Gold gibberish6 March, 2013 at 13:22 | Posted in Economics | 5 Comments
Eighty years ago Keynes could congratulate Great Britain on finally having got rid of the biggest ”barbarous relic” of his time – the gold standard. He lamented that
advocates of the ancient standard do not observe how remote it now is from the spirit and the requirement of the age … [T]he long age of Commodity Money has at last passed away before the age of Representative Money. Gold has ceased to be a coin, a hoard, a tangible claim to wealth … It has become a much more abstract thing – just a standard of value; and it only keeps this nominal status by being handed round from time to time in quite small quantities amongst a group of Central Banks.
Ending the use of fiat money guaranteed by promises for currencies once more backed by gold is not the way out of the present economic crisis. Far from being the sole prophylactic against the alleged problems of fiat money, as the “gold bugs” maintain, a return to gold would only make things far worse. So yours truly – just as Keynes - most certainly reject any proposals for restoring the gold standard.
Why would anyone want to reinstate a gold standard? Duncan Weldon may have the right answer:
Economically, the case for the gold standard simply does not stack up and yet it still finds very vocal supporters. Fundamentally the case is political rather than financial. Gold bugs want to see golden handcuffs restraining the ability of central banks to intervene and states to spend, they want to remove any vestige of political control of the monetary system and fix it an arbitrarily chosen shiny metal in order to let free market forces take over. It is therefore no surprise that most gold bugs are to be found on the libertarian right.