Tuesday, September 11, 2012
There has been a remarkable outpouring of opinion denouncing the gold standard since the GOP introduced the idea of reinstating it. Unfortunately many people are misinformed about both economic history and economic theory and simply regurgitate the propaganda they have been exposed to all their lives.
Tenebrarum refutes a recent article, “Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts.” It compares the behaviour of prices from 1919 to 1932 (which includes several periods of major monetary upheaval) with the behaviour of prices as measured today since 'QE' began in 2008, in an attempt to show that prices are more stable under a fiat money system than a gold standard.
According to the article, “exactly zero economists endorsed the idea in a recent poll.” Obviously then, not a single Austrian school economist was included in the poll.
Tenebrarum rebuts the stock argument against a gold standard, discusses money printing and wealth creation, examines how cherry picking data demonstrates a problem of methodology, and shows that economic theory can explain why the recent period of extremely high inflation (inflation here meaning an expansion of the money supply) has not yet led to a massive increase in final goods prices.
“We have already pointed out that to us, the most important thing is that money be returned to the free market instead of being administered by the State,” writes Tenebrarum. “It is a good bet that the market would choose gold (and perhaps also silver) as its money, but this is not the decisive point. However, it is quite clear that a gold standard would be vastly preferable to the legal tender credit money we use at present.”
According to Ludwig von Mises, “The return to gold does not depend on the fulfillment of some material condition. It is an ideological problem. It presupposes only one thing: the abandonment of the illusion that increasing the quantity of money creates prosperity.”
source: Acting Man
Posted by Unknown at 2:34 PM