I'm very new to this topic at least as far as in-depth details go. I did more reading out of curiosity, and decided to bring it up on the forum. No matter what decade it is, or who the president is, there's always someone saying that we should go back to the gold standard. It goes without saying that times are tumultuous economically. This idea may not even be feasible, given the current crisis over stimulus money. Let's dive in a little.
Many people know what the gold standard is, but I thought I would put the definition here just as a basis for the conversation:
The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price.
It used to be where the world depended on the U.S. dollar, which was backed by the gold standard. That was until 1971 when President Nixon took the U.S., and in turn, the world off of the gold standard due to the depleting U.S. gold reserves. So instead of our money being backed by something as tangible as gold, it was converted to FIAT currencies. Which you could say is basically backed by "confidence" people have in the U.S. dollar. The same goes for other countries as well. Which is what we have today. The value of one country's currency vs. another's fluctuates continuously, which is basically confidence-driven supply and demand.
Now that the history lesson is over. Can our country, or any other country for that matter, go back to the gold standard? Or a version of it? When it comes to the government handing out stimulus money to U.S. citizens in need, they essentially have to print more money, which in turn degrades the value of the U.S. dollar. I could see where going back to something tangible would severely limit what the government could do during an economic crisis. But currently, we literally have to rely on the consensus a few fellow human beings to insure the value of our own currency. On paper, it seems frightening. Other countries as well as our own have seen extreme inflation due to this sort of trust. There isn't any self correcting market tendency to prevent the creation of too much money. In fact, after Nixon took away the gold standard, money printing accelerated which led to double digit inflation not even a decade later. In comparison, the inflation of the gold standard was never in double digits.
I think the U.S. could find itself in a new gold rush, at least as far as the federal government is concerned. The gold from the actually gold rush over a century ago was distributed throughout the world and stabilized the gold standard. The gold rush I'm talking about here is a digital one - cryptocurrency. Instead of using actual gold, cryptocurrency could be used as a stable and almost tangible backing of our currency. The economic advisor to President Trump, Judy Shelton is a big proponent of the idea:
Her proposed solution is the gold standard, which she believes has the stability the economy needs. She reiterated her admiration for digital currency by saying, “I like the idea of the gold standard, I mean, it could be used in a very cryptocurrency way.”
“[cryptocurrency] is a dominant reserve currency…it is very important that we get ahead of the curve to ensure that the dollar continues to offer the best currency in the world.”
In that case, I think we could go back to the gold standard in a digital sense of the word. I'm eager to hear opinions from those who are in-the-know on cryptocurrency, as well as everyone else's opinion on the matter.