Tuesday, March 17, 2009

Defend The Gold Standard

I have blogged before on the evils of fiat money. For those who are unaware of what fiat money is, fiat money is paper money that is not redeemable in any actual commodity, such as gold. In other words, fiat money is counterfeit money that can be inflated willey-nilley, producing all sorts of evils. See my post outlining those evils here. Roberty Murphy writes a great defense of the gold standard for the Ludwig von Mises Institute (using as his basis this piece from Bloomberg). An excerpt:
Let's take these one at a time. 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. After all, the only rigidity enforced by the gold standard is on the central bank's use of the printing press. Requiring the government to maintain a fixed dollar/gold exchange rate is "restrictive" in the same way that the Bill of Rights limits the discretionary power of the feds.

So yes, if Mr. Sesit thinks that the government does a good job centrally planning the economy with injections of new paper money, then I can see why he would consider the gold standard a bad idea. But let me ask you this: would you trust your next-door neighbor to use a legal-tender printing press "responsibly"? Now what about the people in DC? If we're going to be foolish enough to give them a printing press in the first place, don't you think it's a good idea to put some strict rules in place?

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