Many Who Criticize a Gold Standard Know Nothing About a Gold Standard

Noam Scheiber writing for the New Republic tells us that ” the gold standard is nuts– and perfect for today’s GOP.” ” Mr Scheiber confesses  to ” knowing…only… a little” about monetary policy. Just as well to start with this caveat, but why start hurling accusations about a subject on which you are completely ignorant?

Take this line: ” …Suppose something crazy happens, like South African miners go on strike– then there will be too few dollars relative to the amount of buying and selling going on in the economy.” Pure moonshine. Most of the gold ever mined is still around. What comes out of the ground today in South Africa or anywhere else is a tiny, tiny fraction.

Nor is it true that the amount of gold would have to expand with economic growth. If we produce more goods with the same amount of gold ( money) in circulation, all that happens is that goods become cheaper when priced in gold. The whole purpose of the market system is  to produce more so that the price of goods will fall and more and more people will be able to buy. This is what happened with cars and computers and much else. They started as expensive luxury goods, but as production increased became affordable to more and more people. This is not a problem. It is the way we lift people out of poverty

Scheiber also says that ” the speed with which advanced  economies junked the gold standard determined how quickly they shook off the Great Depression.” More moonshine. The real gold standard was abandoned with the onset of World War One, long before the Great Depression. Nor did junking the gold standard pull anybody out of the Great Depression. Instating the real gold standard did seem to end the Great Depression of the 1870’s and a return to it after World War One might well have averted the Great Depression of the 1930’s.

Utter nonsense about the gold standard is not only to be found in the New Republic. Dick Morris ( Republican, then advisor to Bill Clinton, now  Republican again) viciously attacked Ron Paul on Dec 28, 2011 in a video that focused, among other topics, on the gold standard. Morris got off the Scheiber-like   statement that ” if you go to the gold standard, there won’t be enough capital to launch enterprises in the US because some bozo has not discovered enough gold in South Africa.” And he  agreed with Scheiber that ” we abandoned the gold standard in the 1930’s because it was deepening the Great Depression.”

Scholars can argue about the Great Depression but the notion that the US, on a real gold standard, would need South African gold is simply preposterous. It is completely baseless.

On that video, Morris even said that Dr Paul, who is pro-life, was pro-choice. Both Scheiber and Morris need to do some fact checking  before firing off their salvoes.

Click here for Scheiber’s moonshine.

(New Republic, 8-27-2012)