“Let’s go back to the gold standard.
If the very idea seems at odds with what is currently happening in our country — with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year’s record budget gap — it’s because a gold standard stands in the way of runaway government spending.
Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold. Fiat money — i.e., currency with no intrinsic worth that government has decreed legal tender — loses its value when government creates more than can be absorbed by the productive real economy. Too much fiat money results in inflation — which pools in certain sectors at first, such as housing or financial assets, but ultimately raises prices in general.” Read more.