What was the gold standard? Why was it removed? And most importantly, what are the advantages and disadvantages of such a system? Could such a system be reintroduced?
In: Economics
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I feel like no one answered your question in a meaningful way.
We moved away from a gold standard to better meet the needs of a growing population and economy.
The advantage of a gold standard is that there is a floor for how little the currency can be worth (in theory) because gold has usefulness and rarity. Meaning that it has some inherent value as long as people are able to use it to make things.
The disadvantage is that the economy is limited by the amount of gold within it.
Fiat currencies (what everyone uses now) are better in some important ways. The value of the currency instead of being set to an arbitrary gold standard is set by the value produced in the economy. This makes really good sense because the total number of bills in circulation can increase with the growth of the economy without decreasing in value.
The downside is that this system is ripe for abuse by governments that don’t think long term. Printing loads of money is a problem but what really ramps up the issue is the increase in rampant government spending. If spending runs out of control then the government has to print tons of money to pay their bills and then prices for goods and services will inflate because of supply-demand.
Not really and ELI5 but that’s the best I could do.
Also keep in mind I’m not an economist so this is fairly rough.
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