The gold standard is not in any way like the war in Afghanistan by mattsteinglass
May 30, 2010, 5:46 am
Filed under: Afghanistan, Economics, Libertarianism, Uncategorized

Andrew Sullivan writes that we shouldn’t dismiss libertarians as cranks just because they back the gold standard: “The insanity we take for granted every day – the Afghanistan war, for example – is a lot crazier than the gold standard.” Like Andrew Sullivan, I think the US should extricate itself from Afghanistan, but this is, to put it mildly, not a good illustration of the point he’s trying to make. Supporting the introduction of the gold standard in today’s global fiat-money economy is simply much crazier than supporting the continuation of a counterinsurgency and nation-building war against the Taliban that the US originally got into for very honorable reasons and with apparently good chances of success. Supporting the abrupt and unprovoked invasion of Iraq in 2003, I would grant, might have been compared in its craziness to supporting the introduction of a gold standard in a world economy that has long outgrown such metaphysical superstitions.

There are other reasons why, as Conor Friedersdorf says, we shouldn’t dismiss libertarians as cranks and nut jobs. But one of those reasons is that a lot of libertarians are much too smart to believe in snake-oil stuff like the gold standard.


5 Comments so far
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I think the gold standard is rational for a pure-dee libertarians whose understanding of freedom depends on eliminating every office that confers authority. Puritan libertarianism, however, might be mad.

Comment by citifieddoug

Ummm, ok. You’ve made a claim (gold standard is nuttier than war in Afghanistan). Now how about a few paragraphs, heck even a sentence or two, to support it?

Comment by sandiegodave

In what sense is the gold standard, or any currency system involving tangible currency, properly described as “metaphysical”? How is it more rational to support a system in which “money” increasingly exists only as ephemeral electronic impulses?

If you’re serious about dispelling what you consider to be irrational arguments in favor of the gold standard, you’d better bring more to the table than sophomoric snark and arrogant ipse dixits.

Comment by William N. Grigg

William, it’s metaphysical because it imagines that something intangible — the human attribution of commercial value — is an inherent property of something tangible. Nothing is accomplished by denoting one arbitrary medium of exchange value (a unit of currency) as exchangeable for another arbitrary medium of exchange value (gold). Warren Buffett described the craziness of it: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

The gold standard doesn’t work on a pragmatic level in the modern global economy for a whole lot of reasons. Here’s Paul Krugman from back in 1996:

I meant, think about the interaction of GDP growth in different countries and exchange rate dynamics; tying these countries’ currencies to a fixed value in gold not only adds a pointless layer of complexity, it turns it into a kind of ludicrous burlesque comedy. Countries have to actually buy and ship quantities of this arbitrary metal back and forth between each other in order to escape monetary disaster. Think about what happens when China’s real GDP quadruples over 20 years while they still have the same amount of gold in their banks, while the US’s real GDP only doubles. This already caused enough problems in the early 1930s, and there’s no reason to go back.

But people who support the gold standard mostly don’t do so for pragmatic reasons. They do so for naive philosophical reasons, because the idea that money is intangible makes them anxious. But money is intangible. The assignment of value to gold is a futile attempt to make the intangible tangible; carrying out such a system requires all the silly routines one expects from a fetishistic religion. This is why Keynes called it a “barbarous relic”.

Comment by Matt Steinglass

[…] The gold standard is not in any way like the war in Afghanistan … […]

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