by Ralph Benko
There tend to be two reactions to proposals for restoring the classical gold standard. One is a common sense “Of course!”
The other is Austan Goolsbee’s Valentine’s Day quip reported by Reuters in 2012:
“Roses are red. Violets are pink. Don’t listen to goldbugs. No one cares what they think.”
Neither stance is strictly wrong. Except, of course, the part about the violets, which are blue. But Goolsbee was Obama’s top economist, not agriculture secretary. Let’s cut him some slack on that one.
That said, let’s not conflate the enthusiasm of cultish goldbugs with the work of rigorous monetary scholars such as those gathered by Peter C. Earle and William J. Luther on behalf of the American Institute for Economic Research in their superb The Gold Standard: Retrospect and Prospect.
This new compilation utterly avoids the dogmatic quicksand that plagues too many gold advocates (never Lehrman, Forbes, Domitrovic or Nathan Lewis nor the late, great, Mundell and Timberlake). Gold’s antagonists, like Paul Krugman, are even guiltier of dogmatism.
Time to lay dogmatism aside. We now have in one place the work of many of the best classical liberal monetary economists working today analyzing the empirical evidence about how the gold standard worked in practice and, done right, could again work to better our lot.
Moot? No.
I recently called upon President Biden to, in a Nixon-to-China move, quell inflation without inducing a recession by adopting the classical gold standard. Alas. No sign he will heed this wise counsel.
Which, however, opens the door for the GOP to go for the gold. Candidate Trump, on the stump, showered praise on the gold standard on two occasions. While he took no action on it as president, Trump loves gold and remains a potent influence with the GOP.
Currently, the GOP is a party without a monetary plank other than the call for a monetary commission from its 2012 and 2016 platforms.
Earle and Luther’s book does the work of that proposed commission, with excellence.
Hello presidential aspirants DeSantis and Christie and Youngkin?
The gold standard is great policy. And great politics.
Earle and Luther’s guidebook begins with the republication of the AIER’s 1971 prophetic commentary on Nixon’s closing the gold window. It then provides a magisterial essay by the excellent George Selgin on “The Rise and Fall of the Gold Standard in the United States.”
Selgin infallibly provides sterling economics, only slightly tarnished by his gratuitously pessimistic political coda.
Earle and Luther then explain in technical fashion “How Does a Well-Functioning Gold Standard Function?” followed by Kwabena Boateng and Joshua Hendrickson on the “Price-Specie-Flow Mechanism and the Monetary Approach to the Balance of Payments As Theories of International Adjustment.”
Then Thomas L. Hogan’s rigorous analysis of “How Good Was the Gold Standard?” reinforces the findings of the Bank of England’s 2011 Financial Stability Paper No. 13: Reform of the International Monetary and Financial System by Oliver Bush, Katie Farrant and Michelle Wright. The data show that the classical gold standard and the gold-exchange standard produced far better outcomes than the current fiduciary dollar system.
Don’t fight the ticker! My favorite contribution, authored by the unfailingly lucid economics professor Lawrence H. White, definitively demolishes as specious the conventional 14 arguments against specie.
Brian P. Cutsinger then answers the question “Is the Gold Standard Feasible?”
Yes, economically. “Harder to answer,” politically.
Andrew W. Salter addresses “The Monetary Rules: Is a Constrained Central Bank as Good As Gold,” concluding that in theory following certain rules might be superior to the gold standard. He archly concludes, “How to achieve that kind of a commitment, however, is far from obvious.”
Nicholas Cachanosky then addresses “International Monies: The Gold Standard, Currency Boards, and Dollarization.” This counsel of pragmatism is followed by Luther’s “Digital Gold: the Case for Cryptocurrencies,” an erudite two cheers for Bitcoin, cryptocurrencies conjoined with a shrewd forecast of “better versions of the monies we already have.”
Because if so they may all be found in The Gold Standard: Retrospect and Prospect.
The Washington Post’s Gene Weingarten, once dubbed me “the second most conservative man in the world” for my gold standard advocacy. Guilty as charged!
Designated by Reagan Gold Commissioner Lewis E. Lehrman (my mentor) as one of the 23 official witnesses before the 1981 Reagan Gold Commission I, unfashionably, was one of only two or three pro-gold witnesses.
I have not faltered in my classical gold standard advocacy since happening upon its record, while in law school, toward the late, inflationary, 1970s. Now I am less lonesome.
Once, I harbored secret doubts that there were enough classical liberal monetary policy experts to do the classical gold standard right. I now lay those fears to rest.
Hello Republican Party and its presidential aspirants?
Thanks to Earle and Luther you now may safely finish Rep. Jack Kemp’s unfinished symphony, “The Gold Standard Act of 1984.”
Onward to a golden age!
Ralph Benko, co-author of “The Capitalist Manifesto” and chairman and co-founder of “The Capitalist League,” is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply-Side revolution that propelled the Dow from 814 to its current heights and world GDP from $11T to $88T. Read Ralph Benko’s reports — More Here.
