Bob Murphy Defends the Gold Standard

The other day I linked to Michael Sesit's Bloomberg column not endorsing the classical gold standard. Or at least not returning to it. I'm not a gold bug, but I like the idea of the classical gold standard. Steve Forbes advocated returning to the gold standard when he ran for president in 1996 -- though I can't remember offhand his exact plan.

Anyway, I often link to Sesit's columns because I consistently find them interesting. That also goes for his pre-Bloomberg days, when the Paris-based journalist wrote the "Global Player" column for The Wall Street Journal's European edition.

But in the interest of equal time, here's Bob Murphy's defense of the gold standard posted on LewRockwell.com. It ends with this:

It's true that the government can always renege on its pledge to maintain a fixed peg to gold, but at least everybody would know exactly when the government cheated. You would at least avoid absurdities such as the present crisis, in which people are actually praising the Fed for pumping in unprecedented amounts of new money in order to "help."

The political class is not your friend.

Comments

[Sivaram Velauthapillai]

There is nothing to stop a massive boom and bust under a gold standard. One needs to look no further than the 1920's, when most countries, but USA specifically, was on a hard gold standard. The excesses in the 1920's were arguably far worse than the present.

Furthermore, governments even if they were on a gold standard will almost certainly go off the gold standard during a major war and very few would stand up against it...

[John]

Sivaram: I see your point, but booms and busts aren't why I find the gold standard appealing. I think it's a moral way of issuing money. People know that 12 inches make a foot, etc. People should know that a certain amount of gold equals a dollar.

I certainly don't see the gold standard as some sort of silver bullet. Ditto balanced budgets, etc.