Two of the Republican candidates, Newt Gingrich and Ron Paul, have come out in favour of the gold standard, the former (who hopes to win) obliquely, the latter (who knows he won’t) in earnest. Both probably realise that a currency pegged to the country’s gold reserves would put paid to the rampant statism of modern politics. That’s why it’ll never happen, in America or anywhere else. So our politicians can continue to play their little power games with impunity.
It’s a given that politicians have always sought power. However, in the past, when Christianity still provided a unifying moral force in the West, many of them (though of course far from all) saw power only as a way of achieving some desirable ends. When that was still the case, the gold standard was the norm. Britain adopted it in 1717, the USA in 1834 (de facto), Germany in 1871 (immediately after her formal unification) and so forth.
Modern politicians, on the other hand, see power as an end in itself. When this became commonplace, they had to look for ways of increasing their power, and the choice was limited, what with violent coercion being out of fashion in the West. That left control of the money supply as the clear winner, and the gold standard as the loser.
Those opposed to the gold standard argued, justifiably, that it would limit the country’s ability to climb out of recessions by increasing the money supply (this is called ‘quantitative easing’ these days, presumably ‘queasing’ for short). However, Joseph Schumpeter and other eminent economists showed convincingly that, unless a country gets out of a recession organically, it’ll show not so much recovery as remission. In any case, limiting the state’s flexibility in economic matters is no bad thing.
For state control over the money supply is always inflationary, and inflation is in fact a tax that requires no legislative approval. The state uses inflation to control how much we earn in real, rather than bogus, terms, and the difference is staggering. For example, £100 in 1850, when the gold standard was in force, became £110 in 1900 — a negligible inflation of 10 percent over 50 years. However, £100 in 1950, when the gold standard was but a fond memory, became £2,000 in 2000 — a soul-destroying, economy-busting inflation of 2,000 percent.
Money losing value at that rate turns everyone into either a spendthrift or a gambler, including those who are by nature neither. If they don’t want to see their money melt away, people have to turn it into something tangible, which explains the huge inflation of assets, especially property, everywhere in the West. This urge to convert cash into bricks and mortar no matter what was a principal cause of the 2008 debt crisis, and it’s Western governments that created the urge.
By operating the money-printing presses the state effectively turns us all into its dependants — either directly, by pushing people onto welfare rolls, or indirectly, by controlling our real income. That’s why the gold standard, and gold in general, is anathema to modern statists.
Gordon Brown drove this point home when he was still Chancellor. In a series of auctions between 1999 and 2002 he sold off more than half of Britain’s gold reserves at a rock-bottom price that represented a 20-year low. That stands to reason: as gold in the country’s coffers represented a potential loss of power for him and his ilk, the pernicious yellow stuff had to go. The immediate cost to the taxpayer was £2 billion, but the long-term consequence is even more dire: with our gold reserves slipping down to 17th place in the world, Britain can never go back to the gold standard.
Neither, really, can anyone else. For the total amount of gold that has ever been mined in the world is estimated at around 142,000 tonnes. At $2,000 an ounce, all the gold that Egyptian, Soviet and South African slaves, American forty-niners, Inca and Aztec Indians or our contemporary miners have ever extracted out of the ground would today be worth about $9 trillion. This is approximately the value of the inflated paper money currently circulating in the USA alone, never mind the rest of the world.
Thus, barring a catastrophe of a magnitude we dare not imagine, a return to the gold standard would be impossible even in the unlikely event that the state would show willing. Like death and taxes, our brave new world never relinquishes what it claims.
But one can understand a nostalgic longing for the gold standard, especially in those who regard as repugnant the growing power of the state. And it’s not just dyed-in-the-wool conservatives who have reasons to pine for a reliably hard currency. It’s also people who value economic stability above instant gratification, those who’d rather not devote their whole lives to the feverish pursuit of what Americans call happiness (money to you).
They simply want to have decent, not opulent, lives for themselves and their families. But with money worth less and less, even such a moderate expectation requires an immoderate effort to realise. We can no longer trade a bit of wealth for a bit of freedom — it’s all or nothing.
State control over money supply thus leads to what is in effect economic totalitarianism. Admittedly, totalitarianism that relies on money is on balance still preferable to the kind that relies on guns. But it’s totalitarianism nonetheless, and the only way of fighting it would be to deprive the state of its financial instrument of control by reintroducing the gold standard. Alas, this option is no longer on the table. Our power-hungry statists have seen to that.