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Was Dropping The Gold Standard A Mistake? | Economics Explained
학습 통계
CEFR 레벨
난이도
자막 (493 세그먼트)
on august 15 1971 president richard
nixon announced that the united states
would be terminating the convertibility
of american dollars into gold turning
the world's reserve medium of exchange
into something backed by nothing but
belief over the next five years the
price of gold which up until that point
had been the baseline store of value
more than tripled in price thought of
another way by this same standard the
american dollar lost more than
two-thirds of its value this decision
preceded two decades of record-high
inflation in the us where prices are
increasing by double digit percentages
year on year or while the value of the
american dollar slumped in international
markets today we are once again staring
down the barrel of record high inflation
so it seems only sensible to ask
ourselves was dropping the gold standard
a mistake
many prominent economists and financiers
point to this moment as the beginning of
the end for america's economic
superiority while many more argue that
it was a necessary step that released
the currency and by extension the global
economy from an unnecessary burden
following the global financial crisis of
2008 there were renewed calls by certain
policymakers to take a look at the
possible return of a gold standard in
america and once again as the world
struggles through another period of
economic uncertainty the idea does seem
worth exploring this is also a great
excuse to understand the history of what
got us onto and off of the gold standard
and take a look at some genuine pros and
cons that champions from either side of
this very contentious debate tend to
omit from their arguments
so
what was the gold standard and why was
it abandoned what was the advantage of
the gold standard and what were the
drawbacks and finally is returning to
the gold standard something that could
fix the economic issues that we are
facing today
the gold standard as it existed up until
1971 was first introduced in 1944
towards the end of world war ii with the
introduction of the bretton woods system
the bretton woods agreement was a system
of monetary management that was
established to make financial relations
between the united states and its new
allies easier it worked by having all
countries in the system make their
currencies exchangeable for a set amount
of us dollars and the us dollar itself
would be exchangeable for a set amount
of gold this indirectly made the
currencies of all of the participating
nations gold backed in their own right
without requiring them to keep massive
gold reserves themselves however
american dollars themselves could not be
directly converted to gold domestically
this convertibility was only available
to foreign participants not regular
everyday americans this system worked
all right and it certainly enabled a
level of global trade that was
inconceivable up to that point but of
course there were problems currencies
sort of act like shock absorbers for
international trade if left to do their
own thing they will naturally increase
and decrease in value as the economies
that they represent go through periods
of boom and busts if an economy goes
through a really rough patch its
currency will lose value in foreign
exchange markets this devalued currency
will make the economy's exports
artificially more competitive globally
which will help domestic industries if
an economy is doing really well it means
that its currency will increase in value
giving it the opportunity to invest into
foreign economies which should in theory
help them do well too if a currency is
fixed then this self-correcting force
can't do its thing and economies can
quickly spiral out of control the us
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