Blademaster

The reason why we have this fascination with gold and money because they are intricably interwined due to human nature. For instance, if I were to give you monopoly money, it has no value except for the value of the printed paper itself. Likewise with the countries' mint systems and their currencies. How do they obtain value for their currencies? They use items to back it up like securities or collateral. The most convenience form of securities or collateral is gold because it is universal, it is malleable, it can be shapened to any form, and most important of all, it is rare and valued by practically everyone (well except for me. It has absolutely no value to me but that's another story). So the way to create value to their currencies was to assign an amount of gold to the demonination of the currency, thus creating value for the currency. Of course the problem is that it means the amount of currency in circulation is largely tied to each country's reserve of gold. Prior in the past, it was a balancing act by each country's banking or treasury administration to print out more currencies than there are gold available in their reserves. It will work as long as people continue to trust their government and not panic and cash these currencies into gold at once. But you can only go so far and do so much because it is largely tied down to the reserves of gold. It puts a damper on inflation and hence investment. Unless you have discovered more gold deposits, the amount of investment and economic growth remains low and the productivity is severely limited. By converting to a free floating currency, you largely escape these problems but it means that you are more vulnerable to people's fears of security and adequacy of the currency itself. However you can check these potentially fatal flunctuations and fears by imposing some sort of control over the printing of currencies and exchange of currencies. Like some countries purchase other countries' currencies to boost up the value of their own currencies or set down exchange rate policies or interest rates. As long as you remain disciplined and adhere to a policy formulated by the government, economists, bankers, and accountants, you will see a healthy rate of growth. However in reality it is a different story because in every one of us lies the desire to get rich and some amount of greed.

In the immortal words of Gordon Gekko, greed is good.

Forgot several things. Adhering to the gold standard or going back to the gold standard would destory the foundation of wealth creation that has brought prosperity and enourmous wealth to the American people.