If you're a shoe-making elf who jealously guards his gold coins -- a Leprechaun -- you don't have many friends in American politics these days. President Obama, gold-bug message boards say, is working to confiscate all gold in private hands and even the Libertarian Party has deleted overt references to the shiny stuff from its platform. In fact, gold has only one major friend in the national spotlight: Ron Paul.
Paul, for his part, has written a book calling for a gold standard and makes it part of his stump speech. Now, with Paul and his acolytes working to disrupt the Republican convention in August, there's a real chance that some "gold bug" thinking could infect the Republican platform. This would win the party the Leprechaun vote and, by hurting fundraising, lose the election for Republicans.
Let's look at the gold standard to explain why. In the standard's defense, some prominent honestly mainstream Republicans like Jack Kemp, Ronald Reagan, Alan Greenspan have flirted with or even embraced the gold standard it the past. In fact, in an economy where inflation was a major problem -- as it was in the 1970s and early 1980s -- a "tight money" policy could have a lot of merit. But, without switching over to gold, Greenspan's predecessor, Paul Volcker, imposed one and, mostly, it worked. Inflation hasn't been a major problem since then.
The problem is that a gold standard or any other tight money policy is the wrong medicine for the economy now. Today, of course, there's absolutely no evidence of inflation in the Consumer Price Index or the much broader Billion Prices Project. (Theoretically, an "easy money" standard somehow tied to gold is possible, but no modern gold standard proponent with any public support actually favors that.) One of the economy's major underlying problems, the unemployed trapped in upside-down houses that they can't sell to seek work elsewhere, would be solved entirely if inflation were to take off. And corporations would stimulate the economy by spending the billions of dollars in cash currently sitting on their balance sheets. So, even without considering its enormous practical problems that Fed Chairman Ben Bernanke among others have outlined (there isn't really enough gold in the world to make it work in the way most proponents now propose), total lack of evidence for most of Paul's claims, and its godawful track record (we had huge contractions about once every 20 years under the gold standard), a gold standard is a total loser.
In many ways, in fact, a gold standard based economy has the flaws that most gold standard proponents claim for our current fiat currency system. Unlike stocks (real claims on ownership), bonds (real claims on debt), and most commodities (resources for which there is industrial demand) gold is almost entirely useless. Its price reflects people's interest in buying gold -- not anything about any economic fundamentals. And it isn't even a step forward for liberty. A gold standard substitutes one form of government control, over the price of a given commodity, for the existing Federal Reserve System.
Bad as the idea is, it isn't DOA in the Republican convention. Unlike other parts of Paul's platform that involve gutting national defense, withdrawing from NATO, legalizing heroin, and abandoning Israel -- things that have no support amongst most GOP convention delegates -- the generally poor understanding of monetary policy amongst portions of the Republican Party mean that a degree of support for a gold standard or something like it might be foisted on Romney's platform. After all, goldbug measures have become law in Utah and gained support elsewhere. If they make enough trouble, the Republican convention might just be convinced to give some credit to the idea of a gold standard. After all, Paul isn't going to be the nominee and probably isn't even going to get a primetime speaking slot.
While Romney himself is too smart to make anything so kooky a major part of his campaign, simply including it in his platform would make it clear to a large portion of the otherwise right-leaning financial sector that the Republican Party hasn't managed to tame its fringe elements. And this would give Romney -- who is finally fundraising decently -- a fundraising gap that, alone could cost him the election even if the chaos Paul delegates want to create at the convention doesn't turn them off on the GOP first. A gold standard isn't good for anything besides winning the Leprechaun vote.
Follow Eli Lehrer on Twitter: www.twitter.com/elilehrerdc
Everything else this jagoff is about I'd like to smack him for.
...lol... that's probably the dumbest thing I've EVER read... you know, that might work on young naive people with no experience but us old guys that's been around for a long time know better. We're still living with the hyper-inflation from the 70's and it just keeps getting worse and worse. I don't know, maybe the author of this comic piece actually doesn't understand how the system works. Maybe this little cartoon video will help them understand... https://www.youtube.com/watch?v=mII9NZ8MMVM&feature=player_embedded
What this Eli person wants to do is frame Ron Paul as a fringe guy. Trying to scare readers with crazy catch phrases like "legalizing heroin" and "gutting defence" abandoning Israel" .
L
Sorry Eli. Even the Jerry Springer crowd dont buy it anymore. Now you have you have problems.
Ron Paul is very much main stream and has already won. Theres millions of us Paul supporters. Not only are we here to stay, we are growing every day. We have meet up groups and more and more are poping up every day.
Come on Eli! Jump on the bus! 'Cause the bus you're on, the wheels are coming off. FAST!
We've tried various manifestations loose money since Ike was in the Oval Orifice. It has not work, because it is outright theft, and it discourages capital formation. If it were going to work at all, now would be the time, since rates are virtually zero.
"The problem is that a gold standard or any other tight money policy is the wrong medicine for the economy now."
If not now...when?
US Money Supply (M2) as of 2009: $8.48 trillion ($9.61 trillion as of 2011) (http://en.wikipedia.org/wiki/Money_supply#United_States).
$8.48 trillion / 5.3 billion troy ounce = $1600 / troy ounce.
So if we gathered all the gold recovered in history in Fort Knox, we could have based our 2009 money supply on gold at (roughly) par.
Of course, given as only about 40% of current gold production (op. cit Wikipedia Gold) is used in investment and other entities like to hold gold, we're forced to conclude that either: A) Gold is currently hugely undervalued by the market, or B) Gold is no different than any other commodity, with price dependent on supply and demand and not an absolute standard of value.
You can always adopt your own gold-based "currency" if that's your faith: Gold ETFs are liquid as cash. However, they do expose you to the sad fact that gold prices sometimes fall, whereas it seems to be the common thought that the value of a 20 meter cube of the stuff is immutable.
But you libertarians always have to dumb things down so you can pretend to understand them.
We go on the "gold among other things" standard and all is swell.
60 years from now, your great-granddaughter, who's engaged in asteroid mining, discovers a million ton asteroid which seems to be 10% gold by weight. The gold in this asteroid will amount to about half of all the gold humanity holds before the discovery.
Due to the "intrinsic value" of this gold, should we immediately dedicate a third of the global output to retrieving the asteroid into earth orbit and returning the gold to earth's surface?
Does your great-granddaughter, due to her claim on the gold in the asteroid, now hold a corresponding claim on all human wealth?
I know what your thinking. "But what would keep the government from going on a spending spree and hyper inflating the currency?" The answer is another question. What is keeping our government from going on a spending spree in our current system?
In a sentence, Why do we need to sustain a monetary system as fundamentally corrupt as the one we have now? We have much better systems from history to choose from, no?