The Republican National Convention in Tampa has done some official “party business” that required a massive garish ceremony; namely nominating Mitt Romney and establishing a platform that Republicans will try to follow.
The GOP has apparently found logic to be a job-killer and calls for inquiry into a gold standard or “metallic basis” for the U.S. dollar.
If you took a dollar out of your pocket or Googled one, since everyone uses credit cards, you would find, “In God We Trust,” proudly printed. This remains because the trust in the dollar’s intrinsic value, as an exchange for a good or service, isn’t based on anything tangible; it’s been this way for a few decades. Not only is the idea to base the dollar on an amount of gold anachronistic, but it is bad economic policy as well.
Money is printed by the U.S. Federal Reserve. The Federal Reserve controls the supply of bills in the economy by releasing more dollars through open market operations where they buy bonds or other forms of assets. The recent “Quantitative Easing” is an example of this power. By buying these assets, the Fed puts more money into the banks that sold them, which in turn can be lent out to businesses (or college students), thus stimulating the economy.
This is where the gold standard comes in. By tying the amount of money the Fed can print and issue to the amount of gold the government holds, the gold standard would limit how much money can be printed. Backers of the plan, like Congressman Ron Paul, say this will curb inflation because less money printed makes each dollar more valuable; this is absolutely true. However, our economic woes aren’t from inflation.
The inflation rate is at 1.4 percent, which is under the 2 percent viewed in a healthy economy. Inflation usually occurs when the economy is booming and people spend more on things. Obviously, that’s not the problem now.
The gold standard would be terrible for the economy. It would stop the Fed from any more quantitative easing and limit future monetary policy, which Chairman Ben Bernanke has mentioned as a likely measure soon. The price of gold has been volatile in the past few decades and in the roughly 60 years America spent using gold, there were nine financial panics.
Right now, the gold standard would be like sending the U.S. economy into a fistfight with handcuffs on. The GOP Convention may have had enough balloons to lift the entire west coast of Florida into the sky, but adopting a platform that seeks metallic basis for currency will sink the economy with an anchor of gold.
Patrick Quinlan is a freshman majoring in international studies and political science.