?Louis Government (Status Report of). But what is

?Louis WeinrichLana OurenJr./Sr. Composition12 Jan. 2018The Golden Rule or Fools GoldFort Knox, the world’s most secure vault. It holds over 161 million ounces of gold for the US Government (Status Report of). But what is the purpose of this gold? Back in the 1930s when it was built, and the US followed a gold standard, it was used for exactly that, the money backing the dollar. Before 1971 all the paper cash in circulation in the US was backed by gold, thus meaning that for every dollar you had in your wallet you could go to the government and exchange it for one dollar worth of gold. Any country following this system of handling, printing, and acquiring cash and gold, its currency is said to be following or on a gold standard. If not following a gold standard then the government has the ability to print and distribute cash without it having anything to back the cash up with. Up until 1971, the US followed a gold standard, but ever since then US currency has been a fiat currency that is not backed by gold or any physical asset. No one wants the economy to go into recession or even fail and returning to a gold standard is one of the best ways to prevent this. Although many nations are deciding to turn away from a gold standard it has been proven to keep inflation under control, prevent government overspending, and decrease the US’s trade deficits and national debt.This debate has been going on for centuries, but why? It is because it has so much of an impact on everything we do as Americans. The cost of goods, government spending, inflation, and just about everything else is affected by the gold standard or the lack thereof. Of course, there are many other arguments for and against the gold standard, including concerns of the government being able to address unemployment national defense, and economic crises (Bernanke).Every economist would tell you that the kryptonite to a stable economy is inflation. The ideal inflation rate range that many economists agree upon is .7-1.4% (Billi, Kahn). Under a gold standard, inflation has been proven to stay at about 1.6%, opposed to the 9.17% it averaged under a fiat money system (Rolnik, Weber). It is quite obvious to see that the average inflation rate under the gold standard is much closer to the ideal range compared to that of the fiat currency.    Since abandoning the gold standard in 1971 the national government has accumulated over 20 trillion dollars in national debt (REPORTS). Before then the national debt was just under 400 billion (REPORTS). In just 46 years the government increased the national debt by 50-fold. Without any restrictions on the government’s ability to print cash, they can print unlimited sums to pay for whatever they want to.Under a gold standard, the value of cash depends on the value of gold that the government holds. Just like everything else, the value of gold is controlled by the economic forces of the international market. Thus meaning that while usually, the value will increase over time causing some inflation, its value could also decrease causing deflation. Deflation, unlike inflation, is when a currency’s buying power increases. Although this sounds good, over time prices can become unstable. Moreover, deflation has been involved in all the economic crises in America. Returning to a gold standard could put the US at risk for deflation.Although returning to a gold standard would put the US at risk for deflation, it is not very likely to deflate enough to cause a major recession. Also, slight periods of deflation are better for the economy than long periods of increased inflation. According to the most recent reports on the value of gold, it has had stable growth in the past few years (Gold Price Chart). Although both are undesired in a stable economy, a low rate of deflation is preferable to a high inflation rate because high inflation causes people to want to spend all their money now instead of saving it and face it losing value over time. Although returning to a gold standard would be a lot of work and a significant change it would be worth it in the long run. The main reasons the US needs to return to a gold standard are that it will reduce inflation over time, limit government spending, and help to decrease the US’s trade deficits and national debt. Currencies following a gold standard have been proven to have lower inflation rates. The governments overspending can be reduced by having a currency that follows a gold standard by limiting the cash it can print. This will also help reduce the national debt. Although it might seem impossible to convert to a gold standard system, steps can be taken to ease the US into it and reduce the immediate side effects. Works Cited”Status Report of U.S. Government Gold Reserve.” Status Report of U.S. Treasury-Owned Gold, www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm.Bernanke, Ben. “Origins and Mission of the Federal Reserve, Lecture 1.” Board of Governors of the Federal Reserve System, www.federalreserve.gov/aboutthefed/educational-tools/lecture-series-origins-and-mission.htm.Arthur J. Rolnik and Warren E. Weber, “Money, Inflation, and Output Under Fiat and Commodity Standards”, www.minneapolisfed.org, Spring 1998Billi, Roberto M, and George A Kahn. “What Is the Optimal Inflation Rate?” www.kansascityfed.org/QcdXg/PUBLICAT/ECONREV/PDF/2q08billi_kahn.pdf.”REPORTS.” Government – Debt Position and Activity Report, www.treasurydirect.gov/govt/reports/pd/pd_debtposactrpt.htm.”Gold Price Chart.” Gold Price, goldprice.org/gold-price-chart.html.