Monday, November 2, 2015

Cruz Comes Under Heavy Attack For Advocating the Gold Standard

With the headline Ted Cruz Embraces Fringe Monetary Policy That Went Out Of Style In The 1930s, Think Progress is going after Cruz for his advocacy of a gold standard during last week's debate:
At Wednesday night’s GOP presidential debate, Sen. Ted Cruz (R-TX) called for returning to a policy idea that died in 1933 and has gone unmourned ever since. 
“We need sound money,” Cruz said when asked about Federal Reserve policy by CNBC’s Rick Santelli. “And I think the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold.” 
American money hasn’t been based on the price of gold since the early months of Franklin Roosevelt’s presidency. Returning to a “gold standard,” as the policy was known, would send the broader economy into the kind of jittery and deadly tremors usually seen only in lab mice who’ve been fed cocaine. 
The idea of “sound money,” as the libertarian crowd that worships the gold standard prefers to call it, is that it takes away the Fed’s ability to manage the value of a dollar. The supposed benefit of this is that your money’s worth is more real because it is pegged to a shiny, rare metal. 
But when you let the market for gold determine the value of every piece of paper money in every person’s pocket on any given day, you leave your entire economy exposed to catastrophe. The gold standard forced governments around the world to restrict monetary policy just as markets crashed in the late 1920s, which helped turn a crash into the Great Depression.
Actually, it was the Federal Reserve  de facto move away from a true gold standard as Murray Rothbard chronicled in America's Great Depression that caused the economic collapse (and aggravated by government intervention into the economy).

As for gold versus government paper money, there has never been a hyper-inflation crack-up when gold was the medium of exchange, quite different from the record under paper currencies.

The Washington Post has reported:

This is not complicated to understand. The theory was sound in the 1930s and it is sound today: Governments can't print gold, but they sure can print horrific amounts of paper currency, and they have done so many times.



  1. I've seen this chart on hyperinflation before, the one thing that I found interesting is that you notice most hyperinflation scenarios last around 1 year, with 3 years being the most on this chart.

    It's a good indicator of how to plan for such an event if it ever happened here- and in a way shows how quickly it could be over, versus the sustained economic misery of long term devaluation.

  2. did we expect anything else from them? mice on coke? really?

  3. It's Think Progress, so I don't expect much from them, but the last paragraph is astonishing. One would wonder what they think caused the late 1920's recession in the first place? If Cruz really understands monetary issues (and somebody should send him a copy of "The Case for a 100 Percent Gold Dollar"), then he would be pointing out that the Gold Standard allows the poor to accumulate wealth ... to dig themselves out of poverty by saving. While the Keynesian system that Think Progress seems to favor in the above hit piece helps the rich banks, bankers, and the government the most.

    The reason the average citizen isn't clamoring for a return to the Gold Standard is that nobody has effectively made the case that it will benefit the poor, middle class, and those on a fixed income.

  4. Oh, for crying out loud. Who cares what the stultified minds at ThinkProgress say, anyway?

    1. I submit that ThinkProgress is a large enough presence for us to care about the lies they spread. The key point is that their analysis is nothing but lies, which announces to the me and the world that they cannot refute our arguments on the merits and that they know it.

      The concepts of the NAP, voluntary exchange vs. violent intervention, injection effects, prices as information, economic calculation and miscalculation are not that complicated. One must make a concerted effort to avoid engaging them. We should celebrate this pathetic behavior as a victory and announce our victory every time this behavior appears.

  5. The MSM and their masters are concerned enough to have PBS on their Marketplace program spit out this horrible segment:

    It's only about two minutes long and as bad as you would imagine coming from PBS, with all the cliches about the ills of a gold standard. They did their "fair and balanced" act by including less than a sentence from a gold standard advocate.

    The MSM, no matter how well they cover a topic, almost never includes an angle including freedom. In the context of money if they even mention something like a gold standard it is as a crazy outlier, while centrally planed fiat money is promoted. What they don't/can't touch is monetary freedom. If they did people may actually think a free market in money (and everything else) is an option. It is sacrosanct to the MSM and its masters to shine light on money with no government claws deeply embedded in it.