Currency? . [SEE BELOW]? As I understand it, a majority of modern academic economists argue that it is better for a country to use a fiat currency [not backed by gold/silver] than to use a currency backed by gold/silver, primarily because, properly managed, a fiat currency can produce a stimulatory effect yielding more rapid economic growth [one that is not possible with a backed currency], which in turn allows for a higher standard of living for all, including of course the middle class.
For the sake of argument, let us assume for the moment that this majority stance of modern economists is correct on this point.
Turning now to the late 18th Century, I would like to examine the beliefs and the outlook of the founding fathers (the authors of the U.S. Constitution & the key national leaders in the last couple decades of the 18th Century), as regards the merits of a fiat currency versus a gold/silver-backed currency.
Which of the following statements do you consider to be closer to the truth...
A) The founding fathers probably understood that a fiat currency would allow for more rapid economic growth of the nation, and that a gold-backed currency would result in slower economic growth -- but as a matter of philosophical principle they preferred the accountability that a backed currency imposes on government. ... Namely, their priority was to establish trust in currency, and moreover to make it difficult for Congress to print a lot of currency [and thereby transfer a lot of fiscal power to Congress without having to increase taxes on citizens] -- and if that meant a slower rate of economic growth, then so be it.
B) Although the founding fathers were probably aware of the general history of both backed currencies and fiat currencies going back to ancient Greece (or even earlier), they had a fairly limited understanding of economics by today's standards, and simply did not understand that a properly-managed fiat currency would allow for significantly faster economic growth (and other positive benefits). ... Furthermore, if the founding fathers had understood the growth advantages that a properly-managed fiat currency offers [compared to a backed currency], they would likely have implemented a fiat currency at the very beginning of the republic -- even with the potential historical risk of offering Congress the means of accumlating an unsustainably large soverign debt.
C) None of the above [please explain & elaborate]
What historical evidence can you cite for your answer?
thanks for your answers
For the sake of argument, let us assume for the moment that this majority stance of modern economists is correct on this point.
Turning now to the late 18th Century, I would like to examine the beliefs and the outlook of the founding fathers (the authors of the U.S. Constitution & the key national leaders in the last couple decades of the 18th Century), as regards the merits of a fiat currency versus a gold/silver-backed currency.
Which of the following statements do you consider to be closer to the truth...
A) The founding fathers probably understood that a fiat currency would allow for more rapid economic growth of the nation, and that a gold-backed currency would result in slower economic growth -- but as a matter of philosophical principle they preferred the accountability that a backed currency imposes on government. ... Namely, their priority was to establish trust in currency, and moreover to make it difficult for Congress to print a lot of currency [and thereby transfer a lot of fiscal power to Congress without having to increase taxes on citizens] -- and if that meant a slower rate of economic growth, then so be it.
B) Although the founding fathers were probably aware of the general history of both backed currencies and fiat currencies going back to ancient Greece (or even earlier), they had a fairly limited understanding of economics by today's standards, and simply did not understand that a properly-managed fiat currency would allow for significantly faster economic growth (and other positive benefits). ... Furthermore, if the founding fathers had understood the growth advantages that a properly-managed fiat currency offers [compared to a backed currency], they would likely have implemented a fiat currency at the very beginning of the republic -- even with the potential historical risk of offering Congress the means of accumlating an unsustainably large soverign debt.
C) None of the above [please explain & elaborate]
What historical evidence can you cite for your answer?
thanks for your answers