The Gold Standard
Debate Rounds (3)
1. No new arguments in the last round
2. Cite every source
3. No trolling
4. No logical fallacies
In this debate my position is that all currency should be supported by gold. I hope to have a formal debate with my opponent. If you do not feel you can give adequate arguments relating to the topic please do not accept. Leave questions in the comments.
C1: Inflation is rare
Something can only be valuable when it is somewhat rare. If a certain currency has been printed to an extent where there is too much in the economy, it loses it's value. The reason for this is because it has lost a portion of it's rarity making it less valuable. Gold has a value that does fluctuate, but it has maintained worth to some degree ever since it has been valued. If currencies were backed by the gold standard, a currency could not lose value. The only way value would change is if the value of gold changes. My source will prove that gold has only gone up in prices overtime and they have not been drastic enough for the economy to recover from any change.
C2: Emerging economic powers are seeing the potential of gold.
We all know that China is emerging as a huge economic power. They have been hugely successful in recent years as far as net worth goes. China has recently been buying gold in an attempt to make their currency hold more definite value than the dollar. China knows that the dollar; the most important currency in the world, will eventually lose value. They know this because we are not backed by gold. If the dollar falls and the U.S. does not have the gold to rely on, China will become the number 1 economy in the world because they have a solid currency that other countries can trade with.
C3: The gold standard failed during WW1 and we now know how to avoid this.
The gold standard failed during WW1 because the U.S. was forced to spend an incredible amount of money in very little time. We now know that because money cannot be excessively printed, if we are forced to spend more than we have we could either go into large debt or bankruptcy. This problem can be avoided by having a large enough gold reserve set aside for the sole purpose of an emergency. As ISIS gets more powerful, the U.S. could be forced to spend money in a small amount of time to address them. If we returned to the gold standard, we would set gold aside to address this problem.
Conclusion: Gold holds enough value to support an economy
As the U.S. prints money, we will see a decrease in the value of the dollar. If gold is used as the basis for the worth of the dollar, the dollar cannot lose that value. The only way the dollar will change in value is if gold changes. As my source proves, gold has not recently changed to a large enough degree to hurt our economy drastically. Yes if it decreases it will hurt the economy, but it will not hurt it to the point of no recovery. In fact, the recovery from gold changing would hurt a lot less than the road of inflation that we are currently on.
Some problems with todays world is that technology is taking over jewelry. If you haven't realized fewer and fewer people are buying jewelry for their loved ones and the market for a lot of jewelry is changing. If a modern person were to buy a gift for his loved one? What will he buy? Probably an iPhone or computer. Now what is the jewelry industry mainly composed of? Gold. Hundreds of years ago people didn't have this problem. Gold was the the definition of luxury and people would be happy to buy gold wristwatches. In 1980, the inflation adjusted price of gold was $2,337, much higher than than today's price of $1,672 per ounce (Dec. 19, 2012) . Technology has changed that, just like the industrial revolution changed the value for aluminium. If you didn't know aluminium was more expensive than gold at that time.
C2: Difficulties with trade
A lot of currencies in the past are based on materials, such as the bronze and silver Chinese coins back in the days. Why did they change to paper money? Because of trade. As you can see if nations trade with each other using the gold standard. There is much less to negotiate and prices for some certain products are standardized when the value of produce changes depending on certain factors. To put this in simple terms:
A man in Kenya buys a certain product from america using gold standardized currency. Gold has low value in Kenya as there is lower demand for luxury goods, resulting in Kenya gaining more. The same man from a country with a high demand for luxury buys the same product and loses the trade.
C3: Difficulties with economic growth
Under a gold standard, economic growth can outpace the growth in currency since more money cannot be created and circulated until more gold is first obtained. This would be the cause of deflation and economic contraction as seen in the middle of the 20th century. Furthermore advances in technology and the rapid population is rapidly increasing. Returning to an ancient standard does not seem feasible at all. 
 Inflation Data, "Inflation Adjusted Annual Average Gold Prices," inflationdata.com, Sep. 15, 2011
 Robert McTeer, "A Brief History of the Gold Standard," www.ncpa.org, June 16, 2011
RC1: Not everyone in the world trades gold in this way
One of the best things that the gold standard does for America is that it gives us a solid currency that other countries can trade with. Some of the countries that we would be trading with do not have gold sold in the public as commonly as we do in America. In fact, only in richer countries such as America do we buy and sell gold among the public as if it's nothing. But most of this is irrelevant because the price of gold is not based on how much is being sold in the public. What changes the price of gold is at what rate it can be mined out of the ground. If gold is becoming rare in a certain year, the price of gold will change. The amount of gold that is in the market will change all the time but it will never be as severe as the production of gold. Therefore, technology could not change the value of gold to a severe extent because it does not affect it's production or how other countries use it.
RC2: This is true but even without the gold standard this happens
This contention does not pertain to the gold standard specifically as this can happen when the gold standard is not active. As of now your example could take place with America and Kenya:
A man buys a product from America with his own currency. He takes his product back to Kenya where it has a lower demand. Another man from China buys the Kenya mans product and because it has high demand in China, the Chinese man walks away with a better deal. This type of thing is unavoidable as world economies trade with each other and do not have the same resources available. It has no relation to the gold standard.
RC3: Deflation and Inflation are unavoidable to some extent in any economy
As the value of gold fluctuates, deflation and inflation will fluctuate. However in any economy deflation and inflation are unavoidable. Right now America is printing more money. This money is not based on a any foundation so it is subject to hyper-inflation if it is severe enough. Once hyper-inflation happens there will be no economy for us to and other countries to trade with. We would have to build back up on a new currency because the dollar would be so expendable it would be worth nothing. Now let me ask you this, would it be better to risk this happening or return to the gold standard where there could be possible deflation. Note that this deflation would not be severe enough to destroy our economy, it would only postpone the growth for a certain time. All economies go through this and the gold standard would not change that. The only change the gold standard makes is it stops the possibility of hyper-inflation.
As this is the final round, no new arguments can be made. Please read both sides thoroughly before voting and I encourage you to do an honest job! Thank you con for the great debate.
RC1: Gold despite its famous stable nature is still a product
If anybody had taken economics they would know the price of anything is dependent on the supply and demand. Changes in supply and changes in demand both affect the price of a product. Thus PROs rebuttal about how the market doesn't affect the price of gold doesn't work in the economic models. With no demand in gold there will be no gold mined. The reality is the component of aggregate demand known as government spending and investments are what are controlling the price of gold, as in PRO's example of China buying gold argument of the potential of gold. When the demand of gold drops, government will buy more gold to keep the prices stable. However government couldn't be doing this in the long term because of the change in market structure due to technology. Back then the prices for gold are inelastic and thus government doesn't need to interfere with the market.
RC2: The gold standard isn't a international standard and can be controlled
I will provide an analogy for how international trade would affect the gold standard. As of the Kenya and China's example, if the gold standard was standardized, a countries would buy lots of gold from countries where it is in excess and sell the gold to where it is sparse, making money. Soon the countries with sparse gold will have more gold and the gold value will decrease there making the value of money, standardized with the gold standard will decrease, causing deflation in the that country. A country without the gold standard will have more gold and inflation will increase because luxury products are brought in.
RC3: Hyperinflation is not a likely problem for developed countries
PROs comment is true, deflation and inflation are unavoidable, but the deflation and inflation would make a better economic model if the relationship was related to the overall capital and GDP or growth rather than the price of a certain commodity, such as gold. It is true to an extend that returning to the gold standard will prevent hyperinflation, but it doesn't prevent long-term depression, a more likely problem for developed countries.
Thanks PRO for a great debate, good luck!
1 votes has been placed for this debate.
Vote Placed by Azul145 1 year ago
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Reasons for voting decision: RFD: I believe that pro won by a landslide in this debate. I am going to give him arguments points and sources points. Arguments because con did not have a proper understanding of the gold standard. The way that gold is affecting a private market is not going to affect it's price on the gold standard because it does not affect production. I thought Con had a great example when he brought up the international trade but pro quickly shot it down. Pro was right, anytime people trade internationally someone has a chance of getting better off than the guy they bought it from. Con also dropped the argument of inflation and pro proved preventing hyper inflation was better than risking deflation.
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