“Hear this, you who trample the needy and do away with the poor of the land, saying, ‘When will the New Moon be over that we may sell grain, and the Sabbath be ended that we may market wheat? — skimping on the measure, boosting the price and cheating with dishonest scales, buying the poor with silver and the needy for a pair of sandals, selling even the sweepings with the wheat. The Lord has sworn by himself, the Pride of Jacob: ‘I will never forget anything they have done.'” – Amos 8:4-7
I keep on saying that I’m a “no” on Romney … and I still am … but he keeps on dribbling out these little reasons for me to think maybe, just maybe he’s worth a shot. The Financial Times is reporting that the Republicans will put together a “gold commission” as part of their platform to consider a return to a “link between the dollar and gold” … I’m listening.
Now, in the back of my mind I have this niggling “bait-and-switch” warning going off. After all, the plan is to set up a commission to study the possibility. One suspects it won’t be hard to guess where that ends. (As the article notes, Reagan set up a commission in 81 and made positive statements in 84, but never got anywhere with it.) Surely somebody, somewhere will make a plausible case of “well, it would be nice in theory but just too difficult to pull of right now, so it will have to wait.”
Still, so tempting is the thought of returning to a fixed and fair money standard, where the financial elites lose their power to print money at will (that is, their power to shave off a portion of your productivity, your life, and use it for their own purposes), that it might be worth the risk.
Money serves two purposes in a free market. They are actually the same purpose at some level and it can only work as money if it serves both. It is both a medium of exchange and a store of value. It’s easier to carry around dollars than actual production (whether it’s corn or widgets). It’s easier to exchange them, not having to perfectly match the needs/desires of both sides of the barter. But this system only holds together (fairly) if the money holds the same level of value between the times of exchange (store of value).
If my money loses it’s ability to purchase goods and services, even just a little bit, in the intervening moments between when I’ve sold my production (corn or widgets … or algorithms in my case) and when I’ve purchased someone else’s (probably more corn and widgets than algorithms) then I’ve been robbed. Somebody has dipped their hands into my pocket and stolen my production, in some small measure. They’ve stolen the portion of my life that was spent on that production – usurping my natural born rights. The fact that they stole it without entering my house but simply by inventing a huge bundle of “store of value” to spend for their own desires is irrelevant. They have “skimped on the measure and boosted the price.” They have robbed us all with unjust scales.
This is why a gold standard is so appealing. It has nothing to do with an inherent value of gold. Gold is cool, it’s neat, it’s shinny and heavy – but “inherent value”??? I think not. The usefulness of gold as a monetary standard is it’s limited supply. You cannot print gold. You cannot simply invent more gold to put in your pocket and thereby steal the production of others indirectly and through the free market. (Though, this is exactly what the alchemists hoped for.) Yes, you can go out and dig up more gold, but this requires effort – and a lot of it. If only the Fed had to exert that much effort to invent “store of value” out of thin air and stuff it into the pockets of bankers …
One suspects that Mitt Romney’s political advisers are actually pretty sharp. For him to start dropping hints about auditing the Fed and studying a return to sound money indicates that he knows the freedom movement in this country is salivating at the prospect of any good news on the governance front, and might just be willing to vote for the father of Obamneycare if he promises the right things.
The article closes with a wonderfully myopic statement: “A return to a fixed money supply would also remove the central bank’s ability to offset demand shocks by varying interest rates. That could mean a more volatile economy and higher average unemployment over time.” I would have said that a little differently. “A return to a fixed money supply would remove the central bank’s ability to blow asset bubbles and fuel speculative markets, which inevitably pop causing a more volatile economy and higher unemployment over time.”