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Mises University scholar and economist Robert Murphy believes the government should get out of the money industry entirely. However, if we must have a central bank, "it makes a lot of sense to put in place rigid restrictions on it," he writes today in defense of the gold standard as he debunks the argument that gold-based monetary systems are "overly restrictive" and "volatile."
In countering the claim that gold currency is unstable, Murphy asks rhetorically:
So you tell me: looking at the graph below of the Consumer Price Index, when was the value of the dollar stable and predictable, and when was it really volatile? In which environment could businesses and investors confidently make long-term decisions? Remember that FDR took away private citizens' right to redeem dollars for gold in 1933, and then Nixon finally removed even the ability of central banks to do so in 1971.
People who oppose the gold standard have no particular aversion to gold or any other precious metal per se. They are statists, so what they really oppose is the imposition of any standards whatsoever that would at least inhibit central planners from retaining control over the value of our property and, by extension, control over our lives.
Though it's hard to argue with pictures, many people will look at the graph above and still try to convince you that the answer to the current economic crisis is to enable the government to carry on with the same policies that created it -- that is to say, printing paper money backed by nothing more than the thin air out of which it appeared. But this really ought to come as little surprise, for the same types of people will insist that crime can be reduced by increasing government gun restrictions, which tend to encourage crimes in the first place.
Of course, Murphy's article needs no additional endorsement or explanation from the likes of me. He nailed it from the very beginning when he said, "To criticize a monetary system based on gold as 'rigid' only makes sense if you believe that printing green pieces of paper makes a country richer."
