The U.S. should return to a gold standard
Debate Rounds (5)
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I'll start by addressing the plan.
1. The Fed
The Fed's job is to manage the nation's money supply. Pro advocates for removing that body and artificially restricting the money supply. He doesn't replace the Fed. This makes it impossible to combat persistent inflation or deflation, as well as unemployment. If our growth is quick, as he claims, then our economy "overheats", which means "inflation and the potential for asset bubbles." If it grows more slowly, "there would be a tendency toward deflationary pressure and recession. So, instead of having a central bank with the capacity to successfully counter-balance these tendencies, an economy with a fixed exchange rate regime [e.g. the gold standard (GS)] would continue to reinforce the existing negative trends in the business cycle."
2. Using Gold/Silver
As the economy grows, we would need more gold and silver. Without that, price levels, including wages and values of commodities, will fall. Much as Pro's really anti-inflation, he doesn't ever explicate any harms caused by inflation. Harms exist, but so do benefits, like reduced trade deficits, more affordable goods, and improved 401(k)'s. Deflation has a similar give and take. What causes devastating harms is dramatic shifts in inflation and deflation. In the case of deflation, it deters consumption spending and investment, mainly because people think prices will decrease. It's happened before: between 1870 and 1900, when Pro asserts US growth was at its highest. Prices were forced down, workers suffered hugely reduced wages, and almost half of this time is considered to have been in recession.
3. Overvaluing Gold and Silver
Both gold and silver are already overvalued [2, 3], and they aren't stable. Gold, in particular, "can have very large movements within a day," which means the price of our dollar would fluctuate rapidly. Unilaterally setting the price of gold and silver doesn't alter the realities international markets.
4. Replacing Currency
First, printing 2 trillion in new notes is not trivial. Ignoring different denominations, the costs of disposing of every coin and dollar, and the costs of new engravings, even if we assume that the costs of production remain around the average of 10 cents per bill, that's still huge. That's tens to hundreds of billions in costs just for production.
Second, there will be discrepancies. The government will do an imperfect job of matching funds, especially with regards to overseas accounts and money kept out of banks. Even if we assume perfect matching, people are very likely to contest what they get on the grounds that they can get more if they sue the government. If we're just talking about adults, that's over 240,000,000 potential lawsuits. The costs would be staggering.
Third, merely replacing these notes isn't enough. What Pro suggests would and could not cover outstanding US debt, as it stands at $19.5 trillion. That loss of control over our ability to pay the debt can lead to Great Depression-like collapse.
5. Fractional Reserve Ratio
What Pro is talking about is distributing an amount of gold and silver necessary for banks to be able to meet their deposit liabilities, i.e. the amount of these metals required to redeem the fraction of those 2 trillion notes that are deposited in banks. Pro's plan requires that roughly half of the gold and silver in the nation will have to be distributed to individual banks. But 20% is not enough. There's a reason the Great Depression was a huge economic crisis: the banks could not possibly exchange the notes they were receiving for precious metals. That could very well happen during a future crisis as well. But even if we're not considering crises, bank robberies become very costly under Pro's plan, and they happen roughly 5000 times a year. Pro doesn't say what would happen if banks don't meet his standard, but chances are that this loss would force banks to close, whether by regulation or loss of consumer trust.
Onto Pro's advantages.
Capping the money supply is harmful. When we hit a debt ceiling (which we are going to do in approx. 5 months ), we won't be able to print the money required to increase our borrowing limit. So, if we implement Pro's plan, we are guaranteed to default. This means dramatic increases in interest rates for US treasuries, risk of insolvency, immediate across-the-board spending cuts effecting every government program, a stock-market downturn, plunging consumer spending, and a massive loss of confidence in the dollar.
Pro argues that people in other nations will bring their gold to the US to exchange and spend. I'd say this depends on pricing within the US, but assuming it's accurate, the reverse is also true: no one will spend on or in other countries with US dollars. Other countries are likely to respond unfavorably to that, as well as to spending within their countries shifting to ours. Our trade deals would massively suffer, and they're likely to implement tarriffs to ensure internal spending.
It's unclear how the money supply can fluctuate under this system unless the government can dramatically alter the value of gold vs. the number of USNs. Pro doesn't explain how that's possible, or which body of government would do it. If they somehow are able to do this, though, then Pro is essentially treating this the same as a fiat currency, raising and lowering the values on the basis of internal requirements. All that does is allow a different kind of fiat in our currency.
Pro presents weak correlative data without any causative links.
He doesn't explain any effects on the middle class, and his minimum wage graph doesn't help. It's not clear that the loss of the GS caused anything beyond more stability in these wages, given that his graph shows increases after 1971 and far more volatility beforehand, including several large dips.
On workers wages, Pro's numbers appear to use raw dollars rather than purchasing power. The latter is more important because it represents actual value. I'm not sure where his graph is coming from, but the Bureau of Labor Statistics shows that purchasing power has stagnated since long before the GS was abolished.
These arguments have nothing to do with inflation. Let's look at inflation directly. The highest inflation spikes are during the 1910's and late 1940's. Short-term instability is much higher during our history on the GS than our time off of it, staying high throughout the late 1800's and early to mid 1900's before going down over the same period of time that the GS was abolished. So if inflation is the problem, Pro is engendering more of it more rapidly.
Switzerland and Venezuela have completely different economies as compared to ours, and they are not under a GS. They add nothing to his case.
2. Economic Growth
Pro doesn't source his data, but it's generally unclear what he's getting from this. Economics were very different 100+ years ago, and the situation has clearly changed, mainly because of the amount of deficits we have run up since then, but also because of the general size of the economy and a generally globalized world.
But let's be clear: the 1880's were not good for the US economy, as it was more prone to financial crisis. This is because gold doesn't flow into the US consistently " its flow changes based on interest rates, government pressure, financial or political emergencies and demand for non-monetary uses of gold. When this flow goes away from the US, it raises interest rates and cuts off credit. When it goes toward us, we have excessive liquidity, causing banks to take more risks and substantial rises in prices. Gold production is also important to this, as it dramatically affects prices by raising the supply. Since we don't mine gold in the US anymore, we're at the mercy of any country that does. That means China. Under a GS, they would control our currency and, thus, our economy.
3. Ponzi Scheme
Pro talks about a ponzi scheme, pretends it's the same as fiat currency, and equates the two. Ponzi schemes are designed to resemble reasonable investments in order to trick people. Fiat money gives you a bunch of other useful properties in exchange for holding onto your things of value. People know that the value of that money will decrease " they're not being told that it will increase. It's honestly unclear how the two relate. If this system is somehow doomed to fail, then it's unclear how that would happen, and Pro doesn't explain.
4. Honesty and Morality
Pro's metaphor is tortured: no one's being threatened with guns to take less money than what their product is worth, and store owners can charge what they wish for their goods. The government is using notes as a form of legal tender to ensure that people can actually set that value and have it met precisely instead of having to randomly ascribe value to goods and services. And yes, there is worth to this paper, mainly because we all accept that it has worth, not because the concept of worth is forced on us.
But why does this matter? Even if Pro's right that this sytem is being forced on us, he is just shifting to another forced system where the government ascribes value to notes based on what their overvaluation of two precious metals. Why is gold/silver any less fiat? Pro's just shifting to a different system that we also ascribe value to by popular opinion, except this one is limited by how much we pull out of the ground. That's not beneficial, it's just arbitrary.
Back over to Pro.
I. Pro's Plan
1. The Fed
Pro makes a lot of claims without support. He argues that manipulation of the money supply has led to cycles of inflation and deflation without providing any evidence. At several points over the last round, I showed that being under the GS led to various inflationary and deflationary spikes that could not be controlled.[8, 13,14] Even if manipulations of currency lead to these cycles, at least those can be controlled and predicted. That is not the case under the GS.
Pro, in replacing the Fed with the US Treasurer, is simply changing the decision-maker for fiat currency. If the Treasurer can modify the price of gold whenever he wants, then all he's doing is making the price of gold and number of paper bills subject to fiat. As Pro doesn't state any limitations in their capacity to do this, that means they can modify the price of gold and raise or lower the amount of printed money at will. As a new Treasurer can come into office every 4 years, that means there will be little consistency regarding these changes. The market for gold becomes wildly inconsistent, as does the US dollar. Monetary policy will be shaped solely by the president's choice of Treasurer, and that single person would have total control over finances instead of a slow bureaucracy like the Fed. By putting control over that fiat in the hands of a single individual without any oversight, he's exacerbating the problem. So not only is his plan not accomplishing anything the GS sets out to do, it's also worsening the problems of fiat currency by making it more inconsistent.
2. Using Gold/Silver
Expanding the money supply by fiat is functionally identical to the current system. If gold prices are infinitely malleable, then they are under fiat. Pro's claim that his forcibly altered exchange rate will result in an influx of gold is not good. As I argued last round, either pricing schemes in the US will deter this, which means he gets no benefit, or we see a major shift in our trade deals with other countries resulting in massive tariffs that make this impossible. Pro drops these responses.
Pro's response on inflation is all assertion. He ignores my evidence showing that inflation produces benefits, including reduced trade deficits, more affordable goods, and improved 401(k)'s. All of Pro's claims happen under deflation as well, so he provides no harms specific to inflation. Moreover, the system Pro has clarified this round allows for the same fiat-based inflation and even more speculation and uncertainty. Every election would lead to huge market swings.
3. Overvaluing Gold and Silver
How does monetization improve the stability of gold and silver when you start by massively increasing their value and then continuing to alter that value whenever it's convenient? Tying your currency to another currency makes for a fixed exchange rate. That can and does alter the exchange rate, but whether it's beneficial is based entirely on the stability of those two currencies. That's what happened when the Franc got tied to the Euro: the Franc was made more stable by the more widely used and trusted Euro. Tying your currency to gold, increasing the value of that gold, and then modifying that value at will isn't stable, particularly when the "real value in the international markets" bears absolutely no resemblance to the price we set internally. When we unilaterally alter the price of gold, we lose the security of international markets.
4. Replacing Currency
Pro's tariff is an awful idea. That would force many countries to abandon our currency as a reserve (since they can't get more of it without paying high costs), ostracize our trade partners who won't receive a dime from public or private sources, and generally destroy any trust in the dollar by making it look so weak that we can't even let it out of the country.
How does the process of taxation result in a more accurate replacement of funds across the board? Tax revenue only represents a small portion of the funds owned by any given person, particularly for those that don't report some income or savings, and there are still likely to be large and abounding inaccuracies in the process of figuring this out. Eventually, all of those funds will have to be replaced if we're going to get off the fiat currency Pro despises. Having FRNs in play for longer might provide more opportunities to get it right, but it doesn't solve. All it does is increase the number of instances where people would contest how accurate the exchanges are. So all of the problems I mentioned in the previous round, none of which Pro is directly responsive to, still apply. Printing all of this money will still be costly (printing more money to pay for the money you're going to print doesn't resolve that problem and increases inflation) and his plan is even worse for lawsuits.
Pro doesn't explain how he's going to pay off the debt, but let's assume he'll just print more money. That's another almost $20 trillion dollars flooding the US market, massively increasing inflation to Great Depression-like levels. Other countries that get paid off with our currency will receive the equivalent of valueless paper, and since most of our debt is in treasury bills (which would be paid off with this highly inflated dollar), he's massively hurting American citizens who have chosen to take on that debt. Moreover, Pro's case wouldn't allow us to take on any more debt past that payment (which means no borrowing for infrastructure or public goods), otherwise he incurs all of the harms I've cited. What's more, debt is good in the status quo, since the very low interest rates that have been created as a result help the economy function better on the whole, including better risk management, easier transactions, and less speculation on financial collapse.
5. Fractional Reserve Ratio
Even with Pro's view of FRRs, he bites these harms. If we view these certificates as substantially limited (which we should, considering he wants to have some stability to the price), then the 20% cap still means a run on the banks will still result in a lack of sufficient certificates to exchange, and bank robberies will still be more devastating. Every single robbery would have to be replaced, which means every single one would result in the printing of more money, which means the system automatically inflates 5000 times a year.
See the harms of paying down the debt and treating gold as fiat currency.
2. Spending in Other Countries
We currently are involved in massive trade deals overseas. With China alone, this amounts to almost $600 billion. Pro is putting every bit of our trade at risk by erecting massive tariffs at home and inviting massive tariffs from other nations. This amounts to trillions of dollars worth of lost trade deals.
Also, part of what keeps the US dollar strong is the perception of strength. That's why so many countries use the dollar as a reserve currency. Pro is putting that at risk, and is thus potentially reducing the strength of our dollar. Even if this only for the interim period while we transition to certificates, that's a huge problem, since we don't know how long that period will be and during that time, the US dollar will massively lose value.
Pro concedes his system is fiat, and the nature of that fiat is important. The "promise" he ascribes to it is one the US can alter any time it wishes, changing the amount of gold/silver you receive for a given set of certificates. And since Pro is altering the value of that gold/silver as well, that "promise" is no promise at all. If the value of the certificates is infinitely malleable, then that's pure fiat. All he's doing is shifting to a different, arbitrary backing for our currency.
Pro drops my responses on inflation, which I've already extended, showing that the only outcome that's definitely harmful is massive swings in the value of the dollar, something that only happens under a GS. His understanding of the history is flawed, as I clearly demonstrated.
5. Economic Growth
Pro drops that, wherever gold/silver flows, it causes dramatic harms to the US as long as it is flowing. Pro suggests that gold will flow to the US, yet ignores that this leads to excessive liquidity, causing banks to take more risks and increasing prices. All Pro is managing is to repeat many of the problems that have caused recessions over our history, except now, he's placing those harms under the direct control of other countries.
6. Ponzi Scheme
If people expect inflation, they are aware of the outcomes of using fiat currency. Fiat currency also has useful properties in exchange for holding onto your things of value. So Pro's argument that there's an expectation of equal returns and that fiat currency inherently has no value is invalid. Pro still hasn't explained how it fiat currency, and generalizing to all ponzi schemes isn't enough. Unless he can provide a clear set of circumstances, with evidence, that will lead to the failure of fiat currency, this point is moot. Everyone's clear on how this "scheme" works " it's pretty blatant. It doesn't matter that some countries are setting up other means of backing up their own currencies because it doesn't show any mistrust in the dollar, but rather, in the global economy. I've already shown that most countries still use the dollar as reserve currency, and that shows a widespread and genuine trust in our currency.
But this is all moot. If fiat currency is a ponzi scheme, Pro's own system is as well. Why does gold have value? Because we say it does. We have faith that everyone will view it as valuable. It doesn't have inherent value; it's just a shiny rock. So, if the current fiat system is doomed to fail, then his system would be just as certain to fail in the same fashion.
Pro is playing it pretty fast and loose with the rules at this point. He now says that he can win the debate so long as he provides any beneficial financial system that functions on the gold/silver standard.
First, it is Pro's responsibility to show that one of these systems is net beneficial by comparison to the status quo, which is what I am defending. He can't simply advocate that there are benefits and leave it at that - it must be clear that his case is better than what currently exists.
Second, Pro has only presented one semi-clear financial system. He's tweaked it here and there, but he hasn't presented any other systems, and since next round is the final round, it's too late to do so.
Third, hold Pro to his actual plan text. He presented it in great detail in the opening round and we have been arguing it for three rounds now. It has been the focus of this debate, and should remain as such. Shifting out of it in the final round, if that is his plan, would make the rest of this debate essentially moot.
Fourth, practically all of my arguments apply to any gold/silver standard system. Pro has altered his case several times now to avoid my arguments, but if he decides to shift back, he bites all of the harms I've already cited.
So let's be clear about how this debate should be evaluated: we have two cases, one that defends a specific gold/silver standard and one that defends the status quo. Voters should assess these systems by comparison, and determine who should win this debate based on who has the more net beneficial case. Simple.
II. Pro"s Case
Pro drops most of my responses to his case this round. He drops all of my evidence that the gold standard led to massive fluctuations in the value of our currency that cannot be predicted, leading to financial catastrophe.[8, 13, 14] He drops that the process of shifting over to a new currency, no matter how slow and careful, is going to lead to a massive number of lawsuits and difficulties, and that the simple process of printing off more currency incurs a massive financial harm. He even drops that all of the harms he"s asserted for the current system don"t exist. That's basically conceding that that inflation, in and of itself, is net neutral if not net beneficial, since it leads to lower trade deficits, more affordable goods, and improved 401k's. As this is the only clearly linked harm to the current system that Pro has argued, that means my case is either net neutral or net beneficial.
Perhaps most damning of all, Pro drops my arguments regarding paying off the debt. He"s locked himself into one of two scenarios: either we don't pay off the debt, which causes financial collapse by defaulting (the impacts of which Pro dropped), or he prints off the massive amount of money necessary to pay off the debt, causing a huge spike in inflation, which also causes financial collapse.
But onto his responses.
Pro can't seem to agree with himself on what his plan will be. Pro says that he never enforces a massive tariff, yet he said this in the previous round: "What we need to do is re industrialise our nation and establish a protective tariff to prevent our money from flowing out of the nation." Apparently, Pro doesn't remember his own words very well. If this tariff is not massive, money will almost certainly continue to flow out of the country, but regardless of whether or not it's large, he incurs the harms I cited last round. Other countries will respond with tariffs of their own, trade deals will suffer, other countries will abandon our currencies, and trust in the dollar will drop.
Pro argues that the quantity of dollars will remain the same. He keeps shifting back and forth on this, arguing at once that the capacity to respond to crises will remain unchanged and that dollars can be printed/removed from circulation, but that the overall quantity of dollars will also remain the same. He can't have it both ways. Pro can either maintain the quantity of printed money, thereby inviting the various harms of not being able to respond to financial crises that I've cited over the last two rounds, or he can allow for the printing and buying of paper money by the government as he argued last round, which invites the various harms I cited in that round.
Pro"s clarification on the Treasurer is just baffling. He stated in R3: "if we enter a deflationary depression, the Treasurer of the United States can simply order the...printing [of] more US Notes" if we enter an inflationary cycle, the Treasurer...can simply [order the] printing of US Bonds and sell them". As I stated last round, this is what the Fed does in status quo. It's what makes fiat currency fiat currency. Pro can assert all he wants that Soros is to blame for everything (a point he doesn't support, and which is just factually untrue), but he's putting in place a system that gives an individual in every new administration carte blanche to manipulate the financial system. At least in status quo, the Fed has bureaucracies and is checked by the legislature; Pro is throwing all that away and handing total control to a single individual.
Lastly, Pro recants his point about having an FRR of 20% after arguing it the previous two rounds. If he returns to that system, he bites all of the harms I've cited, as he drops all of those responses. Instead, he argues for a "Federal Reserve Grading System" where an audit will be used to grade each bank, but that the FRR would be a part of that grade or, at least, something publicly displayed.
First, grading systems like this were used and abused by the housing market. Credit-rating agencies that were supposed to represent an actual market never did, often because of conflicts of interest, a lack of in-depth analysis into dirty dealings, and an over-reliance on ratings. Pro is setting banks up for the exact same outcomes, and in doing so, is inviting another financial collapse through abuse of yet another grading system that inaccurately portrays the solidity of company holdings.
Second, the FRR percentage is still a part of how they're evaluated, so it's still important. No clue how the US is going to distribute these certificates, which are necessary to increase that FRR percentage, but regardless of how it's done, each bank is going to want more to make itself look better to a public that will want to see bigger numbers. As a result, financial institutions will put tremendous pressure on the Treasurer to print more US notes faster in order to jack up their FRRs. If the Treasurer accepts, then that invites major inflation as well as depressed prices of gold; you can't print off more money directly tied to a static amount of gold without doing at least one of these, if not both. If the Treasurer declines, then most banks will get low ratings because they literally can't get a decent FRR, which means they decline or collapse as their customers flock to other banks that have more clout.
Pro's responses here are solely assertions. All he does is pull a lot of numbers out of thin air without much in the way of explanation and without addressing my rebuttals to the very points he's reiterating with them. I never said that, under a gold standard, there would be no possible benefits. What I did say is that any potential benefits are massively outweighed by the risks involved.
And that"s where Pro drops the ball. He drops the harms of capping the money supply and hitting the debt ceiling, all of my points regarding inflation/deflation spikes and the gold standard, backlash from other nations in the form of tariffs and lost trade deals, the damaged perception of the dollar's strength and the resulting harms, etc. Most importantly, he drops that his case is effectively fiat currency writ large. By providing the Treasurer with the capacity to alter the amount of bills in circulation and the price of gold at will, he's removing any perception of strength that may accompany a gold standard because it"s all under fiat. And since he"s directly rejecting gold prices in international markets, he's not only stirring up trouble with other nations, he's actively rejecting any security from those markets. That will incur a heavy toll on the price of American goods abroad, as well as the value of our currency.
Pro argues that the cost of our goods will be cheaper because of the exchange rate. He doesn't take into account that the pricing of our goods on the international market will remove or even reverse any effect those exchange rates might have, but let's assume it's true. As I said in R2, no one will spend on or in other countries with US dollars, which means that Pro is just incurring backlash through the erecting of tariff walls that will also invalidate or reverse any beneficial effects of the lower exchange rate.
Pro argues that the dollar will not drop while we replace this currency. This utterly ignores all of my arguments regarding the effects of:
1) A weakened perception of the dollar that would result from the shift and the proposed tariff,
2) Printing as much money as is required to pay off the debt, or the harms of not paying off that debt before we shift,
3) Reduced or dissolved trade deals with other countries,
4) Other countries abandoning the dollar as reserve currency, and
5) The realities of simply printing more money in order to pay for the transition will lead to changes in how much that money is worth.
Simply saying that the lower exchange rate will somehow solve for all of this is absurd - it's that same exchange rate that"s causing most of these problems. It doesn't matter if people spend their money here because these realities happen on a global scale; the US cannot unilaterally declare that its money will always be worth the same amount forever and into eternity. Using fiat to say that things will be better doesn't make it so.
Back to Pro.
Now, I'm going to modify the order to focus on key issues.
1. The History of the GS
Pro hasn"t mentioned this since R2. I"ve shown that the GS, throughout American history, has done far more harm than good, leading to giant fluctuations in the value of our currency. We have no other examples of a GS, so this is the only comparison we have between Pro"s case and a real life example, and it does him no favors. I"ve shown that shifting back to the GS will be even more harmful now, and explained how Pro"s modifications don"t solve for many of those harms. Based on real world evidence alone, you can vote Con right here; Pro"s entire case is contingent on a GS leading to a more stable currency, and that is empirically false.
2. The Value of Fiat Currency
Pro hasn"t mentioned this since R3. He"s cited no unique harms of status quo fiat currency. He"s stated more than a few times that there is some harm to inflation, but a) I"ve already shown that moderate inflation isn"t clearly harmful, b) inflation happens in his case as well, c) he incurs far more inflation, causing spikes that are actually harmful, and d) his case involves even more extensive fiat that allows for manipulation of the price of gold and amounts of currency. Given all this, the status quo (i.e. my case) is net neutral if not net beneficial for all the various trade benefits and financial security it"s afforded us. Even if you buy that Pro has some benefits, he has to actually show that his whole case, warts and all, is better than the status quo, something he"s utterly failed to do.
3. Harms of the Shift
Pro hasn"t mentioned this since R4. The costs of shifting over to a new currency and the legal ramifications of exchanging currency for new notes alone are clear, objective reasons to vote him down. These would incur huge costs to the country that would have to be paid up front when our currency would have to appear the strongest. Other countries will drop the dollar as reserve currency, the perception of its strength will plummet, and, regardless of what exchange rate the US itself sets, international markets would bring on the pain by erecting high tariff walls that will demolish US trade deals.
4. Harms of the Debt
I've already explained the pitfalls of having debt as we shift to the GS (financial collapse) and the harms of having debt while on the GS (defaulting). Pro's only response to all of this is that we can pay it off by selling federal land.
First, this is one of those case expansions I was talking about. He's mentioned previously that he would pay off the debt, but not how he would do so. Buy my argument (from R3) that he will pay off our debt by printing more money, which leads to rapid inflation of the dollar. Pro didn"t respond, that"s his problem.
Second, Pro isn't clear about where his numbers came from. All the real estate owned by the US government is only $1.8 trillion, and our oil and gas resources on and offshore is not nearly so high as his TIME article asserts. We have access to 18 billion barrels of oil, worth roughly $1 trillion. There are more than 2 trillion cubic feet of recoverable natural gas, which amounts to another $9 trillion.[21, 22] This excludes costs of drilling, refining and transporting these goods, which would substantially reduce these values. What are we losing? Besides increases in pollution and accelerating global climate change through accelerated resource extraction, we would lose wildlife refuges, national parks, national monuments, valuable resources, control over vast swaths of the country, and anything built on these lands. All of this in exchange for paying off a little over half of the debt, which doesn't solve the problem.
Third, none of this solves for future debt. If we choose to pay off our debt solely using federal lands, that is still a finite resource. We cannot simply continue to sell federal land to pay off other countries to whom we owe money, and we are almost certain to generate new debt at some point in the future. All Pro is doing, at best, is delaying the harms that come from being on the GS with debt.
5. The Harms of Tariffs
Gaming the markets in our favor will cause countries to raise tariff walls. Pro drops this. Prices would skyrocket at home and for American products abroad, reversing effects of setting our own exchange rates. Pro dropped that other countries won"t accept so much money flowing out of their economies. They will erect tariff walls, and that will increase the price of US goods and reduce trade to the US. That alone would have devastating effects on the US economy.
Pro acknowledges his support of a tariff, but shifts to focusing on "countries such as China that run off of slave labour", which is yet another new case expansion, as is this point about abolishing corporate taxes and "deregulating industry." Voters should ignore these points, but just in case, Pro provides no reason to believe that these tactics would accomplish any of his goals, and his tariff could still be applied to any country where workers are paid less than US workers (which is almost everywhere ) as they are comparatively "slave labor." So he incurs the same harms I"ve cited: other countries will respond negatively, destroying trade deals and damaging our currency. Even if this only happens with China, that"s almost $600 billion lost in trade deals.
6. Exchange Rates
I never said that American goods will be cheaper to foreigners and that foreign goods will be more expensive to Americans. Tariff will cause all prices to rise. And Pro"s right that inflation will also raise those prices; competition will ensure that no one will buy American products if they're more expensive.
Pro returns to his points from R3 about the Franc to the Euro, weakly tying it to his case. I already addressed this, Pro dropped those responses. The Euro is a currency. It"s stable and trusted because multiple countries use it and abide by values established by international markets. Gold is a commodity, and if you"re unilaterally fiating its price, you"re inherently reducing its stability. International markets won"t agree to that price, which removes that source of stability. I actually agree that no inflation can be good and out of control inflation is bad, which appears to be Pro's main point here. I never argued that having higher inflation was good. Pro's plan is the one that causes out of control inflation, not the status quo.
Pro argues that, as long as currency is mostly staying within the US, there won"t be inflation. This is absurd: if you print more money, and that money is valued based on a finite supply of gold, then the value of that money decreases as you print more of it, regardless of where it goes. That inflation harms citizens, whose savings will practically vanish. Yes, they can bring gold here and exchange for the same value of money regardless, but this flow of gold in and out of the country is harmful, as I've shown multiple times. This exchange is not beneficial.
7. The Treasurer
Pro says that the Treasurer, a position appointed by the president, is a better representative of the country than the Fed chair, which is also appointed by the president. If Pro"s point was "to demonstrate that the Fed serves no good purpose", then why did he replace it with someone who has the same function and the same checks on them? Pro says the Fed is owned by the banks, but that"s a bare assertion and a false one. The only difference is that it"s one man vs. an entire bureaucratic organization, which means more snap decisions, more errors, and more partisanship.
8. The Grading System
Assuming that the FRR is the only basis for grading banks, regulators can still be bribed, there can still be conflicts of interest, and people can still post incorrect grades. The various pooling tactics and artificial rating boosts that the housing market engaged in was objectively incorrect, but that didn't stop them from doing it.
Pro argues that we can print off as many notes as we want and have banks hoard them all across the country without any consequences. The fact that these aren"t in circulation doesn"t alter the fact that they are meant to represent the sum total of gold and silver in this country. If the amount of them goes well above that total, then one of two things happen. Either the amount of precious metals each note stands for goes down, which is inflation, or the government pretends that they have enough notes to cover every ounce of gold and silver out there, which risks another another banking collapse as people realize that the grading system doesn't represent the actual amount of gold, but rather a set of notes that is also massively overvalued.
Every plank of Pro's plan risks financial collapse, all for the misbegotten view that fiat currency is harmful and the GS strengthens it. Pro is turning gold itself into fiat currency, damaging any perception of strength the dollar currently has, throwing away countless trade deals, and all to support a currency that has consistently failed this country. Even Pro has lost faith in the success of his case, consistantly shifting away from his own ideas. Don't support a case that even Pro won't. Vote Con.
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