The importance of gold in the economy

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Most people believed that the gold standard would bring economic growth, prosperity, peace and stability in its early years. It lasted for nearly a century. After the Enron disaster, Gulf War, and the collapse of Savings and Loan, people realized that the gold standard was a temporary and fragile system that did not provide long-term economic stability. It was found that the United States experienced years and years of economic decline following the fall of the gold-standard monetary system. The country became dependent on foreign currencies for its financial strength.

The main argument against gold standard was that it was closely tied to the price for gold. As other currencies rose in value, so did the dollar’s. To protect the American economy against these fluctuations and ensure that it remains the unaffected central bank for monetary purposes, the government needed to have a large amount of gold on hand.

The Bretton Woods System collapsed during Woodrow Wilson’s early administration. This meant that there was no longer a need for an extensive international monetary system. Many countries have followed the example of the Bretton Woods system, which was established during the Depression era. Soon after, the gold standard was established, which is still the most successful international monetary system in existence today. This system has no interest rates, which is one of its many benefits. Unlike the conventional form of money lending, which requires very high interest rates, gold exchange rates never go down. They actually rise slightly with the economic cycle. This is exactly how smart investors would see it.

In simple terms, gold reserves are an international monetary fortress that protects against deflation. The currency’s purchasing power will decrease if there is more money held by international reserve institutions. With an ever-expanding economic base for lending money, world economy can remain financially sound. Inflation is not a problem when you have the ability to borrow money at an extremely low interest rate.