In the 2008 presidential primary season, candidate Ron Paul highlighted the gold standard as a major part of his campaign, prompting many Americans to ask: What is the gold standard? In short, the gold standard dictates that the value of our currency is determined by the value of gold. In such troubled financial times, would a return to the gold standard bring us back to a strong and stable economy, or usher in yet another economic disaster?
The Federal Reserve can, by federal statute, create money at will. The only limit is the statutory mandate to promote maximum employment, stable prices and moderate interest rates. An unwritten mandate the Fed nevertheless follows is to protect the systemic integrity of the banking system in emergencies. How much money it creates and what tools it employs to create it are left entirely at the Fed's discretion as it attempts to live up to this impossible set of demands from Congress. As a result, the growth and contraction of the money supply, economic growth, and inflation have been erratic.
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