Source: Forbes
Date: April 04, 2023
Bringing up the subject of a gold standard is strictly verboten in the economics profession and among financial policymakers. It’s long past time to break this taboo. A gold-based monetary system would have prevented our present woes, not to mention this century’s previous economic and banking disasters.
When the price of gold changes, it’s not the value of the metal that’s changing; it’s the value of the currency the gold is being priced in that is fluctuating.
If we returned to a gold standard and fixed the dollar to the yellow metal at, say, $1,900 an ounce, all that would mean is that if the price of gold rose above $1,900, we’d reduce the money supply. If it went below that, we’d in- crease the money supply. Contrary to myth, a gold standard doesn’t artificially restrict an economy’s money supply; it simply means that the money created has a stable value.
From 1775 to 1900, when we expanded from a small agricultural country into an industrial giant, the U.S.’ money supply increased 160-fold, while the gold supply increased only about threefold.
Without really intending to, the U.S. blew up the post–World War II gold standard in the early 1970s, and we and the world never went back on it. We have suffered for that decision with an average economic growth far below our historic track record.
Consider this: From the late 1940s—after recovering from the distortions of World War II—until we abandoned the gold standard, the average annual growth rate of the U.S. was around 4.2%. After that, until the pandemic, the average was 2.7%. Had we maintained our gold-based average, the median household income in the U.S. would now be around $110,000, not today’s $70,000—$40,000 more.
History’s lesson is clear, even though people who should know better don’t want to face up to it: A nation always performs better when on a gold standard. That and low tax rates are fundamental for long-term prosperity. Always.
So toss out the taboo on gold, and let the debate begin.
