Thursday, December 20, 2007

That Crazy Gold Bug!

Mainstream pundits love to criticize Ron Paul for his outspoken support of sound-money and the gold standard. Normally, they simply call Ron Paul names like crazy, fringe, or anti-intellectual (my favorite). Now we are beginning to see the next wave which actually contains some arguments.'s Andrew Leonard launches the latest attack by appealing to the consensus.
Mainstream economists will be happy to argue about whether, at any particular point in time, the Fed is too eager to ease interest rates and prop up speculative bubbles. But few would suggest that the solution is getting rid of the Fed altogether, and even fewer that returning to the gold standard is a workable option.
Leonard correctly sees that most 'mainstream' economists disagree with Paul. Yet, many world renowned economists do agree with Paul--Freadrich Hayek, Milton Freedman, and Lidwig von Mises. Perhaps the most interesting endorsement of Paul's position comes from Mr. Fed himself Allen Greenspan, whom all these pundits worship as an economic god. Before becoming the Fed chairman, Greenspan wrote a short article "Gold and Economic Freedom." He concludes
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. ... Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
Although Greenspan pined this while still young, he has confirmed he still holds this position. During a Congressional oversight meeting the following exchange occurred:
‘Now my next question is, is it your
intention that the report of this hearing should be that Greenspan recommends a return to
the gold standard?’ Greenspan responded, ‘I’ve been recommending that for years, there’s
nothing new about that. . . . It would probably mean there is only one vote in the Federal
Open Market Committee for that, but it is mine.'
Ron Paul reportedly asked Greenspan if he still believed the pamphlet. Greenspan responded that he recently re-read it and "wouldn't change a word of it."

So, we can either consider Greenspan a crazy, fringe, anti-intellectual gold bug or give Ron Paul a fair hearing.


Rhett said...
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Rhett said...

If you look at the old testament injuction against charging interest, in a gold standard environment, would you find the lender received back at least what was lent and maybe even a little more? Would the concept of the time value of money be less important in the biblical economy?