The Past Speaks

So, the Republican Party has endorsed the idea of the United States returning, unilaterally, to the gold standard. Wow! Has the right-wing fringe really taken over the GOP? The answer to this question is basically no. The chances of Mitt Romney or any other Republican President returning the US to the gold standard are basically zero. Ronald Reagan spoke about the possibility of studying a return to the gold standard when he running for the Republican nomination in 1980. After he became President, he essentially dropped the idea.

A recent poll of economists found that they were unanimous in regarding a return to the gold standard as a bad idea. The economists polled included people with divergent views on other issues.

GOP’s endorsement of the gold standard has occasioned an outburst of scorn and condemnation by commentators similar in proportion to that meted out Todd Akin for his reprehensible comments about rape. The good thing about this stream of abuse is that it has helped to educate the public a bit more about economic history. In attacking the gold standard in a newspaper column, you have to explain what it was, when it is existed (in its classical form, late 19^th century/early 20^th century), and why it was a bad idea (the golden fetters created by the gold standard exacerbated the Great Depression of the early 1930s).  Lots of great graphs and tables about the gold standard have been published in recent days.

Here are a few of my favourites.

Gold standard advocates like to argue that the gold-standard era was characterized by price stability. Matthew O’Brien of the Atlantic brought us this graph in the course of showing that this wasn’t the case at all.

Gold-standard advocates often assume that the value of gold is fairly stable. Paul Krugman reminds us that it is actually pretty volatile, much like the price of any commodity.

Barry Eichengreen’s essay on the lunacy of a return to the gold standard is essential reading for all concerned.

P.S. Eric Rauchway has published a great post on the GOP’s call for a return to the gold standard.  So why on earth is deflation so hot with the GOP set, whose core constituencies are the same as the Bryanites of the 1890s who opposed the gold standard as the instrument of those who crucified Our Lord? Rauchway is making a good point– the regions and social groups that voted for the Democrats and against the gold standard in 1896 are  precisely those regions and groups that are now the base of the Republican Party (white Southerners, evangelical Protestants, farmers on the Great Plains). The blue states that now vote Democrat are the urban, secular, industrial, and cosmopolitan areas of the country that voted for McKinley and the gold standard in 1896.