There’s a lot of hype in right wing conspiracy circles about the “fiat currency” of the United States. They call for a return to the gold standard; attaching the value of the dollar to the price of gold. That’s a potentially dangerous idea and here’s why.
To understand currency in an economic system one has to understand the idea of convention. We use convention in many aspects of our life. Why is a meter a meter? Because we all agree that it is. It is useful and convenient to have a system of measurements that is uniform. We can exchange ideas and plans with them. An engineer in India can communicate with an engineer in Germany and together they can build something.
Currency is no different. At a store I give the teller a dollar for a bag of peanuts. We agree the dollar is wort the nuts. It’s a convention. It’s simpler than bringing him a chicken and wanting 5 bags of peanuts for it because the chicken won’t fit in my pocket.
Gold is valuable for the same reason; everyone agrees it has value. It’s really just a rock. It’s a pretty rock. It’s soft and malleable and easy to form into jewelry. For thousands of years it has been desired by humans. It was made into coins.
Just because people have been doing something for a long time doesn’t make it a good idea. In today’s complex world economy it is a bad idea. Roman soldiers were often paid in salt (also a geologic specimen) but no one wants to peg the dollar to it.
The price of gold rises and falls according to the market. The price of gold has increased over the past few decades. Generally precious metals increase in value when there is fear in the market place. On a day to day basis it varies, sometimes dramatically. If the dollar were pegged to it, it’s value would vary day to day as well. The gold standard contributed to the Great Depression (History.com)
The value of gold can be manipulated (Underground Newswire). Spoofing the amount of gold on the market or flooding it with a previously unidentified stash could have dire effects on an economy.
CIA director Richard Helms wanted to use economic pressure to cause the downfall of Salvador Allende of Chile ( Foreign Policy). Saudi Arabia punished Venezuela for pumping extra oil against OPEC’s wishes during the First Gulf War (The Conversation). These games are not uncommon.
The question is; where do these ideas come from and who is filling people’s heads with them? Are there fascists bent on the downfall of democracy with a horde of gold? Are they waiting to usher in a new age of socialist dictatorships without the threat of American interference? Are they trying sucker economically impaired politicians into a trap?
Don’t worry. It’s not going to happen. No one in their right minds is going to peg the dollar to gold. FDR took us off the gold standard for a reason (History.com). It was one of the steps that pulled the United States out of the Great Depression. The unhinged right hates FDR. Who knows, if it hadn’t been for him maybe economic pressure would have turned the US into a fascist state as well? Smedley Butler thought so.