The best argument for the gold standard

No, I do not favor a gold standard, for reasons explained in this Bloomberg column.  Still, it is sad/funny to watch the mood affiliation circus of those trying to suggest, in more or less the same breath, that Trump’s Fed picks are dangerous and terrible, and also that the gold standard is the worst idea ever.  Here is one point of mine:

Historical data indicates that industrial production volatility was not higher before 1914, when the U.S. was on the gold standard, compared to after 1947, when it mostly wasn’t. And there are similar results for the volatility of unemployment. That’s not quite an argument for the gold standard, but it should cause opponents of the gold standard to think twice. Whatever the imperfections of a gold standard might be, monetary authorities make a lot of mistakes, too.

And here is the closer:

Most generally, I still think central bank governance can do a better job than a gold-based system that sometimes creates excess deflationary pressures.

Nonetheless, the contemporary world is always testing my belief in central banking. Exactly how will matters unfold when so many world leaders are not behaving as responsibly as they should? Might that irresponsibility seep into monetary policy? After all, populations are aging and debt is accumulating. Surely it is reasonable to worry that some of these governments will seek to monetize their debts and move toward excessively easy money.

Oh, but wait — I forgot one big new argument in favor of a gold standard: President Trump himself. Perhaps his management of central bank affairs is somewhat … erratic? Might it not be a good idea to have the operation of monetary policy protected by a greater reliance on rules? My personal preference is for a nominal GDP rule, but the irony is this: At the end of the day, the advocates of the gold standard, and their possible presence on the Federal Reserve Board, are themselves the best argument for … the gold standard.

Interesting throughout.


Ah, the golden age of the American silver standard is still waiting to dawn, after its Depression era introduction and its subsequent JFK induced death.

Time to bring back the silver certificate as a check on an erratic Fed.

True. Aside form the fact that it was originally devised circa 1700 AD by Isaac Newton in response to the first banking crisis in modern history, the most forceful argument for a gold (and/or silver, if you like)standard is the 100-year, largely unbroken record of failure of voodoo central planning.

The insanity unfolds when after each financial catastrophe, the CBers are awarded additional discretion/powers precisely because of their apocalyptic failures. See Dr. Kaufman's recent book.

Of course, the last thing America could withstand would be for this Congress to do its Constitutional duty regarding money. US Constitution (Art. I, Sect. 8) " Powers of Congress . . . To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; . . . "

The obvious pushback against a gold or silver standard, from a Liberal perspective, would be that you’re giving the Jews control over the economy.

As Congresswoman Ilhan Omar and Ocasio-Cortez says, Jews control Congress through AIPAC: it’s all about the Benjamin’s baby!! The Jews work their hypnosis on Americans, Harris 2020.

All good liberals know Jews control gold, and so they would silence fearless Somali Americans that speak the truth!!

Arguing against a gold standard and favoring a central bank governance in today's economic situation is akin to arguing that no one ever needs an umbrella because right now it is sunny.

The U.S. and much of the world is over due for a great depression. And all of the signals and conditions are there just waiting for the trigger. It isn't difficult to do a google search and see a picture of a street in Venezuela where the gutter is full of Venezuelan money. That is what will happen in the next catastrophic economic collapse to any currency not backed by gold or silver.

Value/Wealth cannot be stored in fiat/paper currency, which, historically, has been and always will be, as "necessary," endlessly, and without limit, printed.

I don't know about a gold standard. It's far above my pay grade. I believe physical gold is a hedge/"insurance policy."

Here is a litany of the 'good' things that happened after Nixon closed the gold window in 1971. [Caveat: there was much else at play.]

Nixon, a big government-loving Republican closed gold window = ended dollar convertibility @$35/ounce (since 1934; it was $20.67 from 1837 to 1933); wage/price freezes; import restrictions. Effective dollar devaluation caused higher commodities prices - a 21% US $ devaluation to $42.22/ounce gold; oil up 4x, gas lines; inflation 12% by 1974 and gold @ $195/ounce. The genius Fed raised rates to unprecedented levels to (13% mid-1974) to fight inflation (from 1971 dollar devaluation and oil shock after the Yom Kippur War 10/1973). That sent GDP crashing down 3.2% (biggest post-Depression drop until the 5.1% drop 2007 - 2009). Unemployment went to 9% - highest since Depression. S&P 500 went down 51.5% from January 1973 to December 1974.

I've seen 41 as the count of problematic inflation events between 1971 to 2008. So! Give the Fed even more power!

In all fairness the French were doing a little bit of arbitrage and demanding our gold instead of dollars. The situation required ending the gold standard or running out of gold. As for the inflation it was not "caused" by abandoning the gold standard, it was caused by other factors including the oil producers in the middle East limiting their oil production. The abandonment of the gold standard was a symptom of the problem not the cause.

The situation required ending the gold standard or running out of gold.

An inevitable risk under the gold standard.

The cost of maintaining a gold standard is HUGE. We have to expend a huge amount of energy, resources, etc. digging up and storing gold.

Countries without domestic gold reserves must run a trade surplus with countries which export gold in order to have access to reserves. At least the US is happy to run a trade deficit with almost anyone, giving them access to Dollars.

What happens when South Africa, Russia and China gain a dominant position thanks to their gold deposits? Do we really want to hand more purchasing power to Russia and China?

So you've finally settled on NGDP level targeting, have you?

How much time do you think we'll need to wait after NGDPLT adoption before the next wave of economists will be calling for the creation of an NGDP futures-futures market?

"That, in a nutshell is why, although I usually agree with the market monetarists on policy, and their desire to lower the status of “hard money” doctrine within liberalism, and while I have long applauded and supported their efforts, I don’t call myself a market monetarist per se."
(From here.)

We already have a NGDP futures market. What does the LT stand for?

LT = "level targeting"

This is what's funny about NGDPLT to me. We have a money futures market to accommodate monetarism, but now we need to kick it one meta step into using an NGDP futures market to accommodate NGDPLT.

So, that's my joke: Next step is to create a futures market for NGDP futures, to accommodate NGDPLT level targeting. I can imagine the next generation's Scott Sumner arguing that "NGDP isn't the thing. NGDP levels are the thing," and then reasoning that we can better smooth business cycles by targeting not the NGDP level, but the change in the NGDP level, which is what "really" dictates the business cycle.

"Never reason from an NGDP level change!" and so on, and so forth...

NGDP futures are a terrible, poorly considered idea promoted by a guy who never did his homework on how markets work and specifically futures markets work.

At least Robert Shiller did the homework. Scott did not, and had over 20 years to do it.

It’s a testament to the lack of knowledge here that NGDP futures are considered to be viable and desirable by many in this comments section.

I’m sure you’ll follow up with a detailed rebuttal. Oh. Of course not. Does “Feminazi” understand how markets work, or does Professor Sumner?

Id love to hear your theory “on how futures markets work”.....I assume it’s less from Shiller and more from the Vox/Fox? Maybe they linked a yahoo news article that mentioned Shiller?

If you’re an economist post your dissertation. Or gtfo.

I do and Sumner does not. I published a multi part critique of NGDP futures. His white paper response to the multiple design flaws and more importantly the fundamental.conceptual problems I demonstrated Showed he just doesn’t understand why and how futures markets work.

Not only that - it exposed he hadn’t done his homework.

I designed futures contracts professionally. That was my job. My job was to come up with ideas for contracts and evaluate the ideas and then actually launch them on an live exchange.

So I just designed the best possible NGDP contract(s) and evaluated them objectively. Fortunately I had done an analysis on inflation futures and (relatedly) on GDP futures so had previously examined ideas close to NGDP futures. Some of that analysis was directly transferable to NGDP futures.


Gold and silver are fine, but they're spiritually 'dead' vessels for value. I propose Papuan cowrie-shell spirit-money. If it's good enough for the dead it's good enough for the Fed!

I pick the shoe standard. The Fed will buy and sell shares in shoe inventory such that the median tennis shoe is nearly $20 everywhere.

Or the Leaf Standard in Hitchhikers Guide.

This is one of those great arguments that we should take the subjectivity out of governing using of course the government own power to restrict it's own actions. Unless you want to pass a constitutional amendment or, at minimum, use legislation to change the structure of the fed (slightly stickier than just fed appointments), you don't really have an argument.

The legislation has to include a large inducement to Congress so they keep the agreement as the law says they can break the central bank agreement at any time, which is why we cycle.

To free the Fed, the Fed must produce enough relief for Congress that they have no desire to over ride the Fed. How can you do that?

Why go to all that trouble to do something really stupid?

Which "gold standard"? An model of "ideal" standard, using gold, and the real question is what does this new standard mean for credit? Will the Units of Accounting still be "dollars" with those defined as so many milligrams of gold? Would a "dollar" of 2018 be revalued as a "dollar of 202x" and debts repaid that way?
And the really important question, raised by F.A. Hayek, is why should we be locked into a National Currency at all? Why not a universal "standard," like "Gold Gram" for the Unit?

A delivery service.
Call up the Fed, they deliver or pick up gold.
I cannot think of a simpler standard, except a savings/loan standard, that one is simpler. The deposit to loan standard is also the more accurate.

Nobody delivers any gold. Ownership of it may be delivered, just as we trade foreign exchange today. The choice of Unit of Account has for centuries been defaulted to the king, and it has been treated as a royal monopoly. But "accounting" is just about adding and subtracting the Units. Those are what make the bulk of our payments system: Units of Accounting.
Why allow any government "to define" it?

Theoretically, currency banking is a pick up and delivery problem, mathematically they all resolve to that model.

US Constitution (Art. I, Sect. 8) " Powers of Congress . . . To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; . . . " God forbid this Congress does its Constitutional duty.

Anyhow, before FDR's unconstitutional 1933 exec order to confiscate all the money (gold coinage) in the US, each Fed Res Note had emblazoned on it "will pay to the bearer ten or twenty dollars as appropriate. Now, the US has a fiat currency that is backed by nothing.

Now, the US has a fiat currency that is backed by nothing.

And we're much better off for it.

The fiat currency has 100% gov't backing to be used to pay taxes.

So you think the US economy has been all downhill since 1933?

What is gold backed by?


All currency is fiat currency.

I'm trying to grasp your last argument and failing to explain it to myself. Let me try an analogy:

1. We put a maniac in charge of the nuclear button.

2. This maniac has publicly stated that we should not have a nuclear button. Stop us before we kill again, he says, in an awareness of his own weaknesses.

3. The existence of the maniac at the button is justification for removing the button.

Is that it?

I for one agree in rule based monetary policy. I do not share the worldview of Scott Sumner who believes, if I understand correctly, that all business cycles have a monetary solution. I think our prolonged low interest rates have been damaging, and IIUC he would have wanted even looser monetary policy. I for one fear the high risks of a hard landing as we unwind the policy we have already got.

I stand more by John Taylor.

John Taylor's rule cycles.

What is the current rule? At any given moment, Congress may change the rule, it is in the constitution. This is the homework you rule givers have to accomplish, papers due tomorrow.

Define a rule that Congress will agree to that gives the Fed 15 years of independence. Solve this riddle and you solve 250 years of economists floundering with banking theory. You get a Nobel prize if you have the answer.

As Taylor argues all the time, the Fed has not followed his rule. Theyve followed modified rules. And had the Fed followed the rule, the last business cycle would have been much smaller.

But I think all rules would have failed to stop the last crisis because it was fundamentally about credit quality, not interest rates. Bad lending continued despite rising rates.

Probably correct, but perhaps "no bailouts, only bankruptcy." as a rule would have stopped the last crisis, or, at least, curbed it substantially.

I'm not 100% certain that is true given the principal-agent problem. I wish it were true.

As Rajan pointed out in his book, Fault Lines, there is no single bullet theory of the crisis that works. It took systemic failures at every level, including and especially government involvement in housing and finance.

I disagree with Rajan on why this occurred, but not how.

Arm the Fed.

Why not? Every other Federal Agency has a SWAT team...

If you believe that Scott Sumner believes all business cycles have a monetary solution you have not read enough of his writing.

" is sad/funny to watch the mood affiliation circus of those trying to suggest, in more or less the same breath, that Trump’s Fed picks are dangerous and terrible, and also that the gold standard is the worst idea ever."

I don't understand this. It seems to me the issue is that, according to Tyler, a rules-based Fed would be a better Fed. He also seems to suggest that there are many other rules that would be better than the gold standard, like NGDP targeting. Color me a mood affiliate, but I think Trump's picks are objectionable because they lack expertise and any rule they chose to impose would be worse than the alternatives.

Now, I suppose, if the issue is bemoaning any Fed pick is mood affiliation, that is fair. For example, if Trump picked Scott Sumner, I think it would be a little unorthodox, but hardly objectionable. Such a pick would satisfy having both expertise and a better, more stringent rule.

Most of us writing here will be dead when the Federal Reserve fails and is replaced by something else, but it will happen, and I don't care who is put in charge or what rules they are given. It is likely that some of us will live to see it, though.

It happened to me, in 1972. I expect it to happen to me again in less than a year. I am speculating that Trump is already on board.
Jeff Frankel, a well known economist, has convinced most economists, correctly, that central bank cycles. If its major cycle is generational, then you can bet that AOC will be pushing for a Trump Shock, and Trump will oblige. It could happen during the next government shutdown, scheduled for Oct, if it coincides with the scheduled recession.
Treasury actually has a difficult time meeting the volatile interest charges.

Frankly, who cares though. It won't work any better or different. At some point people need to admit capitalism is a debt based ponzi scheme that the Abrahamic cults brought to America, had their fight in the 13/14th century on who would run it(Templers vs. Papacy(Jews)) and the plague accelerated things.

Capitalism itself is dying.

"Still, it is sad/funny to watch the mood affiliation circus of those trying to suggest, in more or less the same breath, that Trump’s Fed picks are dangerous and terrible, and also that the gold standard is the worst idea ever."

I am pretty old, and have been told all my life that a gold standard is old fashioned, inferior, the province of goldbugs and other nutters.
Now I'm told it is "mood affiliation" to *not* abandon 50 years of such education on a dime?

That frankly sounds backwards. Find someone *suddenly* defending a gold standard and you might have spotted someone affiliated, one way or another.

Opposing something because the cool trendy people say it's old-fashioned and inferior, because it's associated with uncool people like goldbugs and "nutters", this is what mood affiliation is.

That's throwing away a learning curve, decades of professional expertise, and calling it "mood."

That's bad, but you've tapped the moment.

Trump is not promoting incompetents and they are not flirting with gold standards because they are better, but because expertise is dead (among that group).

In his closing paragraph, does Tyler sign on?

Is it because expertise is driven from the executive branch that a gold standard becomes, for the first time in 100 years, a good option?

Fix the actual problem. Get these fools off stage and revalue executive performance.

What would you do if you wanted to pass down a store of value to two centuries from now?

Farmland, grazing land, or timberland with a modest cottage on it as a residence.

They ain't making any more of the stuff.

"Farmland, grazing land, or timberland with a modest cottage on it as a residence."

Property taxes and upkeep on the cottage make that a very expensive and high maintenance store of value, especially if you are a time traveler.

I would reexamine my motives.


And it is probably a fair bet that the Vanguard S&P 500 index would be around and provide interesting returns to any individual or group you predict to value in 200 years.

How confident are you in your answer? And if your answer is gold, and you are confident, how sure are you that whatever quantity of gold you pass down to your descendants will be worth the same, in real terms, as it is today? Because that's what "store of value" means, isn't it?

Artwork? Low maintenance, tax free, relatively easy to move if necessary. Forgeries are an issue, but there are chains of title for the existing pieces.

But artists go in and out of fashion. And then there are storage and insurance costs.

Besides, maybe in 200 years we will have reproductions that are perfect down to the molecule. Then will the originals be hugely valuable, or will they simply be curiosities?

I'd settle for treating gold as money again (no taxes on the metal). Anyone who wants a gold standard would be free to use it.

The bigger problem these days is central banks accumulating foreign sovereign debt and assets. They should be restricted to owning gold or fiat currency. Let them eat their own cake.

Industrial Policy volatility looked smaller because the economy was smaller and much of that was pre-industrial. Fact is, this same volatility began showing signs of weaving well before 1914. The fact is, 1945-73 the US had big economic growth(4%) in a setting which land development was already matured(aka, unlike the 19th century which created nominal growth bursts). My point? Your post doesn't make any sense.

That was my reaction too. But I'm implicitly assuming that pre-industrial societies have less volatility than industrial ones, and I don't know what the data actually show.

It demonstrates the confidence of central banks in their own operations that they themselves own gold.

Central banks have always owned gold, during the Rothschild "hard" gold standard days. Their operations are still based on it. Even the US had a central bank before the Federal Reserve Act, it just wasn't official.

But gold as a form of money is a "barbaric relic". If fiat money makes sense then there's no reason for any central bank to own gold, unless they view it as an insurance policy for their own failure.

"Still, it is sad/funny to watch the mood affiliation circus..."

You mean followers of Hayek, Knight, Simons? These two nominees are a disgrace. Is John Taylor not available? Apparently, he knows less about monetary theory than these two knuckleheads. These are clearly poodle appointments.

Banana republic appointments. Trump just hires his friends and family to run things, like a South American caudillo.

Fundamentally, one cannot defend the Federal Reserve and the free market at the same time. They are direct contradictions.
Collectivist central planning versus voluntary market cooperation.

But many somehow discern a "Third Way" -- a smooth blend of socialism and free markets. History disagrees.

You mean the historical "world GDP per capita" graph doesn't go in the direction we think it goes in?

The fed fixes the price of borrowing money, just as other institutions fix rent, the price of milk and sugar, etc. It's simply price fixing.

Still, it is sad/funny to watch the mood affiliation circus of those trying to suggest, in more or less the same breath, that Trump’s Fed picks are dangerous and terrible, and also that the gold standard is the worst idea ever.

Oh stop with the "mood affiliation" crap.

It's perfectly possible, correct even, to criticize the nominations and oppose the gold standard. For one thing, if the government is so unreliable on monetary matters, what makes you think it won't abandon the gold standard as soon as it becomes inconvenient?

Besides, two bad nominees - not yet confirmed, and who won't be confirmed if there are three or four GOP Senators with a shred of integrity left - don't make a central bank a worse arrangement than the gold standard. That implication is foolish.

Imagine Trump as President and the country, on a gold standard, in a recession that could be alleviated by abandoning gold.

How long do you think it would take Trump to start trying to go off it?

And AFAIK, you've been silent on the recent Fed nominees. Why?

@byomtov - "For one thing, if the government is so unreliable on monetary matters, what makes you think it won't abandon the gold standard as soon as it becomes inconvenient? " - that was one argument as to why the "managed gold standard" of the interwar period did not work, was was not credible, in that actual gold was not used but blocks of gold moved in-between governments and it was inconvenient to turn paper money into gold.

I favor the gold standard since as Mankiw showed in a paper, it prevents hyperinflation (if one dollar is worth say 10 cents of gold, it puts a limit on how much money you can print to about 10x). I also feel money is largely neutral but hyperinflation is the exception to that rule (paper money is not neutral during hyperinflation). I feel due to excessive debt (both corporate and government, go to the Debt Clock and see here, where private debt is twice government debt and already at 200% of GDP:, the USA will either hyperinflate or default on government debt, unless a gold standard is achieved to limit debt and make it more expensive to issue for both private and public parties. I don't believe in Ricardo equivalence.

Bonus trivia: where are Scott Sumner and George Selgin in this thread?

Well, it prevents hyperinflation if you stick to it. But what makes you think a government willing to print money like mad is going to stop and say, "Oh, wait. We're on the gold standard, so we can't do that?"

Plus, hyperinflation is not the only possible economic problem in the world.

It is quite probably the worst economic problem in the world. Is it worse or better than a Great Depression-type collapse?

I don't know how you measure the severity of the respective problems. Both produce a huge amount of misery.

But the gold standard will not, as a practical matter, prevent hyperinflation. It will cause recessions/depressions.

Second what byomtov said. What prevents hyperinflation is the Central Bank not being stupid. Hyperinflations are relatively rare events that usually happen when society and institutions break down. The Confederate States experienced it but not the Northern States in the Civil War, for example.

Passing a gold standard then is about as useful as passing a law that says "Thou shall not be stupid, even if times are desperate". If you think people are going to get stupid in desperate times, the law mandating the gold standard will just be ignored.

Now on the other hand suppose we have a very bad recession and the gold standard is slowing recovery. Trying to get a revaluation passed is going to be very difficult. So the gold standard possibly harms us for no good reason and is unlikely to prevent the ultimate disaster that is cited as it's reason for existing.

Did Tyler just award himself an "interesting throughout"?

The Bloomberg articles are actually written by Tyrone. I'm only half joking.

One of things that has always puzzled me about central banks is the fact that basically on a whim they could easily allow people "in the know" to make billions. For example, suppose I know that a rate cut is coming. I dump a billion dollars into buying the appropriate position in an interest rate swap. The rate is cut and now I make a small fortune off the derivative asset.

Now I get, some people are less prone to wanting financial reward. And other folks are easily deterred by the threat of social or legal sanctions. Yet we do not buy this excuse elsewhere in political life. Nobody is shocked that there exist some congressmen who sell their souls for trivially small amounts of money (less than say your average Nigerian cabinet member). Likewise, we have oodles of rules about judges recusing themselves and bipartisan screeds about how judges are captured by interests with significant financial stakes before the court. Generals, FBI leadership, even high ranking clerics have all been found to be on the take.

Similarly, we believe that tax rates are issues with massive ideological interplay. Politicians votes on what to tax (say carried interest) and by how much are thought to be heavily influenced by ideology. Yet interest rates function similarly. A consistent yearly excess of 1% inflation over alternatives ends up helping creditors (say those with mortgages or fixed corporate debt) by massively more over a decade than most recent changes to income taxation. And let's not even consider the various judicial cases where legal taxation questions are thought to be utterly dominated by ideological influences. Why exactly do we expect such biases not to be in play at a Central Bank?

I often wonder if central banks in the modern era will go the way of the Supreme Court - an institution thought initially to have a narrow remit that eventually uses sparse, but broadly applicable powers, to dominate national policy.

Some might argue that central bankers just follow rules to control inflation ... but honestly in the modern era I am not sure how NGDP targeting ends up being that different that a projection of global gold output. We are reaching the point where we can easily reprice anything regardless with computers regardless so I am not sure that historical experience with gold will be anything other than a blip in the number crunching.

Like everything else - courts, college administrations, legal societies, unions ... I suspect that the Fed will cease having a narrowly defined mission and become just another battleground in the ideological conflict. Perhaps it might be better to go back to the gold standard not because it is technically superior, but rather because we can our politics to render the Fed as well functioning as so many other modern institutions.

Well that's exactly the fear, that Trump will appoint lackeys rather than independent central bankers, which starts the Fed down the slippery slope to being an instrument of the ruling political party.

The Fed has mostly avoided that, with chairmen ranging in ideology from Greenspan to Yellen adhering to solid mainstream macro policies.

But that could change, if craven board members are appointed. If the Fed leadership became incompetent enough then yes the gold standard would start looking good.

Time is ripe for the bitcoin standard. And since its supply is bounded upward at 21 million its more stable than gold. Yes, it has been pretty volatile recently but that is because it is still in the process of stablishing itself as a store of value, after a few more years I think bitcoin volatility will be a tiny fraction of the present and its use as a means of exchange will begin to skyrocket.

That's funny, Rafael.

Got any more good jokes?

The Gold Standard is popular among people who aren't very good at thinking through the geopolitical consequences.

The largest gold producers include Russia, China and South Africa.

Tell me the world will be a better place if we arbitrarily transfer more economic power away from the US, Japan and the Eurozone to despots in Beijing and Moscow.

It's quite telling that most of the people who support a gold standard also whine about American Imperialism. These people are enemies of western, liberal democracy and should be treated with extreme skepticism.

"Liberal Democracy" - the West is neither liberal or democratic (Rather like the "Holy Roman Empire" ) 18 million people in the UK who voted for Brexit have been ignored by the UK government and branded as racists by some "liberal" commentators in the UK.

I believe that the problem with the gold standard is the very long and cumbersome process to assess the quality/validity of the reserves (incase of the gold in the vault and people interact with electronic proxies)/or assessing the validity of the coins (I don't know how cheap those gold meters can be made) or essentially ending up relying on proxy measures of quality(gold coins with holographic stickers of something like that to indicate the provenance of the gold - you may end up believing the company more than the gold).

I believe that if a nation ever chooses to make any commodity its standard, it should be a commodity that is regularly used so that people never get too much out of touch with the base commodity. For that it might have to be a near universal input. Wheat in the old egyptian system was one such, with all its storage problems. In the modern era, we might move to some fossil fuel, drinking water or some such universal input. Electricity as a currency is a very interesting notion. It is however not storable and the buffers to manage cycles will have to be in capacity and not in inventory as with the other commodity currencies.

I could be wrong but I believe for a while the US gov't actually kept more gold on hand than it had issued in currency. In other words, it was on the 'gold standard' in the sense it had enough gold to redeem dollars for anyone who wanted the hard yellow stuff but the actual monetary policy was not fully controlled by gold. Under the gold standard a surplus of gold would result in the central bank printing more green driving inflation and slowing imports. The central bank did not allow that to happen hence it wasn't a gold standard in the monetary policy sense of providing a full 'autopilot'.

Whether you think currency backed in some form by gold and silver is good or bad is irrelevant. At some point in our future it is going to happen. In theory a well managed currency by responsible leaders would lead to the best of all outcomes providing stability and predictability for a free market capitalistic economy. The problem of a fiat currency controlled by people is the temptation is too great to try to create something from nothing. Our leaders and we the people can not control ourselves when it comes to creating money. We think we have tremendous "needs" that must be met. We want someone else to pay for them if possible and we don't want to feel any pain. Every time we start to go into a recession we start up the printing presses by pushing more and more credit out into the economy. We are not willing to let the economy make the needed corrections that a recession is telling us we need. Some people say wow we have stimulated ourselves out of each recession, making them shorter than they used to be, but at what cost. The cost of accumulating more and more debt. We keep pushing the pain out ahead of us and don't realize what a massive problem we are creating for some future generation. Some day this will all end in some massive readjustment of our monetary system that will convince us that even with all the disadvantages of a gold back system we will create it to prevent this from happening again. It is not if, but when?

Just today Moore said he does not support the gold standard.

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