The discussion on the possibilities of a gold standard can be too fun to give up, so we won’t. Today we’ll take a look at an article from Matthew O,Brien’s article on Business Insider.
It’s interesting how often detractors use absolute and authoritative statements to attempt to bolster their point. Again, the discerning reader can catch these and see them for the chicanery they are. But most readers simply read over articles, absorbing the information and disinformation alike and assimilating it into their consciences as though it helped foment a veritable understanding of the challenge before us.
For example, consider this statement, “Economics is often a contentious subject, but economists agree about the gold standard — it is a barbarous relic that belongs in the dustbin of history.” Really? Economists agree with this statement, across the board? In fact, apparently “exactly zero economists endorsed the idea in a recent poll.” Well, if that’s true and the poll was responsible, then I suppose the case is closed.
First of all, the poll in question was a very simple question that involved two facets. Here’s how the question was presented:
If the US replaced its discretionary monetary policy regime with a gold standard, defining a “dollar” as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American.
There really are two questions here. One involves price stability while the other involves employment. Furthermore, no time frame is given. I would expect most economists, whether for or against the gold standard, would agree that there would be extreme volatility in the short-term if a gold standard were adopted, whether deflationary, inflationary or some fluctuations that involved both. Such a move would give the detractors ammo to say that it doesn’t work. But if the question was focused on the long-term, Austrian’s would point out that the forces of supply and demand would eventually calm the economic storms and there would be more stability.
Furthermore, by making this two questions rather than one, it requires the expectation of stability in both price and employment in order to provide a positive response. With this in mind, one would expect any liberal economist to disagree with the question. And that’s exactly what happened. Forty percent disagreed with 53% disagreeing strongly. The remaining 7% did not answer.
Consider also the host of professors involved in the poll. All are disciples of bastions of Keynesianism; Harvard, Berkeley, Stanford, MIT, Yale, Princeton, etc. Though his vote was to disagree, the only comment that seemed to have a realistic grasp of the challenge came from Edward Lazear of Stanford, “The gold standard adds credibility when a country lacks discipline. The cost is monetary polic flexibility. The tradeoff is unclear in US.” And his vote was only counted with a confidence level of 6 on a scale of 1-10. Maybe there’s some hope? After reading his answer to the follow-up question – doubtful.
How come nobody from the Ludwig von Mises Institute was polled for this article? Economics is their specialty. There are a few mainstream economists out there who could have offered a more erudite response. Ron Paul’s economic prowess would have been much preferred to the nonsensical tripe detractors keep spewing forth.
As we discussed recently, the challenges of changing back to a gold standard are monumental. The effort would be massive. And there would be an interim cost associated. But the cost wouldn’t be because of the gold standard. The cost would be the payment due from 40 years of irresponsible fiscal policy that has resulted in the most gargantuan mountain of debt in the history of the world.
Of course fixing the problem will involve pain. But that’s pain that will be endured eventually whether we pursue it responsibly or not. If we do so on honest terms, embracing a responsible fiscal policy, then we can make it quick. But if we continue to kick the can down the road, it will continue to grow and the painful grind will last years, if not decades, wearing even deeper into the fabric of our society than the current debt culture already has.
I vote for the former. However, as in this irresponsible poll, my vote seldom, if ever, has sway in the big picture. The artists of the latter will continue their shenanigans to the detriment of our economy and the future of our children. Perhaps the best we can do is to vote against them with our pockets, by holding history’s true money in defiance of their empty promissory notes.
For your prosperity,
J. Keith Johnson
The Gold Informant