As history abundantly demonstrates, the gold standard would not immunize the economy from financial crises. Imposing it would, however, render the central bank powerless to respond to them, as it could not readily expand credit or act as lender of last resort to solvent institutions.
Here is another perfect example of an uninformed individual given a bully pulpit to promote his ignorance courtesy of the Washington Post.
He refers to a part of the Republican Party’s platform (which means nothing anyway) which calls for a commission to study “possible ways to set a fixed value for the dollar.” This is an allusion to the study done back in 1980 by the Gold Commission which recommended against the concept, but was dissented to by one of its members, Ron Paul, in his “The Case for Gold.”
And this frightens author Lane:
We can only hope that this iteration of Republican pandering to the gold bugs bears no more fruit than the last one. Touted as a cure for the chronic financial instability that central banking purportedly breeds, tying the nation’s money supply to the supply of gold would be worse than the disease.
We know where he stands: “pandering to the gold bugs” is a giveaway to a polemic, not a rational discussion.
A more rational discussion of the gold standard starts with what it would do: rein in the uncontrollable urge by the Fed to bail out the big banks. The Fed, remember, is a cartel whose mission is to protect the big banks from the consequences of their bad behaviors, using taxpayer monies (or digital money created out of nothing which derives its value from depreciating the value of taxpayer monies).
If we had a commodity-based free banking system, we would not have had the boom and bust of the 2000s in the first place. The powers that enable the Fed to create liquidity ex nihilo in a crisis are the very same powers that enabled it to drive the real Federal Funds rate below zero for two years and fuel the housing bubble, which gave us the financial crisis and recession.
Just because the Washington Post has a louder voice doesn’t make it any more credible. A wrong-headed opinion about the gold standard is still wrong, no matter who promotes it, don’t you think?