How to Defend the Free Market Gold Coin Standard: Stop Defending the Government Counterfeits.
This was posted on one of my site’s discussion forums on the night before Christmas:
Gold based economies more volatile than central bank fiat based money economies??
Roubini: On a return to the Gold standard
“When you had a traditional gold standard, boom and bust with severe swings in economic activity were the norm–really big ones. It was only once we moved to fiat money that central banks were able to smooth the business cycle, and make it less volatile, as we did during the financial economic crisis.” – Nov 2010
Where do they get these ideas? Or rather where did I get the idea the boom and busts would be smaller in a gold based society? I know I have heard this multiple times.
But they did have bank panics in the 1800s. So maybe they are right?
My bet is that the booms and busts will occur in a gold based economy but they will not be so big and wild or last as long as in a fiat money based economy.
The person who posted this is well meaning. He senses that Roubini is wrong, but he is not sure exactly why. He is typical of the overwhelming minority of those who think that a gold standard would be a good idea. He means well, but, as they say, he doesn’t get it.
What is “it”? The logic of the free market.
So, let us begin. First and foremost, a government-guaranteed gold standard is a rotten idea. It is just a little better than a fiat-money standard. But advocates of “the gold standard” almost always mean “a government-guaranteed gold standard.” Therein lies the problem. Governments lie. They cheat. They steal.
Over and over, I have returned to this theme: a government-guaranteed gold standard is a fool’s gold standard. I have had great trouble in getting this idea across.
And now… the rest of the story. …..
Harold
