Wednesday, April 27, 2011

The Case Against Gold

What do critics say about gold as money?  Here are a few of their claims, along with replies.

1.  There’s not enough of it.
The total supply of money is not critical; changes in the supply are.  In a growing economy with a constant money supply prices will tend to decline, as the same dollars bid against a rising level of productivity.  The U.S. experienced this in the latter half of the 19th century, one of the most prosperous periods in history.  Lower prices brings the benefits of prosperity to more people, especially those in low-income brackets.
2.  It’s expensive to produce, and after it’s mined and minted it mostly sits idle in vaults.  What's the point?
It makes it difficult and expensive for government to inflate the money supply.
3.  It limits the spending proclivities of governments.
What the government doesn’t spend, we can. Or better, we can save and invest.  The less government spends, the less it grows, and the more liberty we have.
4.  Most economists - the “experts” - disparage gold.
Most economists are tax feeders.
5.  It places severe limits on authorities in charge of monetary policy.
These are the same authorities who created and helped prolong the Great Depression and whose descendants created the most recent crisis and are busy building the next one.
6.  The gold standard was one of the primary causes of the Great Depression.
It was the absence of a genuine gold standard that ignited and prolonged the Depression.
7.  People find it more convenient to carry paper money than coins.
A genuine gold standard is compatible with money substitutes.
8.  Money is too crucial for prosperity to allow policy to be determined by individual choices rather than government
See point 5.
9.  Gold production cannot keep pace with productivity growth, and therefore we would be subject to devastating deflation.
See point 1.

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