“Price Stability” Not the Point of a Gold Standard

In the attached article by John Carney he explains that despite what critics of a gold standard argue, price stability is not the key goal of a gold standard.

(From CNBC.com, NetNet)

“Matthew O’Brien makes one obvious point: anyone who believes that the gold standard era was marked by price stability, or for that matter any kind of stability, just hasn’t looked at the evidence,” Krugman writes.

What makes this so odd is that “price stability” is not a central claim of real-life advocates of the gold standard. The so-called Austrian school of economics, the most prominent economics school advocating the gold standard, is actually quite notable for its criticism of the very idea of “price stability.”

In his landmark 1963 study of the Great Depression, the late Murray Rothbard argued that the quest for price stability had been one of the reasons that economists of the 1920s failed to notice the monetary inflation that was occurring.”