper money is legal tender for carrying out transactions or paying taxes, as noted in the Page One Economics essay.
What Are Disadvantages of the Gold Standard?
There are significant problems with tying currency to the gold supply:
It doesn’t guarantee financial or economic stability.
It’s costly and environmentally damaging to mine.
The supply of gold is not fixed.
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