CH7: Money and the Canadian Banking System

http://www.cbsnews.com/blogs/2010/02/17/politics/politicalhotsheet/entry6217403.shtml

|Summary|
The South Carolina Representative introduced legislation to replace federal currency as legal tender with gold and silver coins. Pitts, a republican in an interview believes that, "if the federal government continues to spend money at the rate it's spending money, and if it continues to print money at the rate it's printing money, our economic system is going to collapse." There is also a downside to it and it is because it violates a perfectly legal and Constitutional federal law. Also, since gold and silver regularly fluctuate in value, they could not easily function as stable currency. Pitts told Hotsheet (Political Hotsheet) that he anticipates a nationwide economic collapse "if our federal government continues the course it's been traveling under the previous administration and this administration."

|Connection|
The idea that using gold and silver coins to replace print money is being addressed in this article and states that the expense in producing paper currency will eventually cause the economic system to collapse. The South Carolina Representative wants to introduce gold and silver coins because it’s more durable than paper currency. If this idea is supported by legislation, paper currency will no longer become a legal tender. Now gold and silver coins would be acceptable for purchases and for repayment of debt. Moreover, we could apply Gresham’s Law, in which it states that bad money (gold and silver coins) forces good money (paper currency) out of circulation.

|Reflection|
If gold and silver coins were to be used as our modern currency then it would be very inconvenient for individuals to carry around. This idea brings us to the concept of portability, in which paper is more portable than coins. Also, the actual value of gold and silver coins is greater than their face value therefore, it will not circulate as money because people would rather keep it because of the value. I would rather keep the circulation of paper currency because it is much more recognized and readily accepted.