In light of the recent economic downturn and crisis, it's easy to see why people all over the country are searching for some serious, concrete answers. Some time ago, Congressman Ron Paul mentioned going back to the gold standard, and how the Federal Reserve keeps printing money, causing the nation to go deeper into debt. At the time, most people scoffed at Dr. Paul, and shook their heads in a sort of half-blind confusion, half-hoping thought that maybe he actually had a valid point. Aside from adjustable rate mortgages resetting and gas prices skyrocketing, there are some larger points to the economy that most average citizens may not realize.
The economy is much like a living, breathing organism. Once you examine it a bit closer, you can see its inner workings and know what it needs to survive. One of the largest problems the US faces today is the national debt. The GDP (gross domestic product) doesn't look very promising, and we currently owe billions, if not trillions of dollars to foreign nations like China. Why, you ask, did this happen? While the answer is somewhat complex, much of it can be attributed to the War in Iraq. The war has caused the debt to increase up to the trillions with no end in sight. Couple that with higher unemployment, the value of housing going down, and many other factors, and you just might get a better picture of why we're in this mess.
You can think of the national debt like a credit card. In essence, the government continues to print money in abundance. This results in the value of the dollar going down. Think of the law of supply and demand that you learned about in economics class. This same law applies to money. When the government prints more and more of it, its value decreases, thus causing inflation. Up until the very early 1930s, a dollar bill could be exchanged for gold. After this time period, the dollar suddenly was only worth “legal tender” which basically means it's only worth the paper it is printed on. Before, gold coins and bullion was used as currency for a sort of barter system. This way, no real debt was incurred, just an “even trade.” When the government forcibly took people's gold during the Great Depression, suddenly its value was diminished.
Today we are facing serious crisis in our economy. If the government doesn't find a way to eliminate the national debt and help its citizens, the dollar's value may go down even further, causing a much more serious crisis. While he concept of the gold standard may seem old school and practically impossible, the basis principles of sound money can still be applied today. We must do something soon to prevent further catastrophes, and hold the nation accountable for the serious debt that we find ourselves in.
