How the gold standard in our minds messes up our economy

For decades the U.S. and other countries in the developed world were on the gold standard, making sure that they didn't issue any more paper money than their holdings in gold could support. In the U.S. the price of gold was fixed at $35 per ounce, so you couldn't inflate the currency very much at all before investors around the world cleaned you out of your gold reserves.

The gold standard sounds good to many, having money that's "based on something" rather than "just paper." But the effects of the gold standard are a real drag on a modern economy. If you need to do some things that are up for the U.S. right now:

• $1 trillion infrastructure investment ... just a start, according to many experts, proposed again today by Trump

• $2 trillion or more for supporting the country through the pandemic that is "just getting started" according to many public health experts

• All the regular trillions for all the regular stuff that goes on in the U.S. as normal ...

If you start to bump up against the gold in your vault, where do you cut at a time like this?

I just read an excellent book that explains the explains the situation in detail:

Fortunately we ditched the gold standard in the U.S. for good in 1972 ... unfortunately not many noticed how different a "fiat currency" regime such as those now in place in the U.S., Great Britain and Japan, among others, operates:

• There is no fixed quantity of money ... the central banks (Federal Reserve in the U.S.) can create as much money as needed by changing accounting entries in their computers
• The only real limit is inflation, and as we in the U.S. have seen the last few years, the economy can take a whole ton of extra money sloshing around it with "quantitative easing" and all the money that Congress and the Fed threw into the mix since the 2008 financial crisis ... no inflation, not even the 2% target that the Fed says it wants!
• There's no reason for a fiat currency country EVER to default on a payment ...
• And certainly not a social security payment, which is supposedly "underfunded for the long term" and blah blah ... not so.

Dr. Kelton was on Senator Bernie Sanders' staff for some years and lately has reportedly been consulting with the Biden campaign ... Let me end this post by letting you hear from Dr. Kelton herself: