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The Contender
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The United States Should Return to the Gold Standard

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Voting Style: Open with Elo Restrictions Point System: 7 Point
Started: 2/13/2015 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 2,824 times Debate No: 70029
Debate Rounds (4)
Comments (7)
Votes (3)




This debate is for Zaradi's tournmanent.

The Debate

Pretty simple as the title explains. I believe the United States should return to the gold standard. I'm challenging 16kadams for the debate.

No trolling or semantics and round 1 is for acceptance only.


I accept and look forward to an interesting debate.

I am on a bit of a time issue so if my opponent could wait until posting later today or tomorrow morning it would be appreciated.

Good luck!
Debate Round No. 1


My Case

I firmly believe that a gold standard is needed back in the United States again. I hope here for a lively debate.

I. Economic Boom and Stability

A gold standard would would be able to create a booming economy by stabilizing the U.S. dollar, which allows investors, consumers, and producers to know the stable value and safety of the economy. As Peter Ferrara of Forbes writes:

"Fixing a nation’s currency to gold assures that the currency maintains a stable long term value, without inflation, or deflation. That enables a nation’s money to serve as a measure of value, like a ruler measures inches, or a clock measures time. Such a stable measure of value, in turn, means money can best perform its most essential function in facilitating transactions." [1]

With a stable dollar achieved, the United States could achieve great economic growth. It's actually the best stimulus out there. With currencies that aren't trustworthy, economic problems occur. Steve Forbes writes:

"A profound and far-reaching loss of faith can produce a disastrous, self-fulfilling scenario: a massive sell-off of a currency on the foreign exchange market. At its worst, the kind of attack can bring a on a death spiral and collapse in monetary value. This can accelerate inflation at home and cause a government to sharply raise interest rates, throwing an economy into a severe recession. It can set off a panic that can spread to other nations." [2]

Now with the gold standard, a stable currency is more trustworthy and what happens with a trustworthy currency? Forbes writes:

"When a country has stable, trustworthy money, the opposite scenario unfolds: people want to hold their currencies. Capital and investment flow into countries with stable money. That's why stable money is the bedrock of prosperity. [2]

II. History

I. Advance Britannia!

Thanks to Great Britain, the world entered the Golden Era of economic history when it formally fixed the pound to gold in 1717. Forbes writes:

"The British pound was tied to gold at a fixed rate for over 200 years and holds the record for stability. After Great Britain formally established the ratio for the pound to gold in 1717, lenders could rest assured that that they would be paid back in money that wouldn't lose its value. Capital creation and investment in the country exploded. The strength of Great Britain's currency helped create capital markets that turned that island from a second-tier nation to the mightiest industrial power in the world." [2]

It remained under this rate until 1931, marking one of the greatest economic eras in world history.

II. American Colossus

Alexander Hamilton, the U.S.'s financial watchdog and Treasury secretary, was the one to create a gold standard. Forbes writes:

"Reckles money priting during the colonial days and the War of Independence had left the finances of the young republic in shambles. Alexander Hamilton, the first secretary of the treasury, realized that the only hope for recovery lay in the system based on sound money. Among other initiatives, Hamilton established a mint with the dollar fixed by law to a specific weight of gold. The value was fixed at $19.39 per ounce." [2]

After the American Civil War, the United States enjoy some of the greatest growth in the history of the United States. Average GDP growth from 1873 to 1913 was 3.7 percent and under the Bretton Woods system, which continued the gold standard after WW2, the U.S. enjoyed 4.1 percent growth in GDP from 1947-1967. When the country was taken off the gold during the Nixon adminsitration, the economy started to grow slower. From 1971 to 2010, the average for GDP growth was 2.8 percent. Real median income tells a similar story. From 1948 to 1967 it grew at an average of 2.7 percent. From 1971 to 2010 it grew at 0.5 percent. [4]

Cain and Lowrie write:

"If the United States had continued to grow at its gold standard rate, the economy today would be 50 percent larger - average incomes would be about 50 percent higher, and we wouldn't be struggling with a budget deficit." [4]

Under the current policy of fiat money, the economy has grown much slower. Monetary spending has been a disaster:

"Quantiative easing did not just fail as stimulus. It prevented recovery by causing a destructive misallocation of credit. Perhaps even worse, it caused, in its early stages, spikes in the prices of commodities the rased the cost of food and fuel, inflamming political divisions and unrest in many developing nations." [2]

We cannot keep the current system and must go back to gold.


1. Ferrara, Peter. "Linking The Dollar To Gold: Completing The Recipe For Restoring An Economic Boom For America." Forbes. Forbes Magazine, 21 June 2014. Web. 16 Feb. 2015.
2. Forbes, Steve, and Elizabeth Ames. Money: How the Destruction of the Dollar Threatens the Global Economy--and What We Can Do about It. N.p.: McGraw-Hill Education, 2014. Print.
3. Hubbard, R. Glenn., and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013. Print.
4. Cain, Herman, and Rich Lowrie. 9-9-9: An Army of Davids. Herndon, VA: Velocity ; Mascot, 2012. Print.


C1) The Gold Standard is deflationary

Under a gold standard, the growth of the gold supply must keep up with economic expansion. If gold mining fails to keep up with economic growth, we will experience deflation. Economic growth needs to match the growth of the money supply. If the money supply grows too fast, we experience inflation. If it increases slowly in comparison (or falls), we experience deflation relative to economic growth. Both of these are bad things. The rate at which we mine gold is slower than average economic growth, which would lead to deflation. To increase the money supply, we must increase the amount of gold being mined.

We do not know how future mining practices will keep up with economic growth. If mining does not keep up with economic growth, we have deflation. “To increase its money supply, the government must mine more gold. … Limited gold supply stifles economic growth and causes deflation. … According to the World Gold Council, annual production of gold is about 2,500 metric tons or 80 million troy ounces. This implies that world GDP cannot grow more than about $80 billion (at $1000/oz), had we been on the gold standard today. Thus, the gold standard would cause a severe deflation in the world economy.” [1.]

Indeed, the gold reserves often do not grow at the same rate as money demand. As the money supply cannot grow at the same rate as economic growth, the same amount of money is forced to chase around more goods. This is especially bad during depressions and recessions. When the economy shrinks, depositors are less likely to trust banks and banks are less likely to trust borrowers. During recessions, the demand for money from banks increases as they are trying to save their companies. During this time, it is advisable to increase the money supply in order to reduce the economic turmoil. Under a gold standard, this does not occur. “If the money supply does not rise to meet [money demand] because it is tied to gold, a deflationary spiral can occur. Furthermore, the money supply can shrink even with a fixed gold supply, as the deposit-expansion cycle collapses. Most money is deposits, not cash, but if banks stop lending and depositors stop depositing, the money supply drops like a stone as it did during the Great Depression.” [2.]

As noted above, the Great Depression offers a good example as to how the gold standard fails in times of economic depression. Many economists suggest the gold standard made deflation almost inevitable. The gold standard is empirically linked to deflation, not just theoretically like I argued above. And has also been empirically proven that the gold standard worsened the Great Depression. In the countries which were the most linked to gold there existed the greatest deflationary patterns. Countries which left the gold standard actually had much better economic outcomes during the Great Depression [3.].

Denying the link between the gold standard and deflation would fly against the face of all economic evidence. Arguably the strongest case suggesting the gold standard is deflationary is, not surprisingly, deflation rates before and after the gold standard was adopted. The only years deflation occurred was prior to the end of the gold standard. In other words, deflation only occurred when the gold standard was around [4.].

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2009 was a year which had some deflation occur, but the inflation rate averaged to 0.1% throughout the course of the year [5.].

Using prices as another metric of inflation/deflation, it has been found that in the short term “prices can change violently under the gold standard”. In fact, the gold standard on short time scales was bad at avoiding both inflation and deflation--worst of both worlds. Interestingly enough, the current monetary system offers 23 times less price variation. The arguments for the gold standard--inflation is rampant--is untrue. The gold standard is “a problem in search of a problem” [11.].

Deflation is bad because it discourages investment. People will hold onto their gold (or currency) rather than invest in deflation scenarios.

So the fact deflation occurs under a gold standard is a fact, and it is also a fact that it does not occur under any other monetary system. Unless my opponent is willing to argue deflation is a good thing, he essentially concedes the gold standard would significantly harm the US economy. It is impossible to deny a gold standard-deflation link.

C2) Transitioning to gold is impractical

About 5.3 billion ounces of gold has been mined in the entire world history--this, in monetary terms, is about $8.5 trillion [6.]. The US has about 225 million ounces of gold in it’s reserves, or about 4.26% of the total [7.]. The US money supply (M2) is at about 11 trillion dollars [8.].

So, in order for the US to cover every dollar with it’s current reserves, the price of gold in the US treasury would have to be set at $48,888 per gold ounce. Compare this to the market price, $1234.5 per ounce. But this would cause the opposite of what my opponent wants: it would cause inflation. The US cannot maintain a higher price of gold over the market equilibrium. As conservative AEI economist John Makin explains, “if the money price of gold is set too high—above a market equilibrium level—then gold flows to the government offering a higher price and, under the rules of the gold standard, the central bank is forced to increase the money supply.” [9.]

Now, you could tailor the gold standard to reduce inflation--set the gold price below the market price. However, you would have to either (1) significantly increase the gold stock, or (2) shrink the money supply. The first option would cost trillions of dollars, whereas the second option would lead to massive deflation. This entire scenario is set for disaster. If you set the price of gold below the market standard people will also purchase their gold from the government. The government’s stock would fall--and, as explained, so would the money supply. As Makin argues, “That kind of a deflationary shock would be disastrous in the current environment” [9].

R1) Stability and Growth

To suggest gold is ‘stable’ is really an economic fairy tale. If the government avoided price fixing and somehow tied the dollar to the market price of gold, we would enter massive swings of deflation or inflation as the price of gold is not stable. As I previously argued, the current system actually provides 23 times less variance in prices than the gold standard does [11]. If anything, the gold standard is actually less stable.

Conservative economist John Makin argues, “gold standards … [deliver] high volatility in real output and tends to be associated with more financial crises” [9].

As I proved in the graph above, the gold standard was extremely unstable and either had too much inflation or deflation. To suggest it will spur economic growth is insane. Research has proven that the gold standard caused large deflationary episodes, and during those episodes of deflation there was less economic growth [12.]. Thus, the gold standard reduces growth.

R2) History

My opponent makes many weak comparisons. Past economies cannot be compared directly to today as globalization had not yet occurred. I provided examples of the gold standard failing utterly (WW2) when the economy globalized.

Economic growth did not occur because of the gold standard--it happened in spite of it. The gold standard led to many issues. Spain, for example, suffered hyperinflation when they began to obtain gold at an extremely fast rate from their new world colonies. But to apply the past examples (UK, Civil War) to now really does not make sense. The economic growth under the gold standard does not prove it works. “the gold standard was the symptom and not the cause of this peace and prosperity [in the 1800s]” [13.].

The civil war example is arguably the worst. The largest war in US history ended--soldiers entered the workforce and people stopped dying at high rates. An economic boom was inevitable, gold standard or not. We had not yet entered globalization. Slavery also ended, extractive economic institutions inhibiting growth were abolished. The UK is also a weak example as the industrial revolution was beginning, technology was booming, and England was the superpower.

My opponent points to points where economic growth occured in spite of the gold standard (not because of it), but there are many examples where the gold standard exacerbated economic woes. Under the gold standard, there were banking panics in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933 [14.]. Under the current system, there have been zero banking panics. History is only favorable to the gold standard when you cherry pick a few instances. When the entire time period is looked at, it isn't so perfect.

This entire argument is extremely weak. These economies are not comparable to the modern economy which is much more complex. Growth occurred for other reasons, not because of the gold standard. And other historical examples serve to oppose my opponent’s point.


(1) The gold standard is deflationary
(1a) Deflationary episodes contrain growth
C: Gold standard reduces growth
(2) Moving onto a gold standard is impractical
(2a) It would cost billions and cause a large deflationary episode, reducing growth
C: Even if the gold standard was a good thing, transitioning to it would murder our economy
(3) The gold standard is far from stable
(4) History does not support the gold standard

Debate Round No. 2


My Case

C1: Stability and Growth

I will tackle deflation/inflation later, but my opponent forgets that the gold standard leads a full faith in the currency when it is backed by something rather than nothing. The current fiat system has been a disaster, largely caused neo-mercatilist politicians. Under a gold standard, real money means real prices no matter inflation or deflation:

"Sound money via a gold standard would mean that median incomes would once again rise in real terms. When you have fiat money, as we've discussed, prices go up and real salaries go down. You're getting paid in money that is worth less and less." [4]

The value will remain constant, so investors know what their returns will be more efficiently with a gold standard. We shouldn't forget, after all, that one of the benefits of gold stability is an accountable government:

"Gold makes governments accountable. Having to maintain a stable monetary value makes it harder to turn on the printing press to pay for political promises or to buy votes. Governments have to turn instead to borrowing and higher taxation, actions that require popular support. In other words, gold discourages the profligacy possible with fiat money by assuring that spending has consequences." [4]

My good friend debating me here has a great interest in social issues. I know 16k well, so I'm sure he knows gold keeps stability by having less crime. Under fiat money there is more crime because of inflation:

"Inflation has actually been found to have a stronger connection to crime than joblessness. One study by German and American researchers found that inflation had far and away the greatest effect on property crime, greater than variables like manufacturing employment." [4]

There is inflation today as a result of three primary economic variables and that CPI can have its problems:

C2: History

Considering that the UK went on the gold in 1717 and the Industrial Revolution didn't happen until 1760, we can conclude the growth between that time was directly from their gold standard. In addition, Spain itself was a state didn't fall as the result of the gold standard, but because of its institutions. Spain's property rights were quite wrong, as Glenn Hubbard and Tim Kane have found, because they support a centralized monarchy and excluded people of other religions. [6]

As I have cited before, real GDP growth during times of the gold standard was, on average, higher than it was after the gold standard. This is the data from Herman Cain and Rich Lowrie and I will repeat it here:

Classical Gold Standard (1873 to 1913): Real GDP growth 3.7 percent
Bretton Woods system (1947 to 1967): Real GDP growth 4.1 percent
No Gold Standard (1971 to 2010): Real GDP growth 2.8 percent [1]

I have also proven earlier the same thing with real median income numbers, in which growth was higher before the gold standard was taken off. This proves that the periods of the gold standard were better than after it. My opponent uses the returning soldiers from the Civil War as the primary reason for industrial progression during the later half of 1800s, but my numbers are already well after the Civil War (eight years to be precise). For other real GDP growth numbers we can go to Samuel H. Williamson, an economist at the University of Illinois in Chicago and president of, where historical economic data is collected. The five year post-Civil War period (1865 to 1870) saw real GDP growth of 1.30 percent, but from 1873 to 1913 growth was 3.73 percent. Under Bretton Woods we have 4.13 percent growth and after it with the eliminate of the gold standard there was 2.88 percent growth. [2]

Since Civil War soldiers obviously returned to work in less than a few years, we see the years after the Civil War did not enjoy economic growth, therefore the end of the Civil War did not cause massive economic growth. What did was the confidence of investors under a stable dollar.

My opponent cites Paul Krguman, who shows banking panics during the time of the classical gold standard and argues that as an example of why the gold standard would not work. However, newer information has debunked this argument. The economic historian Brian Domitrovic tackled every single one of these banking panics and found that they were not caused by the gold standard:

1873: "Certainly not in 1873, when the United States was still contemplating returning to the gold standard that it had abrogated in the civil war the decade prior." [3]

1884: "
1882-86, yearly growth came in 5.3%, 2.8%, -1.6%, 0.3%, 8.1%. Growth over the five-year period, with 1884 at the mid-point: 9.6%. By the end of the decade, the 1880s, further 28% growth (6.2% per annum) had been tacked on.

For there to be a “major financial panic,” economic growth must take a substantial and sustained hit—as in the years after 1929 and our own cherished post-2007 era. Here we have a modest trough bounded by good growth before, and epic growth after. Take 1884 off the list." [3]

1890: "Saying that there was a panic in 1890 is weird, in that growth was some 9% that year." [3]

1893: Briefly, 1893 was primarily cause by fiat money since a few years before the government launched a massive fiat monetary expansion and a 50 percent increase in tariffs. This caused a bubble which burst in 1893. The U.S. didn't embrace the gold standard, it damaged it and that is what caused the recession in 1893 by not sticking to sound money. [3]

1907: The result of cornering copper in the market, nothing to do with the gold standard. [5]

The Great Depression (1930-33): Steve Forbes and Elizabeth Ames have written:

"Hogwash. The Great Depression was the tragic consequence of the Smoot-Hawley Tariff Act enacted by the United States in June 1930. Equity marketys try to anticipate the future. This dreadful legislation was unprecedented, imposing an average 60% tax on over 3,000 imported items. When it appeared that a destructive tariff of historic proportions might pass Congress, the stock market cracked and then crashed in September-November 1929." [4]

In the end, my opponent argues that today economies are more complex in a modern world, but this doesn't prove any case because during the gold standard trade was growing and the world was continuing to be explored. The world was already globalized by the time of Bretton Woods anyway. Economics is based on the study of human actions through scarcity, production, the transfer of wealth, consumpton as well as the rules of supply and demand. This does not change no matter what era the world is in, they will always be there.

My Refutations

R1: The Gold Standard is deflationary

I've refuted the gold standard and the Great Depression in C2, so I won't address that here, but I will address that deflation isn't a bad thing as some people might think. Robert P. Murphy of the Ludwig von Mises Institute writes:

"One could construct an analogous argument argument for the computer industry, in which the government passes regulation to slow down improvements in operating systems and processor speed. After all, how can computer manufacturers possibly remain viable if consumers are always waiting for a faster model to become available? What consumer would be foolish enough to spend money on a laptop when it will be obsolete in six months? The solution to this paradox, of course, is that consumers do decide to bite the bullet and buy a computer, knowing full well that they would be able to buy the same performance for less money, if they were william to make." [7]

If anything, deflation doesn't encourage hoarding, but instead saving if consumers really do delay buying items. By saving, the loan capacity is expanded and businesses can buy more items to drive the price lower. Businesses would continue to expand because they know consumers will eventually buy. After all, there's no point to holding out for lower prices, but never actually buying.

R2: Impracticallity

My opponent's first argument seems to say that there isn't enough gold in the world. Lawrence H. White of the Cato Institute responds:

"At a market price of $1,700 per fine troy ounces (to choose a recently realized round number), those holdings are worth $444.6 billion. Current required bank reserves (as of October 2012) are less than one fourth as large, $107.3 billion. Looked at another way, $444.6 billion is 18.4 percent of the current money supply measure “M1” ($2,417.2 billion as of October 22), which is the sum of currency in circulation and checking-account balances. That is a more than healthy reserve ratio by historical standards." [8]

Forbes writes:

"You don't need to have piles of a precious metal for a gold standard to work. Even during the heyday of the classical gold standard, no country ever had 100% gold back for its money." [4]


1. Cain, Herman, and Rich Lowrie. 9-9-9: An Army of Davids. Herndon, VA: Velocity ; Mascot, 2012. Print.
3. Domitrovic, Brian. "The Gold Standard Had Nothing To Do With Panics And Busts." Forbes. Forbes Magazine, 19 May 2014. Web. 16 Feb. 2015.
4. Forbes, Steve, and Elizabeth Ames. Money: How the Destruction of the Dollar Threatens the Global Economy--and What We Can Do about It. N.p.: McGraw-Hill Education, 2014. Print.
6. Hubbard, R. Glenn., and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013. Print.
7. Murphy, Robert P. The Politically Incorrect Guide to the Great Depression and the New Deal. Washington, DC: Regnery Pub., 2009. Print.
8. White, Lawrence H. Recent Arguments against the Gold Standard. Washington, D.C.: Cato Institute, 2013. Cato. The Cato Institute, 20 June 2013. Web. 16 Feb. 2015.


R1) Stability and growth

Pro suggests the current fiat system has failed. This is irrelevant, because as to whether or not the fiat system works has no bearing as to whether or not the country should go on a gold standard. My opponent throws around the terms ‘real money’, but that doesn’t even make sense. Whether or not a dollar is backed by gold does not make something worth anything. As noted, by the rules of the gold standard, the government has to set a price to gold which is often not the same as the market price [1.]. This type of price fix causes a lot of problems. Our money is worth what we say gold is--but isn’t that the same as saying a dollar is worth a dollar because we say it is? So this talk about real money really doesn’t make sense. His quote talks about ‘sound’ money as if gold has the same price and never changes, but this is incorrect. Gold prices fluctuate a lot, from $37 in 1970 to $1410 in 2010 [2.]. Gold really does not have some magical fixed value. Like all commodities, it changes through market forces. Under a fiat system, the change in the worth is very predictable. Under a gold standard, you are controlled by random market factors. Backing your money behind a commodity with prices which change to much--or to a government price fix--does not sound like a solid money system. And, I will post the graph I posted last round. That is not what stability looks like…

My opponent again claims the government would be accountable if held to a monetary system. But he seems to ignore the fact the government has ignored the gold standard many times, showing us it is a non-binding contract and does not promote a stable currency. In 1933, FDR ordered all citizens to turn in gold in amounts worth more than $100--the cost was about $20 per oz. The government then arbitrarily increased the price of the gold stock to $35 an oz, effectively increasing the worth of the gold stock and the Fed increased the monetary supply. This means, no matter what monetary system you are on, the government can produce money out of thin air. As the St. Louis Federal Reserve notes, “the gold standard is no guarantee of price stability … price inflation in the U.S. has remained low and stable over the past 30 years demonstrates that the gold standard is not necessary for price stability.” [3.] In other words, the current system actually seems to provide less of a chance in creating money out of thin air. The gold standard is just as promising as the current system. The government promises to keep the dollar the same worth as gold. Sadly, as seen in the 1930’s, the government can and has ignored their agreements. The gold standard does not require any accountability from the government. So far, the current system is better at doing this.

My opponent suggests inflation increases crime. A lot of the research in the area notes how the studies only observed two variables (joblessness and inflation), and cannot “fully capture the criminal behavior” [4.]. The study also suggests there is no reverse correlation--in other words, reducing inflation seems to not decrease the crime rate. Thus, the relationship between inflation and crime is exploratory and does not lead to any definitive conclusions. The reason inflation led to crime was because, as the authors suggest, it made the lives of people worse to they turned to crime to supplement their income. But this flies in the face of most evidence that a low inflation rate may benefit the economy, and the fact that inflation changes fairly slowly [5.].

My opponent argues inflation is occurring today. I never said it wasn’t. You should note, however, if prices rise due to inflation so do salaries, mitigating many of the harms. Further, deflation is just as bad if not worse. In Japan, for example, deflation led to two decades of economic stagnation [6.]. And as noted, some inflation is related to economic growth [5].

R2) History

My opponent states English economic growth in the inter-period is likely due to the gold standard. Again, this analysis is totally simplistic and ignores a lot of factors. He ignored that I suggested England was a rising power. It must also be noted England had many inclusive institutions which led to it’s growth [7. Daron Acemoglu and James Robinson. Why Nations Fail (2012)]. Trade with India also became a factor in the 16 and 1700s [8.]. Again, growth occurred in spite of the gold standard, not because of it.

Pro also suggests Spain did not fall because of inflation. I never said it did, this is a red herring. There were many factors in the fall of Spain--all I said was that hyperinflation occurred due to a gold standard, which is a fact.

My opponent again shows the growth rates under different periods of time. This analysis ignores other factors. Indeed, growth could have been higher if we were on a fiat system--his statistics do not have a control variable. Studies controlling for this have found the deflationary aspects of the gold standard actually have found that deflation causes recession [9.]. As his statistics have no control variable, they do not meet scientific standards of proof. When these factors are controlled for, it seems as though growth may have been higher had there been no deflationary gold standard. His statistics prove nothing.

Using numbers 8 years after the civil war is a weak refutation. The fact that the US was a growing superpower, that the workforce was increasing, etc. still is unchanged. When extractive institutions (e.g. slavery) end, growth is long term. So growth could have occurred in spite of the gold standard, not because of it. And my opponent states there was a stable dollar, which is totally untrue. In the graphic above you can see throughout the 1800s the dollar was not stable and entered various deflationary and inflationary periods. Stability did not occur in that period--how did it cause growth?

Suggesting the panic of 1873 was not due to the gold standard is revisionism at it’s finest. The 1873 panic occurred because we went back onto the gold standard and a deflationary spiral hit the US economy [10.]. The rest of the arguments do not mention the recessions and say “over a few years there was growth”. Duh! If you average good years with a few bad years, you will have a positive trend. And it seems as though your historian does not know history, as in 1890 the recession his other gold nations, not necessarily the US [11.]. So the crisis DID occur and BECAUSE of the gold standard, but other factors shielded us from the damage.

To argue the gold standard didn’t have some effect on the depression is odd. I never said it was the only factor, only one of them. The most recent peer-reviewed research suggests the gold standard led to a deflationary spiral which lengthened the great depression [12.].

The Wood’s system was not a ‘true’ gold standard. Many factors existed--such as no other country using the gold standard and everyone else basing their currency off of ours--allowed us to increase the gold stock and the money supply in the post-war economic boom. In the current economy, as conservative economist John Makin argues, this would not work well. In the 1970s, many factors caused this system to produce inflation at undesirable levels which constrained economic growth [13.].

C1) Deflation

My opponent takes my advice and tries to argue deflation is a good thing--or at least not bad. As I noted Japan has had 20 years of economic stagnation in part because of deflation. I have also cited research providing a link between deflation and recessions and reduced economic growth in the gold standard period. The evidence suggests it is bad.

Deflation in the computer industry is not applicable to the economy. Prices fell because of technological progress causing prices to drop due to market pressures. Deflation occurs because demand is falling and the money supply is contracting. The tech industry does not compare well to the economy as the cause of the price decreases are totally different.

C2) Practicality

No, this is not how the gold standard works. The money supply must cover the entire money supply [13]. So the government pegs the gold at a certain price either above or below the market price. My argument still stands. Also note the M1 is not as comprehensive as the M2 as it includes far fewer variables. The M2 includes bank deposits and other important parts of the money supply which the M1 does not include [14.]. Thus my calculations are actually better picture what the money supply is whereas my opponent’s cherry pick a desired non comprehensive dataset and claim victory. And, again, Pro’s calculation assumes we set our currency to the market price, something which did not occur. The government set it to cover the whole currency at rates often different from the market--in this case, it would have to be $40,000. Libertarian Milton Friedman calculates the costs of maintaining a gold standard would be 2.5% of GNP [15.]. Thus, estimates corroborate my argument and not my opponent’s.

Every country had 100% backing. I am not saying you literally have gold at the market price for every dollar as my opponent’s pundit sources suggest. But you would set the price of gold at a rate which covers the entire gold stock. So we could have a gold standard with the current gold reserves--but it would not be practical.

Debate Round No. 3


My Case

C1: Stability and Growth

The current fiat system is relevant to this debate in that I want the United States to turn to a gold standard. To do that I have to prove why the gold standard is better than the fiat system and part of that is showing the faults of the fiat system. The fiat system has been quite unsatisfactory, as Forbes and Ames explain:

"The ending of fixed exchange rates was a supreme act of mercantilism that ushered in a decade of stagnation and monetary chaos and laid the groundwork for the biggest disasters of recemt times. It helped to bring on the stock market crash of 1987. And it gave us the destructive cheap dollar policies of the past decade that set the stage for the 2008-2009 financial crisis." [1]

Fixed exchange rates existed under the gold standard because the world's countries had been pegged to the dollar which was pegged to gold. Further:

"In a 2000 study, researchers from Rutgers University, the University of California at Berkeley, and the World Bank analyzed data spanning 120 years of financial history and found that the 'crisis frequency since 1973 has been double that of the Bretton Woods and the classic gold standard periods and is rivaled only by the crsis-ridden 1920s and 1930s.'" [1]

Money is just that, it's money. We must understand that money, as defined by Investopedia, is an official legal tender that is used as a medium of exchange. It brings the owner of a shop and a customer together and is far more efficient than a barter system. It is a unity of measurement by measuring what something is worth. The best money is money that is stable. Staibility is best achieved when money is linked to a commodity. Forbes continues:

"Over the centuries, precious metals, such as silvers and especially gold, most often have served this purpose. But other commodities, such as seashells, fur, fish, corn, rice, and tobacco, have also worked as currencies. Tobacco notes were used as money during colonial trimes. Prisoners of war used cigarettes as money during World War II, as did Germans for several years after the war." [1]

Regarding the inflation problem, Rolnick and Weber write:

"The average inflation rate for the fiat standard observations is 9.17 percent per year; the average inflation rate for the commodity standard observations is 1.75 percent per year. And, once again, every country in our sample experienced a higher rate of inflation in the period during which it was operating under a fiat standard than in the period during which it was operating under a commodity standard." [2]

It is clear the that the gold standard offers less inflation, especially the classical one. Salaries might go up, but the value of money changes and income inequality increases:

"Monetary inflation clearly leads to a coercive redistribution of wealth. That this redistribution tends to penalize lower-income individuals is even more outrageous from a social welfare point of view. The limitations of effecting an egalitarian social order through manipulation of the money supply should be apparent." [3]

Forbes writes:

"If you had $100,000 in cash in 2000 and did abseloutely nothing, it would only have been worth only worth $74,000 in 2013." [1]

Even with salary increases, the value of money goes down unless linked to a commodity like gold.

White says on regarding governments and gold:

"Leaving money issue in the hands of private banks rather than a government institution, as the United States did before 1913, removes the option to use surprise monetary expansion one step further. It remains true that government can suspend the gold standard in an emergency, as both sides did during the Civil War, but the spirit of the gold standard calls for returning to the parity afterward, as did the United States." [4]

Even if the government changes the price of the gold stock, the point remains that the dollar is more stable when backed to gold. The gold standard also doesn't exactly mean a price fix:

"The gold standard doesn’t fix a price between dollars and gold any more than the traditional British measurement system fixes a price between pints and quarts. The fixed relationship is a matter of definition. A gold standard defines the dollar (or whatever the name of the monetary unit) as a specified mass of gold. Dollars are not separate goods from gold." [4]

From 1960 to 2005, a study found that when inflation rates were higher then crime was higher. This happens over time as inflation slowly reduces the value of money and purchasing power. The study found that supply-side economics tackles the problem best since it means to seek lower inflation, or deflation, in which criminals are less likely to cause crime. Under the fiat system, inflation has been higher and remained higher. During the gold standard eras, times of deflation would lead to less crime because prices were lower. Therefore, the gold standard is better since, on average, there is low inflation. [5]

C2: History

I disagree that the gold standard isn't what primary started the huge surge of economic growth after 1717 because it recognized the value of a commodity currency. The East India Company was create over a century before in 1600, yet with all its institutions and trade (and no doubt as good as it was), the economy really did take off with gold. A monetary crisis was on the way if Britain didn't do what it had to do in monetary policy (the result of a debased currency), regardless of whatever actions were occuring in the rule of law and trade. Britain, as Forbes writes, ended up going the right thing:

"It was decided that, to avert a monetary crisis, Britain would melt down and remint the damaged money. Traditionally such an occasion was an opportunity for a devaluation...Parliament's eventual decision not to devalue was a victory for advocates of sound money. [Isaac] Newton, as Master of the Mint, formally fixed the pound to gold in 1717." [1]

The result of holding gold at the fixed value and not debasing brought Britain into its golden age. Trade couldn't have been as useful with a weak pound, but with gold the pound remained strong during the high times of the British Empire.

Let's look at GDP growth and CPI during the time of the classical gold standard:

Before the Civil War, U.S. GDP growth grew at an average of 4.3% annually and after it 4.7% annually. Those are times of great growth as the economy is growing above inflation (and yes I had to take this picture from a book, which I will cite below). [6]

The dollar in the classical gold standard era is completely stable because it is supposed to on average. Gold will adjust to what is better for the economy in different years, so it's flexible. With an economic and wage growth above those price changes (as they were at the time), there was no problem. Regarding the panics and the Great Depression:

"Other countries on the gold standard—Canada, for example—had no banking panic in 1929–33 (nor did Canada have panics in the late 19th century), so the gold standard couldn’t have been responsible for the panics. Rather the panics were due to completely avoidable legal restrictions (namely the ban on branch banking and compulsory bond collateral requirements that make the supply of banknotes “inelastic”) that weakened the U.S. banking system." [4]

It should be noted that tight money and deflation actually saved the U.S. economy in the 1920 depression, which largely cured itself. This depression proves deflation actually helps and does not cause recessions. Deflation during the 1920 Depression was by 15%, yet there was major economic growth at the time.

The Bretton Woods system is obviously gold standard. There is no denying that. There are, in total, four different kinds of gold standards:

1. Classical Gold Standard - Countries peg currencies to a particulary weight of gold, which was what Britain started. Anyone could take gold to a bank and exchange for currency at a fixed rate, or they could swap money for gold.

2. Gold Exchange Standard - The U.S. dollar and British pound would be directly fixed to gold while other countries like their currencies to either the dollar or the pound. This system clearly revolves around gold since the rest of the world pegs to two nations that are linked to gold.

3. 100% Gold Standard - Only a % of the money stock was covered under the classical standard, but this system has the entire currency backe by gold. In a 100% gold system, gold would support the entire stock.

4. Gold Price System - Uses gold a measure of value and the dollar would be pegged at a price.

My Refutations

R1: Deflation

The computer industry isn't the only example, but my case holds that deflation encourages savings which helps businesses expand. If we take cars for example in which one costs $20,000, but the dealership bought too much and the customer expects prices to fall by $1,000, then the customer can take time to put that money into CDs yielding return to come out with more money.

R2: Practicality

Gold doesn't have to be 100% backing and that is not what happened during classical times.



1. Forbes, Steve, and Elizabeth Ames. Money: How the Destruction of the Dollar Threatens the Global Economy--and What We Can Do about It. N.p.: McGraw-Hill Education, 2014. Print.
2. Arthur J. Rolnick and Warren E. Weber, “Money, Inflation, and Output under Fiat and Commodity Standards,” Journal of Political Economy 105 (December 1997): 1308–1321.
Balac, Zoran. "Monetary Inflation’s Effect on Wealth Inequality: An Austrian Analysis." The Quarterly Journal of Austrian Economics 11.1 (2008): 1-17. Mises. Ludwig Von Mises Institute, 06 Aug. 2008. Web. 18 Feb. 2015.
White, Lawrence H. Recent Arguments against the Gold Standard. Washington, D.C.: Cato Institute, 2013. Cato. The Cato Institute, 20 June 2013. Web. 16 Feb. 2015.
6. Cain, Herman, and Rich Lowrie. 9-9-9: An Army of Davids. Herndon, VA: Velocity ; Mascot, 2012. Print.



C1) Deflation

My opponent drops the majority of the evidence I have in regards to deflation harming the economy. He drops the study by the St Louis Reserve proving deflation did occur under the gold standard and that it reduced economic growth, he drops the study proving deflation both causes and worsens recessions, and drops the analysis that had we been on a gold standard economic growth would have been constrained as the growth in the gold supply is very small. Thus, he concedes those arguments as true. And those concessions make it impossible to win the debate.

He repeats the example of the technology industry but drops the important point I make: that although deflation occurred, the *cause* of the deflation is equally important. Deflation in the computer industry was caused by market forces. Deflation due to a gold standard would be due to shrinking the money supply and a reduction in demand. His example does *not* apply well to the economy as a whole.

It is fairly clear my opponent fails to refute my first contention.

C2) Practicality

My opponent again drops my argument in relation to the M2. His rebuttal works for the M1, but the M2 is much more comprehensive and closer represents reality. Thus, the current gold stock does not even meet an acceptable coverage--even assuming we only need a 28% backing. Billions of dollars would have to be purchased. He also ignored my arguments about price pegging and fixing, meaning a transition to the gold standard would cause a deflationary spiral and crucify the economy.

My case is proven true.

R1) Stability

Although comparing to the fiat system in many ways is a good strategy, it ignores the fact that *should* includes all forms of monetary systems. It should also be noted even if his arguments were true, my C1 and C2 still apply. Thus, it is not preferable to move back to an archaic system which made sense 100 years ago but makes no economic sense today.

My opponent seems to claim the expanding monetary supply caused the 2008 recession. This doesn’t really hold up to scrutiny. The right wing Heritage Foundation even agrees that the Federal Reserve has “positively contributed to economic stabilization in the U.S.” [1.] To claim it would not have occured under the gold standard is incorrect. Although the recession was caused in part because the Fed lost control of the money supply, it occurred due to a massive change in global finance--not because we left the Bretton Woods gold standard [2.]. Thus, the recession would have occurred under a gold standard meaning the point does not really help my opponent. It should also be noted that entering the gold standard--as my opponent dropped--would lead to a deflationary spiral and would have exacerbated the current economic woes.

Pro claims a study shows the gold standard reduces the rate of crisis. How do they define ‘crisis’? It is well known that the last banking crisis occurred in the Great Depression under the gold standard. *Every* banking crisis has occurred under the gold standard. According to NBER, there were six recessions after 1971 (1971 = gold standard abandoned). There were 7 under the Bretton Woods system. There were 16 under the classical gold standard, and five in the short (1919 - great depression) interwar period. Under the gold standard there were more recessions than under the current system [3.]. To claim a gold standard would reduce the rate of crisis is incorrect

Pro claims the gold standard is stable--but this does not work as he failed to even respond to my argument that the current system is actually 23 times more stable than under the gold standard. If stability is your goal, the current system is pretty good. The inflation/deflation graph I produced refutes my entire opponent’s case--he ignores it. The low inflation rate under the gold standard was not because of stability. Hyperinflation was simply canceled out by large deflationary periods in the following year. Even though the long term rate is zero, the short term rate is so volatile that stability really does not occur. This is proven by the graph I showed last round. A small increase in price which is consistent is far preferable than a volatile system which is only ‘stable’ because the extremes cancel eachother out. That is not stable at all. Gold is not a stable commodity. As my opponent seems to ignore, in recent years the price of gold has fluctuated greatly. Within the last decade alone the price of gold has fluctuated from $400 to almost $2000 [4.]. The ‘stability’ in the past was not really stable--just opposite extremes. In the modern world with a complex economy, the price of gold means backing the currency with a gold standard would be destabilizing.

My opponent claims inflation steals wealth. You have to remember wages will inflate at the same rate as prices rise meaning the net-cost is zero. Only in hyperinflationary environments--which is NOT happening--would inflation harm the economy. A low and stable inflation rate is not a bad thing. Indeed, under deflation debts would be increased in worth. Deflation--which ONLY occurs under a gold standard--is also a thief. If anything, the gold standard steals more.

Pro seems to claim the gold standard prevents the government from changing the monetary supply. He has failed to show one instance where the government has abused its power under the current system--whereas I have provided cases of the government abusing the gold standard. Based upon the evidence in the debate, it is clear the gold standard does *not* force the government to be responsible.

Pro cites the study I already refuted. The study did *not* have enough controls to prove inflation caused crime. The only mechanism which could cause this was an increase in poverty. But as I have proven, deflation increases economic woes and has led to 20 years of economic stagnation in Japan and economic contraction in the US (under the gold standard). As the gold standard causes both hyperinflation and deflation, we can assume the gold standard would increase crime rates.

R2) History

My opponent ‘disagrees’ with my evidence but fails to produce evidence to the contrary. Many of the institutions in england were founded in the century prior, but they did not become large enough to spur economic growth until after 1717. It should also be noted English GDP per capita did not increase over that period, and economic growth began *before* the gold standard was implemented [5.]. To claim the gold standard is the cause of growth is incorrect. The gold standard simply existed during periods of growth, it was not the cause of it.

My opponent again gives us statistics with no control variable, and drops my analysis explaining why his simple time-series data is not valid. He just repeats that the economy grew after the civil war and he thinks it was because of the gold standard. I have given many reasons as to why the growth was *not* because of monetary policy--I actually gave evidence that growth would have been FASTER had a fiat system existed. He also drops this. To suggest a gold standard caused the economic prosperity of the 1800s is ludicrous. Real technological developments occurred, more oil was found and sold, we build railroads, discovered the steam engine, discovered electricity, etc. Thus, the economic growth was *not* because of the gold standard but because of unrelated factors. As I have been arguing, the gold standard worsens recessions. Under the same period recessions were more frequent and longer [6.]. The gold standard did *not* spur economic growth.

My opponent claims the 1920 recession was saved by deflation but offers zero evidence for such an extraordinary claim. To the contrary, the recession occurred because of deflation. “[T]he recession of 1920–21 was the result of an unnecessary contractionary monetary policy of the Federal Reserve.” [7.]

Pro lists many gold standard versions which my argument still apply towards. I have refuted directly both the Woods (exchange) and Classical gold standard variations. The price standard was refuted when I argued linking the dollar to the market gold price would put us into unprecedented deflation. That system is doomed to fail. The 100% standard was refuted by my C2. None of these serve to help my opponent’s case as my C1 applies to all of them and C2 simply eviscerates a 100% backed system. Also note that I presented evidence last round--which my opponent dropped--that maintaining any variation of the gold standard would cost in excess of 2% of GDP.

== Summary ==

(1) My opponent drops too much of C1 to refute it. He drops *all* of my evidence that the gold standard causes deflation and that deflation is bad. He weakly defends his computer argument which I have repeatedly refuted and he continues to misunderstand how deflation works.

(2) My opponent hardly refutes C2, and concedes upholding the gold standard would either cost trillions of dollars or cause a deflationary spiral which would murder the economy.

(3) His stability arguments are thoroughly debunked. He drops my evidence that the gold standard was 23 times more destabilizing, and that it is only ‘stable’ because two extremes cancel eachother out. The gold standard is not stabilizing. He drops my evidence that the current system is stable.

(4) He continues to repeat the mantra that economic growth was fast in the 1800s but fails to understand that a plethora of advancements unrelated to the gold standard are responsible for the growth. He fails to present valid statistics (no control variable) that prove his point.

The gold standard may have made sense 150 years ago, but to implement that system in the modern economy would be economic suicide. Vote Con.

Debate Round No. 4
7 comments have been posted on this debate. Showing 1 through 7 records.
Posted by 16kadams 3 years ago
HG my pic didn't post ima upload it to DDO and send it to you and post it again next round
Posted by 16kadams 3 years ago
well a survey of the top economists found that 0 supported it. I am supporting pretty much modern economic thought. Those economists were not liberals, either. They were from U. Of Chicago--they produced Milton Friedman and Gary Becker (my profile pic).
Posted by TN05 3 years ago
That's the best argument against the gold standard I've ever seen, especially coming from a conservative perspective. I've never really taken a side on this but it seems like a pretty bad idea now - though Pro could prove me wrong.
Posted by 16kadams 3 years ago
yeah that will be cool! I'll be home tomorrow so it's all good. I have my case mostly done but I'm out of town and the Internet is bad

Good luck bro
Posted by 1Historygenius 3 years ago
No problem 16k, I will start typing after 8 tonight for you, Midwest time since I think we are in different zones.
Posted by ResponsiblyIrresponsible 3 years ago
I'm totally going to vote on this! One of you remind me if I forget.
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by Varrack 3 years ago
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Reasons for voting decision: This was a well-done debate. Pro first argued that problems occurred during the gold standard that didn't happen as much with our current standard, but Con pointed out that these problems were not because of the lack of gold but because of other factors. Both made the assumption at first that inflation/deflation was good/bad but fixed those assertions later on. Con showed that the gold standard would starve the economy because it would run out of money and Pro's rebuttals didn't quite overturn that claim. Some of Con's evidence went unanswered by Pro in the last round, which means that Pro didn't uphold the BoP as he should have to win the debate. Thus, I vote Con.
Vote Placed by TN05 3 years ago
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Reasons for voting decision: I will not be giving a numerical vote for this debate, as I find that would be a conflict of interest as I am participating in this tournament. However, I believe Con is the clear winner here. Con gave extensive reasons as to why the gold standard is not a good idea, and Pro did not successfully refute much of it.
Vote Placed by Commondebator 3 years ago
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Reasons for voting decision: Pro pretty much drops much of C1 and C2, and is unable to refute many of Con's points. Pro's main rebuttal was an argument that deflation is not THAT bad. Con debunks all of Pro's stability argument. Despite Pro's repeated mantra he has no statistical evidence to support his claim.