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No doubt that America, the country that is interested in export and import, has difficulties with future prognoses concerning foreign currency. The return to the gold standard can have influence on monetary and credit policy. The emissive bank will be deprived of independence because the emission of dollar will be tied to the gold. The gold standard, in its turn, implies free conversion of dollar to gold and vice versa. It should be taken into account that after implementation of the gold standard, further economic processes in the country will differ from those in causa fluctuating currencies. The country will definitely require global re-examination of methods of management and stimulation of the economy.
What are the possible prognoses of far-reaching consequences? The recent events in Iraq confirm that demand for the gold inevitably increases during the moments of instability. Correspondingly, the currency that will be tied to the gold standard will automatically become the world reserve currency. This currency will be so-called financial etalon for other world countries. Dollar is the world reserve currency.
However, due to its active contraposition to Euro, American should undertake all efforts in order to keep the leading positions. America should keep the leading position of dollar in the world economy. Further, our country should undertake all attempts in order to overcome the rising inflation. Floating currencies are more dangerous for financial stability of the country as far as their fluctuations influence price inflation.
Besides, Jack Kemp considers that American central bank makes mistakes in the discretionary management of floating currencies (n. p. ) and such situation puts the entire world economy at risk. The gold standard can also help the country to determine how much liquidity markets demand. Jack Kemp brings in evidence sad experience of the Bank of Japan that couldnt determine the requirement for liquidity markets and contributed to prolonging and deepening Japans monetary inflation (n. p. ). The only way to manage a currency is to tie it to the gold.
The gold can be used as a reference point and a new monetary standard for a new millennium (n. p. ). The gold standard will allow the citizens of America buying and selling gold at will, and the government will forget about raising or lowering interest rates and simply add liquidity (buy bonds) when the price of gold tries to fall and subtract liquidity (sell bonds) when it tries to rise (n. p. ).
Besides, the will be no need for American government to maintain a large stock of gold or to redeem gold and dollars on demand as far as the citizens will be able to do it in the marketplace. In such a way, it will limit the role of central bank. Besides, the return to teh gold standard would restore economic security by stabilizing prices, smoothing business cycles, and rewarding savers and capitalists who think ahead and invest in the future (Rockwell, n. p. ) Bettina Bien Greaves considers that the return to the gold standard meets only with ideological problems. According to her, the most important issue is the change of ideology because people consider that the return is too difficult and there are just too many people in the world [] and the economy is too complex (n. p. ) The return to the gold standard is quite simple.
The country will meet no difficulties on the way. The gold will serve as a financial anchor able to protect the US dollar. World monetary system will receive a perfect system of protection. Financial stability, minimal inflation, self-supporting budget all these goals can be achieved by returning to the gold standard. America has problems with its economy and return to the gold standard can be merely is the only thing to do. American still has great potential and perspectives of more perfect financial stability.
There is no alternative to the gold standard: our economy needs a golden anchor.
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Research essay sample on Gold Standard Financial Stability
