Venezuela = Gold and Oil
Economy = 21 Trillion in Debt and Counting
Rumours that the gold standard could return center largely on positive comments Trump has made. The president has said it would be “wonderful” to bring it back, and a number of his advisors think so too — Judy Shelton, Robert Mercer, John Allison and others have also expressed support for the idea.
But could the US really return to the gold standard? And what would would it mean if Trump brought it back? Read on to learn what the gold standard is, what Trump has said about it and what could happen if he actually brought it back. Plus, take our poll to let us know whether you think it could happen.
The gold standard is a monetary system where the value of a country’s currency is linked directly to gold. Countries that use the gold standard set a fixed price at which to buy and sell gold, and then use that fixed price to determine the value of their currency.
For example, if the US went back to the gold standard and set the price of gold at $500 per ounce, the value of the dollar would be 1/500th of an ounce of gold. This offers reliable price stability.
How the gold standard ended
In the years following the war, Britain’s pound sterling and the US dollar became the world’s reserve currencies, and other countries began to accumulate those currencies instead of gold. The stock market crash of 1929 exacerbated the situation — many countries raised interest rates in order to keep people interested in owning gold, but ultimately the higher rates worsened the global economy.
Finally, in 1933, Franklin Roosevelt, then president of the US, largely removed the US from the gold standard and made private ownership of gold bullion, such as gold coins or bars, illegal. The move allowed the government to affect the moneysupply by “pump[ing] money into the economy and lower interest rates.” Foreign governments were allowed to exchange gold for dollars until 1971, but President Richard Nixon put a stop to that in an effort to halt the depletion of the country’s gold reserves. He also completely severed the link to the gold standard at that tim
Since then, Trump has specifically praised the gold standard. In an oft-quoted 2015 GQ interview that ranges from marijuana to “man buns,” Trump says about the system: “ringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.” In a separate interview from the same year he also says, “[w]e used to have a very, very solid country because it was based on a gold standard.”
As noted, Trump has “surrounded himself with a number of advisors who hold extreme, even fringe ideas about monetary policy,” as Politico’s Danny Vinik puts it. Of those advisors, “at least six … have spoken favorably about the gold standard.” Shelton, Mercer and Allison, all mentioned above, are just a few of them. Others include Ben Carson and David Malpass.
What would happen if the US returned to the gold standard?
Going back to the gold standard would have a huge impact on the US economy. For one thing, it would make it impossible for the Fed to offer fiscal stimulus. After all, if the US had to have enough gold reserves to exchange for dollars on an as-needed basis, the Fed’s ability to print paper currency would be incredibly limited.
Supporters believe that could be the perfect way to get the US out of debt, but it could also cause problems during times of economic crisis. It’s also important to remember that because 68 percent of the US economy is based on consumer spending, if inflation rose due to the gold price rising, then a lot of consumers would cut spending. That would then affect the stock market as well, and could very well lead to a recession or worse, without the ability of the government to soften that blow via money supply.
So a return to the gold standard would also mean “accepting the wild swings that are sometimes inherent in the lustrous yellow metal.” And while some think that gold would offer greater price stability, it’s been volatile in the past. Though the gold price has been fairly stable lately, if we look back further we can see that it dropped steeply from 2011 to 2016.
As can be seen, returning to the gold standard would be a complex ordeal with many pros and cons associated. What do you think about the idea? Do you think Trump should bring back the gold standard? Let us know in the comments, or by taking the poll below.
Will Trump Bring Back the Gold Standard? | Investing News Network
Economy = 21 Trillion in Debt and Counting
Rumours that the gold standard could return center largely on positive comments Trump has made. The president has said it would be “wonderful” to bring it back, and a number of his advisors think so too — Judy Shelton, Robert Mercer, John Allison and others have also expressed support for the idea.
But could the US really return to the gold standard? And what would would it mean if Trump brought it back? Read on to learn what the gold standard is, what Trump has said about it and what could happen if he actually brought it back. Plus, take our poll to let us know whether you think it could happen.
The gold standard is a monetary system where the value of a country’s currency is linked directly to gold. Countries that use the gold standard set a fixed price at which to buy and sell gold, and then use that fixed price to determine the value of their currency.
For example, if the US went back to the gold standard and set the price of gold at $500 per ounce, the value of the dollar would be 1/500th of an ounce of gold. This offers reliable price stability.
How the gold standard ended
In the years following the war, Britain’s pound sterling and the US dollar became the world’s reserve currencies, and other countries began to accumulate those currencies instead of gold. The stock market crash of 1929 exacerbated the situation — many countries raised interest rates in order to keep people interested in owning gold, but ultimately the higher rates worsened the global economy.
Finally, in 1933, Franklin Roosevelt, then president of the US, largely removed the US from the gold standard and made private ownership of gold bullion, such as gold coins or bars, illegal. The move allowed the government to affect the moneysupply by “pump[ing] money into the economy and lower interest rates.” Foreign governments were allowed to exchange gold for dollars until 1971, but President Richard Nixon put a stop to that in an effort to halt the depletion of the country’s gold reserves. He also completely severed the link to the gold standard at that tim
Since then, Trump has specifically praised the gold standard. In an oft-quoted 2015 GQ interview that ranges from marijuana to “man buns,” Trump says about the system: “ringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.” In a separate interview from the same year he also says, “[w]e used to have a very, very solid country because it was based on a gold standard.”
As noted, Trump has “surrounded himself with a number of advisors who hold extreme, even fringe ideas about monetary policy,” as Politico’s Danny Vinik puts it. Of those advisors, “at least six … have spoken favorably about the gold standard.” Shelton, Mercer and Allison, all mentioned above, are just a few of them. Others include Ben Carson and David Malpass.
What would happen if the US returned to the gold standard?
Going back to the gold standard would have a huge impact on the US economy. For one thing, it would make it impossible for the Fed to offer fiscal stimulus. After all, if the US had to have enough gold reserves to exchange for dollars on an as-needed basis, the Fed’s ability to print paper currency would be incredibly limited.
Supporters believe that could be the perfect way to get the US out of debt, but it could also cause problems during times of economic crisis. It’s also important to remember that because 68 percent of the US economy is based on consumer spending, if inflation rose due to the gold price rising, then a lot of consumers would cut spending. That would then affect the stock market as well, and could very well lead to a recession or worse, without the ability of the government to soften that blow via money supply.
So a return to the gold standard would also mean “accepting the wild swings that are sometimes inherent in the lustrous yellow metal.” And while some think that gold would offer greater price stability, it’s been volatile in the past. Though the gold price has been fairly stable lately, if we look back further we can see that it dropped steeply from 2011 to 2016.
As can be seen, returning to the gold standard would be a complex ordeal with many pros and cons associated. What do you think about the idea? Do you think Trump should bring back the gold standard? Let us know in the comments, or by taking the poll below.
Will Trump Bring Back the Gold Standard? | Investing News Network
please enlighten.
