Originally posted on Thursday, March 20th, 2014
About a year ago (and eventually noticed here), Harvey Gold, a blogger at Liberal Beef, indulged himself in a long ridicule of the gold standard and of former Congressman Ron Paul: “Panic Must Be Rampant Among Gold Worshiping Paulites.”
Gold likens advocates of the gold standard to those benighted souls who believe the manned moon landing to have been a hoax.
While witty, although often sophomoric, Mr. Gold, demonstrates no comprehension of the gold standard, thereby succeeding only in making himself, rather than the gold standard, ridiculous.
For example, Mr. Gold writes:
Much of the fascination with gold is a simplistic longing for a bygone time of imaginary certainty when currencies were backed by ample gold reserves. But this romantic reminiscence is more fantasy than reality.
Michael Bordo, a distinguished professor of economics at Rutgers, who has made a study of the comparative strengths and weaknesses of the three most recent currency regimes – 1)the gold standard, 2)the system of fixed currencies established by Keynes at Bretton Woods and 3) the modern regime of floating currencies- ‑ concludes that Bretton Woods performed “by far the best on virtually all criteria.”
I’m sorry Paulites, The Gold Standard will never be revived. Moreover, those who continue to hoard gold, or simply believe that it is some sort of magical economy-savior, will be tragically deprived of their vociferously predicted Judgment Day.
Mr. Gold obviously fails to understand that the Bretton Woods system was a version of the gold standard in which international governments had a legal right to convert their dollars into gold at a fixed rate. By citing Bordo (who scored that version of the gold standard as superior to “floating currencies”) Gold undermines not only his argument but his credibility.
While the Lehrman Institute, following the thinking of Prof. Jacques Rueff, believes the gold-exchange standard to have critical inherent defects, such defects clearly argue for a restoration of the classical gold standard. They do not present as an endorsement of “the modern regime of floating currencies” in which, it would appear, Mr. Gold reposes his trust.
Moreover, as Lehrman Institute founder and chairman Lewis E. Lehrman, the most prominent and one of the most respected modern proponents of the classical gold standard, has repeatedly stated, the empirical record demonstrates that gold is the “least imperfect” of all monetary standards tried to date. Gold’s real proponents do not consider or present it as “some sort of magical economy-savior.”
Moreover, as Lehrman assiduously points out, the gold standard has always proved, and remains, perfectly antithetical to gold hoarding. Defining the dollar as a fixed weight of, and convertible into, gold dramatically diminishes desire to hold gold (one of several favored hedges against dollar depreciation). Investors, once freed of a need to hedge, prefer to invest in economically productive assets such as stocks and bonds.
A system with a long track record of investing with integrity the national economic unit of account is to be preferred over one — the fiduciary dollar — with a poor track record for integrity or for generating a climate of equitable prosperity. Fluctuations in the price of gold — such as its dramatic price decline last year — are an artifact of its commoditization rather than its monetization. Once gold is, as currently, demonetized it becomes, and displays all the qualities of, a speculative commodity in a relatively thinly traded market. Fluctuations in the market price of gold, as a commodity, are a complete irrelevancy to the gold standard.
The classical gold standard is not an instrument of “Chicken-Little, survivalist-obsessed, Hannity-admiring brainiacs.” Nor is the version of the gold standard preferred by Dr. Paul — which also is unreflected by Mr. Gold’s critiqued — in any way flimsy.
Dr. Paul, out of a deep-rooted Jeffersonian skepticism about the benevolence of a powerful central government, embraces a model propounded by Hayek for the denationalization of currencies. While distinct from the classical gold standard adhered to, with some variations, for almost 200 years by the United States this is an elegant and entirely respectable proposition. It has nothing whatsoever to do with survivalist obsessives.
Given the level of ignorant abandon displayed by Mr. Gold, this writer feels it wise to point out, to facilitate Mr. Gold’s researches on this subject, should he ever undertake any, that the Hayek herein referred to is Frederich — who won the Nobel Prize in Economics.
Not Selma (with whose work it seems likely that Harvey Gold is considerably more familiar).