It’s deja vu all over again!
So says Doug French, formerly of Las Vegas, in his Mises Institute column today. French compares the current election year to 1980 in that discussion of the gold standard has actually crept back into the Republican policy debates.
While campaigning for the Republican nomination in 1980, Ronald Reagan promised to establish a gold commission once he got into office, just as Newt Gingrich has done in the current race. (Ron Paul has also urged a return to gold-backed monetary stability for decades.) Reagan at least nominally made good on this promise, although as the great Rothbard observed at the time: “The gold standard was the easiest pledge to dispose of. President Reagan appointed an allegedly impartial gold commission to study the problem – a commission overwhelmingly packed with lifelong opponents of gold. The commission presented its predictable report, and gold was quickly interred.”
French goes on to debunk the pseudo-intellectualism of some supposed monetary scholars who were recently quoted mocking the gold standard in the New York Times. Here’s my favorite retort: “A number of professors on the panel made comments to the effect that the price of gold is too volatile or unstable to back the dollar. Evidently it doesn’t occur to them that it’s not the price of gold that’s volatile but the value of the dollar. The value of the dollar is volatile downward for the very reason that the Fed can create dollars from nowhere; evidenced by the M2 money supply increasing from $683.7 billion in August 1971 to the current $9,712.8 billion.”
To be fair, I should point out that not all Austrians necessarily agree with the gold standard, even though they might all agree that a gold standard would be vastly superior to the current system of fiat monopoly currency and the attendant boom-and-bust cycle it facilitates. Hayek, for instance, simply advocated for free choice in currency, with the expectation that traders would naturally gravitate toward currencies that established a reputation for stability, whether backed by gold or not. This would imply a rejection of legal tender laws so that privately-issued currencies could compete openly on the marketplace with various government-issued currencies.
Whatever the endgame of the resurgent gold debate may be, it’s certainly encouraging to see that Americans are beginning to understand they have been systematically looted by the inflation tax and that this phenomenon is also related to volatility in the business cycle.