There are many reasons why no nation uses the gold standard today; one of them is not that the fiat, central banking system that most nations have in place today is superior. In fact a gold standard would work better than any fiat system for the simple fact that gold back money would never become worthless. So if the gold standard is superior why no nation uses it today? You ask; there are two reasons for this. The first reason is that fiat currency gives the government the ability to inflate the currency. This in essence gives the government the ability to secretly tax its citizens through inflation. The other reason is that the gold standard alone is not enough to stop governmental manipulation of the economy.

If a nation has a gold standard and some people within or outside of government wanted it gone for their own benefit, there are three options they can do. The first option is to raise taxes; by raising taxes businesses will in turn raise the price of goods and services in order to stay profitable. The price increase would cause less goods and services to be able to be purchase at that given time. Next step is to blame it on the gold standard and say things like “we need a more elastic kind of money, to help the people of course”.

The second option is to get the government to implement a central bank. Use the central bank to raise interest rates. By raising interest rates high, people would spend less and invest less, because the better option would be to keep the money in the bank and get a higher return. Also businesses would have less income; some may even go out of business if implemented long enough. Like the first option, blame it on the gold standard and say things like “we need a more elastic kind of money, to help the people of course”.

The last option is to slow the minting of coins and printing of certificates to a stand still (in this case it is necessary for the government coins and certificates to be the only legal tender). After a while less and less money would be in the system, causing businesses to have less income and like mention be for some would even go out of business. You can guess the rest, blame it on the gold standard and say things like “we need a more elastic kind of money, to help the people of course”.

All three of these options do one thing, soak up the money supply. All a government has to do is to implement all three simultaneously and blame the gold standard to get the system that is most beneficial to them. The devious part is that most of the time the new system is even easer to manipulate than the gold backed system. With the gold back system banks have a shorter time limit on how high or low they can keep the interest rates. The reason for this is if banks keep interest rates too high for too long the bank’s gold would be paid out to the customers. If too much of the bank’s gold is paid out, the bank would start to default on the interest rates they pay to their customers and then they would most likely go out of business.

If interest rates are too low for too long less people would keep their money in the bank and the banks would take in less profits or even take a loss. With a fiat currency, central banking, fractional reserve system the banks can manipulate the economy easier by creating money out of thin air anytime someone takes out a loan. This also would allow banks the ability to keep interest rates too high or too low for a longer period of time compared to money backed by gold.

Government benefits because of the ability to grow larger without having to overtly raise taxes. If this is not bad enough, the fiat currency, central banking, fractional reserve system is not sustainable, it will eventually implode on itself when the fiat currency becomes worthless. The main reason why no nation uses a gold standard is it can be made to look bad, and governments love a system that gives them more power no matter how unethical, unsustainable or unstable that system might be.