If you want to be ridiculed by mainstream pundits, economists, and financial analysts, just bring up the gold standard.
Republican presidential candidate Ted Cruz got the full treatment after a recent GOP debate when he had the audacity to suggest, “I think the Fed should get out of the business of trying to juice our economy, and simply be focused on sound money and monetary stability, ideally tied to gold.”
Cruz's passing references to the gold standard led to howls of protest. Based on the hue and cry, you'd think the Texas senator had suggested the earth was flat.
According to the mainstream, nothing is more certain than the fact that the gold standard is a relic that should be forever relegated to the dustbin of history. But like a lot of conventional wisdom, the anti-gold rhetoric isn't so wise. In fact, much of it is based on pure myth.
The primary purpose of the gold standard is to tie money to something tangible and stable. As it stands today, currency simply floats around like an untethered balloon. Central planners love this because it empowers them to just blow it in any direction they please. But as Steve Forbes points out in a recent column, the concept of untethered money is really absurd:
The purpose of a gold standard is to ensure that a currency has a fixed value, just as measures of time, weight and distance are fixed. We don't ‘float' the number of minutes in an hour or inches in a foot. Yet, strangely, economists believe that constantly changing the value of a currency is good for growth.”
In truth, it's good for politicians, central planners and government power brokers.
When the money supply is tied to something tangible and relatively fixed like gold, it naturally limits the amount the government can circulate. When it is “free-floating,” the government can print as much as it wants. Politicians love this, of course. More money means more spending. More spending means more opportunities to essentially buy votes. And of course, all of this means more debt, as Frank Holmes recently pointed out:
