Economics

Could the world go back to the gold standard?

Martin Wolf asks “Could the world go back to the gold standard?

During any period of monetary disorder — the 1970s, for example, or today — a host of people calls for a return to the gold standard. This is not the only free-market response to the current system of fiat (or government-made) money. Other proposals are for privatising the creation of money altogether. (See, on this, Leland Yeager, professor emeritus at the University of Virginia and Auburn University, in the latest issue of the Cato Journal.) But the gold standard is the classic alternative to fiat money.

It is not hard to understand the attractions of a gold standard. Money is a social convention. The advantage of a link to gold (or some other commodity) is that the value of money would apparently be free from manipulation by the government. The aim, then, would be to “de-politicise” money.

The argument in favour of doing so is that in the long-run governments will always abuse the right to create money at will. Historical experience suggests that this is indeed the case.

Wolf’s answer is predictable, but the whole article is worth reading.

1 comment to Could the world go back to the gold standard?

  • As is typical of the unimaginative, Mr. Wolf seems to believe that any transition to another monetary system must be planned and managed. This is exactly the problem with the current monetary system, that it is planned and managed.

    I believe that the transition to a free market in money (the only rational and moral system) will have to grow organically.

    He also states

    “So why choose gold? It is, after all, an impossibly inconvenient means of exchange.”

    I believe he is wrong there too. Thinking along conventional lines, he can’t imagine new forms of bullion that would make the use of gold convenient.

    Sure, the world isn’t going to return to carrying around bags of coins, but bullion doesn’t have to be heavy, bulky, large-valued coins. I have developed a form of bullion that fits comfortably in the modern wallet. I’ve also put the idea into the public domain, complete with instructions on how to set up your own “mint” – which can be done for less than $500 in startup capital. (Somebody please compete with me!)

    Please take a look at Shire Silver to see one possible means of returning the power to produce money to the people as individuals.