Gold and Silver Standard Act

[Associate Justice PiT]

I'll be voting against this, obviously. Perhaps my honorable colleague would like to defend his bill before we vote on it?

     I would like to say that I introduced this bill with the intention of fighting the scourge of inflation.

     After all, inflation hurts many people. It hurts the fiscally responsible consumer by reducing the purchasing power of their dollars. It hurts the disabled & the elderly, people who live on fixed incomes. It hurts workers who happen to shift into a higher income bracket due to inflation.

     While it is true that the government has it within its power to deal with many of these problems, the federal government is a beast shackled by its own bureaucracy. Social security will not be increased fast enough & income tax brackets will not be moved higher fast enough to prevent these people from losing significant amounts of purchasing power. This in turn hurts the economy.

     To restate my initial idea, we should seek to prevent further inflation of the dollar. If you have ideas for additonal items that should back the currency, I would be glad to hear them, but I would like to remove a source of much economic inefficiency. Likewise, you should see the value in removing a source of increased hardship for certain parts of society.

[Associate Justice PiT]

     I decided to look into what being on a gold/silver standard could do about deflation. In cases of long-term deflation, the government could raise the exchange rate of gold or buy more gold, thereby inducing a temporary spurt of inflation.

     While printing a load of money would have the same effect, this system would not necessarily be any worse at dealing with deflation while being able to safeguard against inflation.

     I suppose it could wait for another season, though I think it would be better to take on measures to protect us from inflation now, heading off the next period of devaluation of the dollar.

[Associate Justice PiT]

Moreover, we have not had inflation as a serious problem for close to 30 years now, which is what the gold standard is supposed to prevent. We have other problems.

     How do you figure. After all, a dollar today is equivalent to 19 cents in 1971. If this sort of massive devaluation is what happens when in inflation is not a serious problem, I don't want to see what happens when it becomes one.

[Associate Justice PiT]

Moreover, we have not had inflation as a serious problem for close to 30 years now, which is what the gold standard is supposed to prevent. We have other problems.

     How do you figure. After all, a dollar today is equivalent to 19 cents in 1971. If this sort of massive devaluation is what happens when in inflation is not a serious problem, I don't want to see what happens when it becomes one.

Inflation is a part of the natural course of events in a growing economy.

     It's still a bad thing though. Fixing the dollar to a commodity would not eliminate inflation, though it would go a long way towards reducing it.

Moreover, we have not had inflation as a serious problem for close to 30 years now, which is what the gold standard is supposed to prevent. We have other problems.

     How do you figure. After all, a dollar today is equivalent to 19 cents in 1971. If this sort of massive devaluation is what happens when in inflation is not a serious problem, I don't want to see what happens when it becomes one.

Well, try from say, 1984, and your numbers will be considerably less dramatic. Gold won't prevent inflation due to commodity shortages anyway, or if it does, will result in negative growth, as the economy is starved for dollars.

     Well that's largely because inflation leveled off because of the recession. I don't think anyone wants to see the return of 8% annual inflation like we had in the 1970s.

[Associate Justice PiT]

     Aye

[Associate Justice PiT]

As much as it pains me to vote against my pal's bill:  nay.

     No hard feelings, of course. I should try to think of a less divisive bill to introduce next, though.

[Associate Justice PiT]

No it doesn't.  While it might make some sense to have either a gold standard or a silver standard if a hard ceiling on inflation is deemed necessary, bimetallism just doesn't work because the value of gold and silver fails to remain constant.

True, though it is still an improvement over the current system, and the bimetalism was only put there to appease the vice-president.

     Yep. It was originally just the Gold Standard Act.